SECURITY ASSISTANCE ACCOUNTS 

AGENCY FINANCIAL REPORT 

FISCAL YEAR 2022 
Dover AFB conducts Ukraine security assistance mission. 

U.S. Air Force photo by Airman 1st Class Cydney Lee 
 

 

 

 

 

 

 

 

 

 

 

 

 

	 	 	 	 			 	 	 	 	 	 	 																		

 

 

 

 

 

 

 

 

 

Table of Contents 

PREFACE 1 

HOW THIS REPORT IS ORGANIZED 2 

MESSAGE FROM THE DIRECTOR OF THE DEFENSE SECURITY COOPERATION AGENCY 3 

SECTION I 

MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) 4 

Security Assistance Accounts Overview 5 

DSCA Mission 9 

Organizational Structure 9 

Performance Summary and Highlights 23 

Analysis of Financial Statements 24 

Analysis of Systems, Controls, and Legal Compliance 29 

Forward-Looking Information 36 

Limitation to Financial Statements 38 

SECTION II 

FINANCIAL SECTION (UNAUDITED) 39 

Message From Chief Financial Officer 40 

Report of Independent Auditors 41 

Financial Statements 67 

Notes to the Financial Statements 71 

Required Supplementary Information (RSI) 103 

SECTION III 

OTHER INFORMATION 105 

Summary of Financial Statement Audit and Management Assurances 106 

Management Challenges 110 

APPENDIX 111 

Glossary of Acronyms 111 
1 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

Preface 

The Security Assistance Accounts (SAA) Fiscal Year (FY) 2022 Agency Financial Report (AFR) provides financial

and performance information for the fiscal year beginning October 1, 2021, and ending on September 30, 2022,

with comparative prior year data, where appropriate. Unless otherwise designated, all use of a year indicates 

fiscal year, e.g., 2022 equals Fiscal Year 2022. The AFR demonstrates the Security Assistance (SA) community’s

commitment to its mission and accountability to Congress, the President, and the public.

This report satisfies the reporting requirements contained in the following legislation:

FEDERAL MANAGERS’ FINANCIAL INTEGRITY ACT OF 1982 (FMFIA) – requires ongoing evaluations and 

reports of the adequacy of internal accounting and administrative controls, and whether financial management

systems comply with federal financial management systems requirements;

CHIEF FINANCIAL OFFICERS ACT OF 1990, AS AMENDED – established the position of Chief Financial Officer

(CFO), requires audited financial statements for each major executive agency, and requires the Director of the

Office of Management and Budget to prescribe the form and content of the financial statements;

FEDERAL FINANCIAL MANAGEMENT IMPROVEMENT ACT OF 1996 (FFMIA) – requires financial statement

audits to assess the compliance of an agency’s financial management systems with Federal requirements, Federal

accounting standards, and the United States Standard General Ledger (USSGL); and

REPORTS CONSOLIDATION ACT OF 2000 – permits agencies to consolidate certain statutorily required reports 

into a single annual report and requires certain information be contained in the consolidated report.
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 2 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 		 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

Dover AFB supports US, Ukraine strategic partnership. 

U.S. Air Force photo by Mauricio Campino 

HOW THIS REPORT IS ORGANIZED 

The Defense Security Cooperation Agency (DSCA) acts as the steward of the SAA, providing mission 

information and financial management oversight. The AFR begins with a message from the Director of DSCA,

James A. Hursch. This introduction is followed by three main sections.

SECTION I 

MANAGEMENT’S DISCUSSION AND ANALYSIS 

Section I provides an overview of the SAA performance and financial information. It introduces the mission of the

DSCA, includes a brief history, and describes SAA’s stakeholders. The section also highlights the SAA financial

results and provides management’s assurances on the internal controls.

SECTION II 

FINANCIAL SECTION 

Section II begins with a message from the CFO. This section details the SAA financial status and includes the audit

transmittal letter from the Department of Defense Inspector General (DoDIG), the independent auditor’s report,

and the financial statements and notes. The Required Supplementary Information (RSI) included in this section

provides a combining statement of budgetary resources.

SECTION III 

OTHER INFORMATION 

Section III provides a summary of financial statement audit and management assurances, as well as management

challenges pertaining to SAA. 
3 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 		

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

 

	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	

MESSAGE FROM THE DIRECTOR OF THE 

DEFENSE SECURITY COOPERATION AGENCY 

On behalf of the Defense Security Cooperation Agency and all those serving

our nation through Security Cooperation activities, I am honored to present the 

Agency Financial Report for the Security Assistance Accounts for Fiscal Year 

2022. This report provides a financial and operational overview of the SAA and

reflects the transparent, comprehensive, and in-depth review of DSCA’s and the

collective Security Cooperation enterprise’s finances and operations.

As it celebrates its 50th anniversary, DSCA reflects on its ever-evolving mission.

It encompasses a wide range of activities that advance the United States (U.S.) 

national security, defense, and foreign policy objectives by enhancing the security,

capacity, and capability of our Allies and Partners across the globe.

The SAA reflects the important Security Cooperation (SC) initiatives that DSCA

leads, including the administration of Foreign Military Sales (FMS) on behalf of

the U.S. Department of State and the Executive Office of the President (EOP), the

provision of International Military Education and Training (IMET), Institutional 

Capacity Building, disaster relief, humanitarian assistance, and much more. This 

report includes analysis of the SAA financial statements and audit findings as well as

the Security Assistance community’s effort to improve the veracity and quality of

financial data and performance metrics.

The SC community continues to be tactical and calculated in our strategy to

strengthen alliances and build partnerships by effectively defining the right,

full-spectrum solutions (capacity and capability) for each partner. The SC

community strives for excellence in every facet of our mission through a cohesive

and collaborative team effort across the government – from the individual

program offices up through policymakers in the Department of Defense and the

Department of State. Integrating, aligning, and unifying our efforts with partners 

across the government while continuing to develop a diverse, certified, and

adaptable SC workforce is essential to achieve our mission and to meet shared

U.S. and international security challenges. 

As with every other aspect of our mission, the SC community strives for 

excellence in meeting our audit goals and remains committed to improving the

efficacy of the SC enterprise’s business operations, which will in turn lead to audit

successes. The SAA has known limitations in financial management processes and

systems that may impact the reliability and accuracy of financial information. Our

first standalone audit resulted in a Disclaimer of Opinion due to the identification

of multiple material weaknesses. The complete description of the material 

weaknesses can be found within the Management’s Discussion and Analysis

(MD&A) section and within the Report from the Independent Public Accountant.

The related audit findings and recommendations continue to provide us with

invaluable information and an opportunity to improve our financial-reporting

process and data in support of the SA mission. The SC community is committed to 

addressing these findings and advancing the SAA to meet its audit goal.

James A. Hursch | Director 

Defense Security Cooperation Agency (DSCA) 
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 4 

Meeting strengthens partnership through security assistance. Photo by Tim Hanson 

SECTION I 

Management’s Discussion 

and Analysis (MD&A) 
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MANAGEMENT’S DISCUSSION	 	 	 AND ANALYSIS (MD&A) | SECURITY ASSISTANCE ACCOUNTS OVERVIEW UNAUDITED 

MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A)

SECURITY ASSISTANCE ACCOUNTS OVERVIEW 

The Department of Defense (DoD) defines the SC as activities undertaken by the U.S. Government to

encourage and enable international partners to work with the United States to achieve strategic objectives.

SC encompasses a combination of legal authorities, annual appropriations, organizations, and initiatives from

within DoD, Department of State (DoS), or EOP resources. As a subset of SC, SA encompasses a group of

programs, authorized by law, through which the DoD or commercial contractors provide defense articles,

services, and training in support of national security policies and objectives. An overview of the Security

Assistance Accounts is provided in Table 1 below and in Note 1, Summary of Significant Accounting Policies.

The table below provides information about the SAA; each account includes a detailed description and the

type of funding. 

TABLE 1: SAA FUNDING OVERVIEW 

ACCOUNTS DESCRIPTION FUNDING TYPE 

FOREIGN 

MILITARY SALES 

(FMS) 

TRUST FUND: 

11 X 8242 

The FMS Trust Fund is used for payments received from 

purchasers and disbursements made against implemented

FMS cases. This fund is cited directly on contracts for 

the procurement of defense articles and/or services for 

the purchaser, or is used to reimburse DoD Component

appropriations for deliveries from DoD stocks or services 

performed by DoD employees. DSCA manages the FMS Trust

Fund and is responsible for the solvency of each purchaser’s

FMS Trust Fund account. 

The FMS Trust Fund also includes the following three accessorial 

accounts to support the execution of the FMS program:

• FMS Administrative Surcharge Account: Generates funds

 via a surcharge applied to FMS cases to cover the costs

 of operating the FMS program, including civilian employee

 salaries, facilities, and information systems. 

• Contract Administration Services Cost Clearing Account:

 Generates funds via a surcharge applied to FMS cases

 used to cover the costs of quality assurance and inspection,

 contract management, and contract audits. 

• Transportation surcharge, which is used to cover the cost

 to the United States of transporting purchaser material

 using the Defense Transportation System (DTS) or a Bill

 of Lading. 

Non-revolving 

Trust Fund 
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 6 

	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

UNAUDITED MANAGEMENT’S DISCUSSION	 	 	 AND ANALYSIS (MD&A) | SECURITY ASSISTANCE ACCOUNTS OVERVIEW 

ACCOUNTS DESCRIPTION FUNDING TYPE 

FOREIGN 

MILITARY 

FINANCING (FMF) 

PROGRAM: 

11 1082 

11 X 1082 

The FMF Program Account is used to record the receipt and 

use of appropriated grant funds to finance U.S. defense sales to

selected foreign friends and allies, primarily through the FMS 

program. The fund also includes appropriated administrative 

funds used to cover the DSCA costs of operating the FMF 

program. 

General 

Fund 

SPECIAL DEFENSE 

ACQUISITION 

FUND (SDAF): 

11 4116 

11 X 4116 

SDAF is used to facilitate the delivery of material in advance 

of normal procurement lead times, enhancing readiness by

reducing the need to divert assets from U.S. forces when 

partners have urgent requirements that cannot otherwise 

be satisfied. The SDAF operates as a financially independent,

revolving fund. The primary source of funding to grow or 

capitalize the SDAF is the monetary collections received from 

the sale and transfer of FMS-procured defense articles and 

services to foreign governments and international organizations 

where funds are identified as excess. In accordance with Section

51(b) of the Arms Export Control Act of 1976 (AECA), the Fund

may be capitalized with monies authorized and appropriated

or otherwise made available for the purposes of the SDAF

for charges on export sales by the U.S. Government and its

contractors. 

Revolving 

Fund 

INTERNATIONAL 

MILITARY 

EDUCATION AND 

TRAINING (IMET): 

11 1081 

11 X 1081 

IMET is used to record the receipt and use of appropriated grant 

funds for the training of selected foreign military and related 

civilian personnel worldwide. 

General 

Fund 

SECURITY 

ASSISTANCE AND 

INTERNATIONAL 

PROGRAMS 

(SAIP), DEPOSIT 

ACCOUNT: 

11 X 6147 

SAIP is used to record collections from foreign governments to 

reimburse the DoD for goods and services not acquired through

the FMS program, or for FMS customers to use the Air Force 

Parts and Repair Ordering System to acquire non-standard 

items, and to provide advance funding to support acquisitions. 

Deposit 

Account 
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MANAGEMENT’S DISCUSSION	 	 	 AND ANALYSIS (MD&A) | SECURITY ASSISTANCE ACCOUNTS OVERVIEW UNAUDITED 

ACCOUNTS DESCRIPTION FUNDING TYPE 

FMF DIRECT The FMF Direct Loan Account is used to receive the payments Revolving/ 

LOAN ACCOUNT: for the subsidy cost from the program account, Financing Fund 

11 X 4122 11 (FY) 1085, and includes all other cash flows to and from the

United States Government (USG) resulting from post-FY 1991 

foreign military direct loans. This appropriation is for new loans 

with original disbursement dates on or after October 1, 1991.

MILITARY DEBT The Military Debt Reduction Financing Account is used to Revolving/ 

REDUCTION record the rescheduling of loans and to collect loan repayments Financing Fund 

FINANCING on those loans rescheduled from 11X4121. 

ACCOUNT: These loans have pre-FY 1992 original disbursement dates.

11 X 4174 

FMF DIRECT The FMF Direct Loan Program Account is used to record General 

LOAN PROGRAM the appropriation that subsidizes the estimated long-term cost Fund/ Subsidy

ACCOUNT: to the USG of post-FY 1991 foreign military direct Program 

11 X 1085 loan obligations.

FMLLA (FOREIGN 

MILITARY LOAN 

LIQUIDATING 

ACCOUNT): 

11 X 4121 

The FMLLA is used to record the receipt and use of appropriated 

funds to finance credit sales under 22 U.S.C. § 2763 and credit

sales guarantees for pre-FY 1992 loan obligations under 22

U.S.C. § 2764.

Revolving/ 

Liquidating 

Fund 

The largest of the SA accounts is the FMS Trust Fund, which is used for payments received from purchasers and 

disbursements made against implemented FMS cases.
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

UNAUDITED MANAGEMENT’S	DISCUSSION	AND	ANALYSIS	(MD&A) | SECURITY ASSISTANCE ACCOUNTS OVERVIEW 

Figure	1	identifies	foreign	partners	that	implemented	new	FMS	cases	in	FY	2022.

FIGURE 1: FMS SALES MAP 

FMS Funded Building Partnership Capacity 

Total Sales ($) FMS ($) w/FMF ($) (BPC) ($) 

52B 43B 7B 2B 

1B - <12B 100M - <1B 0 - <100M 

SAA LEGAL AUTHORITIES 

The SAA authorizations and appropriations are provided primarily under Title 22 of the US Code in the following 

three	public	laws:

1.		The	Foreign	Assistance	Act	of	1961	(FAA),	as	amended:	an	act	to	promote	the	foreign	policy,	security,	

					and	general	welfare	of	the	United	States	by	assisting	people	of	the	world	in	their	efforts	toward

					economic	and	social	development,	internal	and	external	security,	and	for	other	purposes.	The	FAA	

 organizes assistance programs and details policies governing all SA provided to foreign governments. 

					(22	U.S.C.	ch.	32	§	2151)

 2. The	Arms	Export	Control	Act	of	1976,	an	Act	to	amend	the	FAA.	The	amendment	to	the	original	act

					focuses	on	regulations	and	documentation	for	arms	sales.	(22	U.S.C.	ch.	39	§	2751)

 3. Annual	appropriation	acts	for	the	Foreign	Operations,	Export	Financing	and	Related	Program	

 Appropriations Act (H.R. 4373) 

Each	year,	a	SA	appropriations	budget	is	requested	as	part	of	the	President’s	budget	submission.	Legislative

amendments	may	also	be	requested	for	authorization	and	appropriation	laws	from	Congress.	Congress	then	reviews

requests, authorizes and appropriates the funds, and enacts the necessary legislative amendments to carry out 

SA	programs.	Appropriations	may	also	be	requested	to	reimburse	the	DoD	for	the	value	of	items	furnished	under

a	Military	Assistance	Drawdown.	In	the	event	appropriations	are	not	enacted	prior	to	the	beginning	of	the	fiscal

year,	essential	activities	are	typically	carried	out	under	a	Continuing	Resolution	Authority	(CRA)	for	applicable

appropriated	accounts.	The	CRA	is	a	temporary	or	stopgap	appropriation	made	by	Congress	and	contains	special

rules	regarding	expenditures.

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U.S. Army Central strengthens partnership with the Deputy Assistant Secretary of the 

Army for Defense Experts and Cooperation. U.S. Army Photo by Sgt. Amber Cobena 

DSCA MISSION 

DSCA leads a Security Cooperation (SC) enterprise of more than 20,000 personnel and provides policy, legal, 

financial, legislative, programmatic, and weapons system expertise to stakeholders across the U.S. interagency.

The DSCA mission is to advance U.S. defense and foreign policy interests by building the capacity of foreign

partners in order to encourage and enable Allies and Partners to respond to shared challenges. Such programs

build relationships with foreign countries and international organizations that promote the U.S. interests, develop

allied and partner capacities for self-defense and coalition participation in overseas contingency operations, and 

promote peacetime and contingency access for U.S. forces. DSCA accomplishes its responsibilities for SAA in

concert with DoS, Military Departments (MILDEPs), Other Defense Agencies, other U.S. Government organizations, 

U.S. industry, and non-governmental organizations. Together, the SC community provides financial and technical

assistance, provision of defense articles and services via nationally-funded cases, FMF for defense articles and 

services, including training, provided through the FMS program, as well as training provided and funded under IMET 

authorities. 

ORGANIZATIONAL STRUCTURE 

While DSCA manages the SAA, the DoS is responsible for continuous supervision and general direction of SA

programs. DSCA directly manages the SAA and the MILDEPs and applicable Defense Agencies, collectively

known as the Implementing Agencies (IA), to execute the majority of SAA funds. The three MILDEPs account for

the majority of sales, and Air Force led the IAs in FMS with $27 billion in sales in FY 2022 comprising nearly 52%

of FMS sales for the year. Each Secretary of the Military Department advises the Secretary of Defense on SA 

issues pertaining to their Departments and perform the following major actions in support of the SC mission:

 • Provide price, source, availability, and lead time data of requested defense articles to develop and

implement FMS cases;

 • Acquire and deliver defense articles and services to eligible countries and international organizations; and

 • Conduct training for foreign military and civilian personnel. 
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

UNAUDITED MANAGEMENT’S	DISCUSSION	AND	ANALYSIS	(MD&A) | ORGANIZATIONAL STRUCTURE 

The	following	Military	Department	offices	lead	their	respective	Departments	as	IAs	in	support	of	the	SC	mission:

NAVY (INCLUDING U.S. MARINE CORPS AND U.S. COAST GUARD)

The	Navy	International	Programs	Office

ARMY 

The	Office	of	the	Deputy	Assistant	Secretary	of	the	Army	for	Defense	Exports	and	Cooperation

AIR FORCE (INCLUDING U.S. SPACE FORCE)

The Deputy Under Secretary of the Air Force for International Affairs 

In	addition	to	the	MILDEPs,	other	Defense	Agencies	also	serve	as	IAs	which	manage	and	execute	FMS	cases	in

contribution	to	the	SC	mission.	For	example,	the	Defense	Logistics	Agency	(DLA)	supports	the	MILDEPs	to	supply

FMS	orders	from	items	in	stock	at	DLA	distribution	centers	and	also	executes	FMS	cases	to	provide	cataloguing

services	and	transfer	Excess	Defense	Articles	(EDA)	to	foreign	partners.	

Defense	Finance	and	Accounting	Service	(DFAS)	is	a	service	provider	for	the	SAA	and	performs	accounting,	billing,

disbursing,	and	collecting	functions	in	support	of	the	SC	mission.	Further,	DFAS	prepares	the	financial	statements

on	behalf	of	the	SAA.	DSCA	and	DFAS	maintain	a	Mission	Work	Agreement,	which	details	the	specific	services

that	DFAS	performs	on	behalf	of	the	SAA.

SAA STAKEHOLDERS 

The	graphic	below	shows	the	relationships	between	the	primary	SAA	stakeholders.

FIGURE 2: SAA STAKEHOLDERS 

SENIOR DoD LEADERS 

OUSD(P) 

DIRECT 

Financial Reporng 

Oversight and 

Compliance DSCA 

DEPARTMENT 

OF STATE Treasury 

OMB 

ARMY NAVY AIR FORCE DCMA DISA DLA DTRA 

OUSD(C) 

DoDIG 

COMBATANT 

MDA NGA NSA F35* DCAA COMMANDS DFAS 

GAO 

*Non-IA ODO (Other Defense Organiza
on) 

Naonal Security Congressional Department of Foreign U.S. Defense Professional/Trade 

Council (NSC) Commi�ees Commerce Partners Industry Organizaons 

INDIRECT 

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O

MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) | ORGANIZATIONAL STRUCTURE UNAUDITED 

RESPONSIBILITIES AND RELATIONSHIPS 

Congress authorizes and appropriates funds for the USG-financed portions of SA as well as providing Contract

Authority approval. Congress has a keen interest in the sale and transfer of defense articles and services to 

foreign countries and international organizations. Executive Branch agencies such as the Office of Management

and Budget (OMB), United States Department of Treasury (USDT), and others have responsibilities related to SA.

However, aside from the President, the principal legislated responsibilities fall to the Department of State and

the Department of Defense. 

DEPARTMENT OF STATE (DOS)

Under the FAA, AECA, and Executive Order 13637 the Secretary of

State is responsible for continuous supervision and general direction of

SA programs. This includes determining whether (and when) there will 

be a program or sale for a particular country or activity (to include IMET)

and, if so, its size and scope. It also includes the determination of budget

requests and allocation of funds for military assistance. The DoS reviews 

and approves export license requests for direct commercial sales of items

on the United States Munitions List of the International Traffic in Arms

Regulations. The DoS also reviews and approves third party transfers of 

exported defense articles and services. The DoS ensures FAA, section

503 (22 U.S.C. 2311) eligibility and obtains the assurances from recipient

countries and organizations required by FAA, section 505 (22 U.S.C. 2314)

prior to most grant transfers of defense articles. The DoS prepares the 

Mission Strategic Resource Plan and reviews and submits to Congress the

Congressional Budget Justification, which includes an annual estimate of

the total amount of sales and licensed commercial exports expected to

be made to each foreign nation as required by AECA 25(a)(2) (22 U.S.C.

2765(a)(2)), and annual arms sale proposal (Javits Report) as required by

AECA 25(a)(1) (22 U.S.C. 2765(a)(1)). 

DEFENSE SECURITY COOPERATION AGENCY (DSCA)

DSCA directs, administers, and provides guidance to the DoD Components 

and DoD representatives to U.S. missions, for the execution of DoD SC

programs for which DSCA has responsibility.

The Director of DSCA is responsible for the execution and administration

of all security cooperations programs and activities of the DoD involving 

the provision of defense articles, military training, and other defenserelated services by grant, loan, cash sale, or lease.

DSCA ensures Secretary of Defense and Office of the Under Secretary

of Defense (Policy) (OUSD(P)) interests in SA matters are represented;

identifies requirements, criteria, and procedures for the selection and
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

O

UNAUDITED MANAGEMENT’S	DISCUSSION	AND	ANALYSIS	(MD&A) | ORGANIZATIONAL STRUCTURE 

training of personnel engaged in SA activities in DoD SC programs over 

which	DSCA	has	responsibility;	communicates	directly	with	the	Heads	of

the	DoD	Components	on	SC	matters	over	which	DSCA	has	responsibility;

in	coordination	with	the	OUSD(P)	and	the	Office	of	the	Under	Secretary	of

Defense (Acquisition and Sustainment) (OUSD(A&S)), as appropriate. 

DSCA also supports the development of technology security and foreign 

disclosure and sales policies and procedures for defense information, 

technology,	and	systems;	jointly	establishes	appropriate	agreements	and

procedures with the Director, Defense Intelligence Agency (DIA), and 

with	the	Combatant	Commands	(CCMDs)	for	Senior	Defense	Officials

(SDOs) and Defense Attachés (DATTs) to provide guidance and oversees 

SC	programs	for	which	DSCA	is	responsible,	in	accordance	with	applicable

laws and regulations. 

Additionally, in coordination with the Chairman of the Joint Chiefs of 

Staff,	DSCA	approves	Security	Cooperation	Organizations	(SCOs)	joint

manpower	programs	involving	the	establishment	of	new	SCOs	or	changes

in	manpower	authorizations	or	organizational	structure;	jointly,	with	the

Director of the DIA, approves changes to the grade or Military Department 

affiliation	of	the	SDO	or	DATT;	reports	to	the	Under	Secretary	of	Defense

for Personnel and Readiness in the Defense Readiness Reporting System 

readiness of personnel for SA activities in DoD SC programs over which 

DSCA	has	responsibility;	and	acts	as	the	Executive	Agent	for	DoD	Regional

Centers for Security Studies. 

Authorities	conferred	on	the	Secretary	of	Defense	by	the	FAA	and

AECA	pertaining	to	SA	and	authorities	under	those	acts	delegated	by

the President to the Secretary of Defense are re-delegated through the 

OUSD(P) to the Director of DSCA. 

DEPARTMENT OF DEFENSE (DOD) ORGANIZATIONS

The	Office	of	the	Under	Secretary	of	Defense,	(Comptroller)

(OUSD(C))	establishes	military	requirements	and	implements	programs

to	transfer	defense	articles	and	services	to	eligible	foreign	countries

and	international	organizations.	Within	DoD,	the	principal	responsible

agencies for SC are DSCA, the CCMDs, Other Defense Agencies, the 

Joint Staff, the SCOs, and the MILDEPs. 

OUSD(C)	establishes	policies	and	procedures	for	SC	activities	involving

financial	management,	fiscal	matters,	accounting,	pricing,	budgeting	for

reimbursements	to	DoD	appropriation	accounts	and	revolving	funds,

international	payments,	and	matters	affecting	the	DoD	budget.

12 
13 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	

MANAGEMENT’S DISCUSSION	 	 	 AND ANALYSIS (MD&A) | ORGANIZATIONAL STRUCTURE UNAUDITED 

THE MILITARY DEPARTMENTS (MILDEPS) 

The MILDEPs serve as IAs to conduct SC programs and activities. In coordination with the 

OUSD(P), they serve as advisors to the Secretary of Defense on all matters of SC affecting or 

related to their respective Departments’ support to the Combatant Commanders (CCDRs); and

provide recommendations to the Secretary of Defense to ensure the successful conduct of SC 

programs. They conduct international armaments cooperation with eligible friendly foreign

countries and international organizations in accordance with policies and criteria established

by the OUSD(A&S). They conduct military education and training and sales of defense articles

and defense services to eligible foreign countries and international organizations in accordance

with policies and criteria established by the OUSD(P) and the Director of DSCA and provide the

technical information and data, upon request, on weapons systems, tactics, doctrine, training, 

capabilities, logistic support, price, source, availability, and lead-time for developing and reviewing

SC programs. They maintain appropriate records and furnish prescribed reports as requested. They

provide qualified military and civilian personnel to carry out SC assignments according to approved

tables of distribution and other authorizations, directives, and requests. They ensure conformance

with technology transfer, classified military information release, and disclosure policies for their

respective areas of responsibility while conducting SC activities. They assist OUSD(A&S) and the

Director of DSCA, as requested, in government-to-government or interdepartmental discussions 

or negotiations involving SC. 

DEFENSE FINANCE AND ACCOUNTING SERVICE (DFAS)

The DFAS mission is to lead customers in finance and accounting by

ensuring the delivery of efficient, exceptional quality pay and financial

information. As one of the world’s largest finance and accounting

operations, DFAS supports military and civilian customers. The DFAS 

mission emphasizes the importance of DFAS’ role as a primary contributor

in standardizing and improving finance and accounting activities across

the DoD. 

DFAS performs accounting, billing, disbursing, and collecting functions

for SC programs. DFAS, including Security Cooperation Accounting (SCA), 

other mission areas, and various DFAS sites, leads the SC community in 
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 14 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	

	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	

UNAUDITED MANAGEMENT’S DISCUSSION	 	 	 AND ANALYSIS (MD&A) | ORGANIZATIONAL STRUCTURE 

accounting and financial management by delivering timely, accurate, and

meaningful information to global partners. They leverage the DoD-wide

Defense Departmental Reporting System (DDRS) solution for financial

reporting based on reconciled Trial Balances from the MILDEPs and

Defense Agencies. DFAS performs a key role for certain IAs in FMS case 

management, starting with the Letter of Offer and Acceptance (LOA), 

implementation, continuing to case execution, and concluding with case

closure. DFAS has work agreements with individual IAs to support the 

following Assessable Units including, but not limited to the following:

• Civilian Pay • FMS Trust Fund Cash Management 

• Contract Pay • Country and FMS Case Financial Management 

• Travel Pay • Departmental Level Accounting and Reporting 

• Commercial Pay • Field Level Accounting Services 

OTHER IMPLEMENTING AGENCIES (IAs)

In addition to the MILDEPs, certain other agencies also prepare and execute FMS cases, and other SA sources such as

FMS Administrative Surcharge, FMF and SDAF as applicable. In coordination with the OUSD(P), IAs serve as advisors

to the Secretary of Defense on all matters of SC affecting or related to their respective support to the CCDRs and 

provide recommendations to the Secretary of Defense to ensure the successful conduct of SC programs. They 

conduct military education and training and sales of defense articles and defense services to eligible foreign countries

and international organizations in accordance with policies and criteria established by the OUSD(P) and the Director

of DSCA and provide the technical information and data, upon request, on weapons systems, tactics, doctrine, 

training, capabilities, logistic support, price, source, availability, and lead-time for developing and reviewing SC

programs. They maintain appropriate records and furnish prescribed reports as requested. They ensure conformance

with technology transfer, classified military information release, and disclosure policies for their respective areas of

responsibility while conducting SC activities. They assist the OUSD(A&S) and the Director of DSCA, as requested, in

government-to-government or interdepartmental discussions or negotiations involving SC. 

MISSILE DEFENSE AGNECY (MDA)

MDA is a research, development, and acquisition agency within the DoD. 

Its workforce includes government civilians, military service members,

and contractor personnel in multiple locations across the United States. 

MDA develops, tests, and fields an integrated Missile Defense System

(MDS) and works closely with the combatant commanders who rely on

the system to defend the U.S., U.S. forward deployed forces, and friends 

and allies from missile attack. MDA’s mission is to develop and deploy a

layered MDS to defend the United States, its deployed forces, allies, and 

friends from missile attacks in all phases of flight.
15 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

 

	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	

	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	

	 	 	 	 	 	 	 	 	

MANAGEMENT’S DISCUSSION	 	 	 AND ANALYSIS (MD&A) | ORGANIZATIONAL STRUCTURE UNAUDITED 

NATIONAL GEOSPATIAL-INTELLIGENCE AGENCY (NGA)

NGA delivers world-class geospatial intelligence that provides a decisive 

advantage to policymakers, military service members, intelligence

professionals and first responders. NGA is a unique combination of

intelligence agency and combat support agency. It is the world leader

in timely, relevant, accurate and actionable geospatial intelligence.

NGA enables the U.S. intelligence community and the DoD to fulfill

the president’s national security priorities to protect the nation. NGA

also anticipates its partners’ future needs and advances the geospatial

intelligence discipline to meet them. 

NATIONAL SECURITY AGENCY (NSA)

NSA leads the U.S. Government in cryptology that encompasses both

signals intelligence insights and cybersecurity products and services,

and enables computer network operations to gain a decisive advantage

for the nation and its allies. The NSA is part of the DoD, serving as 

a combat support agency. To support military customers, the NSA

has deployed personnel to all of the major military commands and to

locations around the globe where there is a U.S. military presence. NSA

analysts, linguists, engineers and other personnel deploy to hostile 

areas to provide actionable signals intelligence and cybersecurity

support to warfighters on the front lines.

DEFENSE INFORMATION SYSTEMS AGENCY (DISA)

DISA is a combat support agency of the DoD. The agency provides,

operates, and assures command and control and informationsharing capabilities and a globally accessible enterprise information

infrastructure in direct support to joint warfighters, national level

leaders, and other mission and coalition partners across the full 

spectrum of military operations. 
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 16 

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	

UNAUDITED MANAGEMENT’S DISCUSSION	 	 	 AND ANALYSIS (MD&A) | ORGANIZATIONAL STRUCTURE 

DEFENSE LOGISTICS AGENCY (DLA)

The Director of DLA advises the Secretary of Defense on all SC matters 

impacting DLA and acts for the Secretary of Defense when responsibility

has been delegated. DLA prepares FMS cases for cataloging services

at the DLA Defense Logistics Information Service and EDA at the DLA 

Disposition Services. DLA coordinates on MILDEP FMS cases exclusively

for medical equipment and supplies (except for U.S. Army cases prepared

by U.S. Army Medical Materiel Agency), clothing and textiles, subsistence,

and bulk petroleum. As the item manager for consumable stock-funded

secondary items, DLA supply centers work with the MILDEPs to fill

requisitions, process Supply Discrepancy Reports, and close cases when 

supply is complete. 

DEFENSE CONTRACT MANAGEMENT AGENCY (DCMA)

DCMA performs contract administration and management, quality 

assurance, product acceptance and other acquisition services for the 

DoD and other federal agencies, in addition to foreign governments 

and international organizations, as authorized. The combat support

agency manages more than 225,000 contracts performed at more than 

15,000 contractor locations world-wide. This includes contracts that 

support FMS cases. 

DEFENSE THREAT REDUCTION AGENCY (DTRA)

DTRA enables the DoD, the USG and International partners to counter

and deter weapons of mass destruction and emerging threats. As a 

Combat Support Agency, DTRA supports the CCMDs and the military

services with both defensive and offensive capabilities. With a focus

on the combat support mission, and through leveraging and expanding

collaboration with interagency and international partners, DTRA is

uniquely prepared to address some of the most immediate, consequential 

and non-conventional weapon threats to national security. As the 

DoD’s research and development leader focused on weapons of mass

destruction and improvised threats, DTRA facilitates innovation as it 

combines traditional research with unconventional means to develop and

quickly field solutions to the most complex, deadly and urgent threats

facing the U.S. and the rest of the world. 
17 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) | ORGANIZATIONAL STRUCTURE UNAUDITED 

	 	 	 	 	 	 	 	

	 	 	 	 	 	 	

	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 

Dover	 	 	 AFB delivers helicopters;	 	 	 	 	 bolsters US, Australian alliance. U.S. Air Force photo by Tech. Sgt. J.D. Strong II 

NON-IA DEFENSE ORGANIZATIONS

DEFENSE CONTRACT AUDIT AGENCY (DCAA)

DCAA performs all necessary contract auditing for the DoD and provides 

accounting and financial advisory services regarding contracts and

subcontracts to all the DoD Components responsible for procurement

and contract administration. These services are provided in connection 

with negotiation, administration, and settlement of contracts and 

subcontracts. This includes contracts that support FMS cases.

F-35 PROGRAM

The F-35 Program (previously referred to as Joint Strike Fighter or JSF 

Program) is recognized as a non-IA Other Defense Organization and 

is the DoD’s focal point for defining affordable next generation strike

aircraft weapon systems for the Navy, Air Force, Marines, and our Allies 

and Partners. The focus of the program is affordability - reducing the

development cost, production cost, and cost of ownership of the JSF 

family of aircraft. 
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 18 

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	

UNAUDITED MANAGEMENT’S DISCUSSION	 	 	 AND ANALYSIS (MD&A) | ORGANIZATIONAL STRUCTURE 

COMBATANT COMMANDS (CCMDS)

The CCMDs develop campaign plans to conduct SC programs and activities; complete campaign plan

and campaign support plan assessments, as appropriate; provide appropriate assistance as requested

by the OUSD(P) or the Director of DSCA; and supervise the SCOs in matters related to execution of

the Guidance for Employment of the Force, including the provision of necessary technical assistance 

and administrative support to the SCOs. 

DSCA TRAINING HOUSES 

The Defense Security Cooperation University (DSCU) is the Department of Defense’s Center of

Excellence for security cooperation education, training, development, research, and institutional

capacity building and is universally recognized as the leading academic institution for security

cooperation knowledge and practice. A component of DSCA, DSCU itself is comprised of multiple 

components, including the Defense Institute of International Legal Studies (DIILS) and the Institute 

for Security Governance (ISG). 

DIILS plans and executes professional legal education and international engagement focused

on human rights, international humanitarian law, and the law of armed conflict. DIILS’ mission is

to advance US national security and foreign policy interests by building the capacity of foreign

security forces to respond to shared challenges. 

ISG is the Department of Defense’s lead implementer for Institutional Capacity Building (ICB)

internationally and within the US. ISG’s mission and vision are to further align ICB innovation,

leadership, and objectives to maximize DSCA’s capacity and flexibility to execute its mission as

mandated by Congress and the Secretary of Defense.
19 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	

MANAGEMENT’S DISCUSSION	 	 	 AND ANALYSIS (MD&A) | ORGANIZATIONAL STRUCTURE UNAUDITED 

EXECUTION OF SAA FUND TYPES 

FOREIGN MILITARY SALES CASE FUNDING 

The figure below provides a high-level overview of the general FMS Case process from signing the LOA to

disbursement/outlays. At the start of the financial process when the LOA is signed by the Partner and USG,

funds are deposited into the FMS Trust Fund in accordance with the payment schedule found in the LOA. 

Funds can also be deposited into the Federal Reserve Bank or Commercial Bank Accounts for select countries.

Once the LOA is signed and the initial deposit has been deposited, the FMS Case is implemented and Contract

Authority for the full case value is received. Obligation Authority is then provided to the IAs on either FMS or

BPC cases. 

The BPC programs encompass security cooperation and security assistance activities funded with USG 

appropriations and administered as FMS cases, also called BPC cases, utilizing the existing FMS process. These

programs provide defense articles and/or services to other USG departments and agencies under the authority 

of the Economy Act or other transfer authorities for the purpose of building the capacity of partner nation

security forces and enhancing their capability to conduct counterterrorism, counter drug, and counterinsurgency

operations, or to support U.S. Military and stability operations, multilateral peace operations, and other

programs. DoD appropriated funds are made available to DSCA and moved into the FMS Trust Fund to fund BPC

cases, and then executed through the existing FMS infrastructure using Security Assistance systems and a case

developed by the IAs.

DSCA is leading an effort to decouple BPC transactions from the FMS Trust Fund and instead report financial

activity for BPC cases on the DoD Financial Statements. This effort is designed to support accurate reporting 

of DoD Appropriated funding and maintain or enhance financial and programmatic report capabilities for

BPC programs. 

FIGURE 3: GENERAL FMS CASE FLOW

LOA Signed 

Cash 

Transferred 

to the FMS 

Trust Fund 

Contract 

Authority (CA) 

Received 

CA Provided 

to the lAs as 

Obliga�on 

Authority 

IAs Execute 

FMS Cases 

(Legal obliga�ons 

for contracts and 

services) 

Once Expenditure 

Authority is 

Provided, IAs 

Make Outlays 

FOREIGN MILITARY SALES ADMINISTRATIVE SURCHARGE FUNDING 

The genesis of the DSCA funds distribution for FMS Administrative Surcharge-funded activities is the section

43(b) of the AECA, which states “(b) Administrative expenses incurred by any department or agency of the United 

States Government (including any mission or group) in carrying out functions under this Act which are primarily for the 

benefit of any foreign country shall be fully reimbursed from amounts received for sales under sections 21 and 22.” 

Figure 4 below provides a high-level end to end overview of the FMS Administrative surcharge funding flow.

This process begins when a department or agency incurs an expense while carrying out functions under AECA.

Each department and agency will then claim amounts to be reimbursed which are then placed on the Annual

Funding Plan. Distribution amounts are determined in the Annual Funding Plan, which is issued to claimants by

DSCA Headquarters at the beginning of each fiscal year. DSCA will then substantiate amounts requested to be

reimbursed on a Transmittal Letter (TL) and will distribute the appropriate amounts. With the funds distribution

process complete, claimants are able to execute the FMS Administrative funding.
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 20 

	 	 	 	

		 	 	 	 	 	 	 	 	 	 	 	 	 	 							

 

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

UNAUDITED MANAGEMENT’S DISCUSSION	 	 	 AND ANALYSIS (MD&A) | ORGANIZATIONAL STRUCTURE 

Additional accessorial surcharges include:

• Contract Administrative Services (CAS) surcharge which is used to fund three basic elements: quality

 insurance and inspection, contract management and contract audit. 

• Transportation surcharge, which is used to cover the cost to the United States of transporting 

 purchaser materials using DTS or a Bill of Lading. 

FIGURE 4: FMS ADMINISTRATIVE FUND FLOW 

Department/Agency 

Incurs Expense 

in Prior FY 

Annual Fund 

Plan 

Create Transmittal 

Letter 

Funds Sent 

to Claimants 

Claimants Execute 

Funding 

SPECIAL DEFENSE ACQUISITION FUND 

SDAF is used as a revolving fund separate from other accounts, to finance the acquisition of defense articles and

services in anticipation of transfer to eligible foreign countries and international organizations. This provides

the DoD with the flexibility required in planning for anticipated foreign procurements of U.S. defense materiel.

Through its ability to buy military equipment to meet future requirements, the SDAF permits the U.S. to act in

anticipation of an emerging defense export environment. The objective of SDAF is to procure high demand, long

lead-time defense equipment in anticipation of future sales to be conducted on a government to government basis

through the FMS Program. These acquisitions result in accelerated deliveries once FMS cases are signed. The 

availability of SDAF assets reduces pressure on the DoD to meet urgent requirements through withdrawals from

U.S. inventories or through diversions from production. 

The authority which provides the SDAF the ability to operate comes from Section 114(c) of Title 10 of the U.S.C.

The authorization dates back decades, well before the 1980’s, but was dormant for a number of years. In 2012,

Congress approved the Administration’s request to recapitalize the SDAF for $100M with the enactment of the

Department of State, Foreign Operations, and Related Programs Appropriation Act, 2012 (Public Law 112-74). This

law also provided the obligation authority the funds needed to exercise its requirements, making SDAF initially a

four-year fund. 
21 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

 

 

 

 

 

	 	 	 

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MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) | ORGANIZATIONAL STRUCTURE UNAUDITED 

Figure 5 provides a high-level flow of the SDAF process beginning with the MILDEPs submitting SDAF procurement

requests to DSCA. The DoD, in consultation with DoS, must determine the most effective and efficient use of the

funds through a jointly chaired board called the SDAF Procurement Board. Once the Procurement Board selects the

top proposals, budgetary authority is provided through the Foreign Operations and Consolidated Appropriations

Act. During the sales process, articles and services are pulled from the SDAF inventory and placed on an FMS case 

also known as an LOA. All LOAs and SDAF sales are executed through the FMS system. This process requires that all

articles/services be directly procured from the SDAF inventory, once requested by a foreign partner. Upon delivery

of SDAF articles to the foreign partner, payment is received into the FMS Trust Fund. Finally, a reimbursement

package must be submitted to replenish cash back into the SDAF account and to maintain the revolving nature of

the account. 

FIGURE 5: SDAF FUND FLOW

DSCA receives SDAF 

procurement requests 

from the MILDEPs 

1. 

5. 

Reimbursement Package 

submi‡ed and cash returned 

to SDAF account 

SPECIAL DEFENSE 

ACQUISITION FUND 

2. 

Top line Budget Authority 

loaded by OMB 

4. 

Sales Process 

• Ar€cles and services pulled 

from SDAF inventory and 

placed on an FMS case 

• SDAF ar€cles and inventory 

are bought by foreign partner 

• Payments received into FMS 

trust fund 

3. 

Budgetary Authority 

transferred to the MILDEPs 

3. 
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 22 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

UNAUDITED MANAGEMENT’S DISCUSSION	 	 	 AND ANALYSIS (MD&A) | ORGANIZATIONAL STRUCTURE 

INTERNATIONAL MILITARY EDUCATION AND TRAINING FUNDING 

The IMET program is a DoS program, jointly managed by the DSCA and the DoS, that funds military education

and training courses for international military, and related civilian personnel of foreign countries. It is a key SC 

component, promoting regional stability and defense capabilities through professional military and technical

courses and specialized instruction. The IMET courses are provided primarily at military schoolhouses in the 

United States, exposing international students to the U.S. culture, military students, practices, standards,

and professionalism. 

The IMET funding flow shown in figure 6 begins with the DoS receiving an IMET appropriation. A Transmittal

Letter is then consolidated with training requirement submissions from all three MILDEPs for determination

of which events to fund. Upon this determination, the Transmittal Letter is approved and a non-expenditure

transfer is completed by USDT. DSCA will then generate a Funding Authorization Document and distribute the

corresponding amounts to the MILDEPs receiving IMET funding. Finally, the MILDEPs are able to execute the

funding consistent with the training requirements previously submitted.

FIGURE 6: IMET FUND FLOW 

IMET Funds 

Appropriated 

Budget 

Authority 

Loaded 

Appropriation 

Transfer 

Funds 

Transferred 

from 

Treasury 

IMET Funds 

Distribution 

IAs Execute 

Funding 

FOREIGN MILITARY FINANCING DIRECT LOAN FUNDING 

The FMF Direct Loan Financing account was established to allow for a subsidy to fund and make disbursements

of FMF funds for approved procurements and for subsequent collections for the loans. The FMF Direct

Loan process begins when the DoS approves funds for the FMF Direct Loan program and OMB establishes

the subsidy. The FMF Direct Loan Financing account subsidizes the estimated long-term cost to the U.S.

Government. This subsidy is for the risk of defaults and the difference in interest rates that the country pays

on its loans and the interest the government must pay on U.S. Treasury borrowings. When FMS cases being

funded by a FMF Direct Loan are accepted, an LOA is prepared to support the case and a disbursement is made

by the USDT into the FMS Trust Fund. IAs are able to execute these cases once the funds have been disbursed

into the FMS Trust Fund. See figure 7 for an end-to-end FMF Direct Loan fund flow.

FIGURE 7: FMF DIRECT LOAN FUND FLOW 

New FMF Loan 

Established 

Subsidy 

Established 

LOA and Loan 

Agreement 

Prepared 

Disbursement 

of FMF Loan 

Funds to the 

FMS Trust 

Fund 

lAs Execute 

Cases Funded 

by FMF 

Loan 

Payments 

Received 
23 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	

MANAGEMENT’S DISCUSSION	 	 	 AND ANALYSIS (MD&A) | PERFORMANCE SUMMARY AND HIGHLIGHTS UNAUDITED 

FOREIGN MILITARY FINANCING GRANTS FUNDING 

The FMF Grants process begins when Congress appropriates FMF funds in the Foreign Operations Appropriations

to the DoS, who allocates funds for eligible partner nations. Similar to the FMF Direct Loan process, an LOA is

prepared for FMS cases being funded by a FMF Grant. A funds transfer will then occur to disburse FMF Grant

funds to the FMS Trust Fund, allowing IAs to execute cases.

FIGURE 8: FMF GRANTS FUND FLOW 

FMF Funds 

Appropriated 

Funds 

Transfer 

LOA 

Prepared Disbursement 

lAs Execute 

Cases Funded 

by FMF 

PERFORMANCE SUMMARY AND HIGHLIGHTS 

DSCA’s Strategic Plan aligns key tenets of the National Security Strategy and NDS with the Agency’s Strategic

Goals. This enables a direct linkage between national security guidance and DSCA measurable objectives and

action. This demonstrates DSCA’s critical role in implementing national security and defense strategy.

DSCA’s values-based approach, including human rights, rule of law, civilian harm mitigation, and women,

peace, and security initiatives, is what distinguishes the United States from our strategic competitors. DSCA 

will continue to identify and implement SC enterprise improvements with an emphasis on cost, schedule, 

and performance. DSCA will ensure that authorities and policies are implemented and updated to facilitate 

all aspects of Security Cooperation. Finally, DSCA will empower the SC workforce by ensuring they have the

training and tools to excel as SC professionals.

In service of, and in alignment with, enduring national defense strategic goals, in April 2021 DSCA developed its 

2025 Strategic Plan, which contained five Strategic Goals. The five strategic Goals begin with a focus on external

SC stakeholders to enable decision-making that is mutually beneficial for the U.S., DSCA, and the partner nations.
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 24 

	 	 	 	 	

	 	

	 	 	 	

	 	 	 	 	

	 	 	 	 	 	 	

	 	 	 	 	 	

	 	 	 	 	 	 	

	 	 	 	 	 	 	

	 	 	

	 	 	 	 	 	

	 	

	 	 	 	 	 	

	 	 	 	 	 	 	

	 	 	

	 	 	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

UNAUDITED MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) | ANALYSIS OF FINANCIAL STATEMENTS 

STRATEGIC GOAL 1 

Align and integrate department SC 

activities to influence partner capability

development and acquisition decisions 

to mutual benefit.

STRATEGIC GOAL 3

Improve the effectiveness and 

efficiency of the SC enterprise’s

business operations.

STRATEGIC GOAL 5

Develop a diverse, certified, adaptable,

and resilient SC workforce to meet 

shared U.S. and international security 

challenges. 

STRATEGIC GOAL 2 

Standardize and lead SC program planning 

such that activities and resources are 

prioritized, aligned, and executed within a

structured, full-spectrum approach focused 

on developing capabilities.

STRATEGIC GOAL 4 

Improve our ability to strengthen alliances

and attract new partners by obtaining and

refining authorities and policies.

In FY 2022, DSCA worked to develop objectives

to further enhance these five strategic goals.

These objectives are designed to reflect an

incremental approach to codify the ways that DSCA 

and the SC Community meet current and future 

demands and the corresponding Implementation 

Plan will support reporting progression on fulfilling

these FY 2023 Objectives.

ANALYSIS OF FINANCIAL STATEMENTS 

The principal financial statements include the Consolidated Balance Sheets (BS), Consolidated Statements

of Net Cost (SNC), Consolidated Statements of Changes in Net Position (SCNP), and Combined Statements

of Budgetary Resources (SBR). Due to limitations of SAA financial management processes and systems,

there is a possibility that not all elements of U.S. Generally Accepted Accounting Principles (U.S. GAAP) and

OMB Circular No. A-136 have been fully implemented. DSCA is developing corrective action plans to resolve

financial management issues identified during the reporting period that were highlighted by the SAA audit.

The financial summary and highlights that follow provide a brief description of the nature of each financial

statement and significant fluctuations from FY 2021 to FY 2022. A summary of key financial measures

from the Balance Sheets and Statements of Net Cost and Budgetary Resources is provided in Tables 2-4,

respectively. The complete financial statements, including the independent auditor’s reports, notes, and

required supplementary information, are presented in Section II: Financial Section.
25 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	

MANAGEMENT’S DISCUSSION	 	 	 AND ANALYSIS (MD&A) | ANALYSIS OF FINANCIAL STATEMENTS UNAUDITED 

CONSOLIDATED BALANCE SHEETS 

The Balance Sheets, which provide a snapshot of SAA’s financial position as of September 30, 2022, and September

30, 2021, report current and future economic benefits owned or managed by SAA (Assets), claims against those

Assets (Liabilities), and the difference between them (Net Position).

TABLE 2: TABLE OF KEY FINANCIAL MEASURES - BALANCE SHEETS (AMOUNTS IN THOUSANDS)

SUMMARY CONSOLIDATED 

BALANCE SHEETS DATA 2022 2021 CHANGE % CHANGE 

Fund Balance with Treasury $51,966,897 $45,412,296 $6,554,601 14%

Cash and Monetary Assets 39,872,408 38,554,491 1,317,917 3%

Loans Receivable 1,446,013 2,046,177 (600,164) (29)%

Remaining Assets 1,456,610 472,920 983,690 208%

Total Assets $94,741,928 $86,485,884 $8,256,044 10%

Accounts Payable $18,333,442 $18,089,841 $243,601 1%

Advances from Others and 

Deferred Revenue 

167,950,103 126,153,289 41,796,814 33%

Other Liabilities 40,379,697 39,053,458 1,326,239 3%

Remaining Liabilities 1,041,841 1,668,726 (626,885) (38)%

Total Liabilities $227,705,083 $184,965,314 $42,739,769 23%

Unexpended Appropriations $12,504,726 $7,766,181 $4,738,545 61%

Cumulative Results of Operations (145,467,881) (106,245,611) (39,222,270) 37%

Total Net Position $(132,963,155) $(98,479,430) $(34,483,725) 35%

Total Liabilities and Net Position $94,741,928 $86,485,884 $8,256,044 10%

ASSETS 

The SAA’s Total Assets were $94.7 billion as of September 30, 2022, an increase of $8.3 billion (10%) over the

2021 total. The majority of this increase is attributed to SAA’s largest asset, Fund Balance with Treasury (FBwT),

which increased $6.6 billion (14%) over the 2021 total. This increase is primarily due to the funding received in

support of Ukraine in FY 2022 to the Foreign Military Financing Grant Account. 
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 26 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

UNAUDITED MANAGEMENT’S DISCUSSION	 	 	 AND ANALYSIS (MD&A) | ANALYSIS OF FINANCIAL STATEMENTS 

FY 2022 SAA ASSETS 

(AMOUNTS IN THOUSANDS) 

Loans Receivable, Net 

$1,466,013 

1% 

Cash and Other Monetary Assets $94,741,928 $39,872,408 

42% 

TOTAL ASSETS: 

Remaining Assets 

$1,456,610 

2% 

Fund Balance with Treasury 

$51,966,897 

55% 

LIABILITIES 

The SAA’s Total Liabilities were $227.7 billion as of September 30, 2022, an increase of $42.7 billion (23%)

over the 2021 total. The majority of this increase is from Advances from Others and Deferred Revenue, which

increased by $41.8 billion (33%). The $41.8 billion increase in Advances from Others and Deferred Revenue is

primarily driven by adjustments to FMS cash collections from systems that do not directly feed into DDRS, and

the funds advanced from the Department of State that were previously recognized as revenue. 

FY 2022 SAA LIABILITIES 

(AMOUNTS IN THOUSANDS) 

Accounts Payable Remaining Liabilies 

$18,333,442 $1,041,841 

8% <1% 

Other Liabilies 

$40,379,697 TOTAL LIABILITIES: 

$227,705,083 Advances from Others 18% and Deferred Revenue 

$167,950,103 

74% 
27 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 		

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 		

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	

	 	 	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	

MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) | ANALYSIS OF FINANCIAL STATEMENTS UNAUDITED 

ENDING NET POSITION 

The SAA’s Net Position, comprised of Unexpended Appropriations and the Cumulative Results of Operations,

increased $34.5 billion (35%) between 2022 and 2021. Cumulative Results of Operations decreased $39.2 billion, and

Unexpended Appropriations increased by $4.7 billion, largely attributed to SAA’s FMF program receiving an additional

$4.6 billion in appropriations related to the ongoing conflict in Ukraine.

CONSOLIDATED STATEMENTS OF NET COST 

The Statements of Net Cost present the net cost of SAA’s major programs for the years ended September 30, 2022,

and September 30, 2021. The net cost is computed by subtracting earned revenue from gross cost and adjusted by the

(gain)/loss from changes in assumptions, as applicable.

TABLE 3: TABLE OF KEY FINANCIAL MEASURES - STATEMENTS OF NET COST (AMOUNTS IN THOUSANDS)

SUMMARY CONSOLIDATED STATEMENTS 

OF NET COST DATA 2022 2021 CHANGE % CHANGE 

Gross Costs $102,322,370 $95,684,584 $6,637,786 7%

Less Total Revenue (19,467,727) (17,320,368) (2,147,359) 12%

Total Net Cost $82,854,643 $78,364,216 $4,490,427 6%

SAA’s Net Cost of Operations increased $4.5 billion (6%) between 2022 and 2021. This increase is a result of a $6.6

billion increase (7%) in Gross Costs and a $2.1 billion (12%) increase in Total Revenue. The increase in Gross Costs is

driven by activity in the FMS Trust Fund, consisting of an increase of $4.6 billion in Distributed Offsetting Receipts and

an increase of $2.0 billion in Disbursements.

CONSOLIDATED STATEMENTS OF CHANGES IN NET POSITION 

The Statements of Changes in Net Position identify all financing sources available to, or used by, SAA to support its

net cost of operations and the net change in its financial position. The sum of these components, Cumulative Results of

Operations and Unexpended Appropriations, equals the Net Position at year-end.

The SAA’s Total Unexpended Appropriations increased $4.7 billion (61%), primarily due to an increase in

appropriations related to the ongoing conflict in Ukraine.

COMBINED STATEMENTS OF BUDGETARY RESOURCES 

The Combined Statements of Budgetary Resources present SAA’s total budgetary resources, their status at fiscal

year-end, and the relationship between the budgetary resources and the outlays made against them. In accordance

with federal statutes and related regulations, obligations may be incurred, and payments made only to the extent that

budgetary resources are available to cover such items.
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 28 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	

	 	 	 

	 	 	 	 	 	

UNAUDITED MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) | ANALYSIS OF FINANCIAL STATEMENTS 

TABLE 4: TABLE OF KEY FINANCIAL MEASURES - STATEMENTS OF BUDGETARY RESOURCES

(AMOUNTS IN THOUSANDS)

SUMMARY COMBINED STATEMENTS OF 

BUDGETARY RESOURCES DATA 2022 2021 CHANGE % CHANGE 

Unobligated Balance from Prior Year Budget

Authority, Net 

$180,140,886 $176,934,990 $3,205,896 2%

Appropriations 11,733,266 11,878,103 (144,837) (1)%

Borrowing Authority 184,611 645,684 (461,073) (71)%

Contract Authority 53,271,225 34,385,748 18,885,477 55%

Spending Authority from Offsetting 

Collections 

133,740 204,318 (70,578) (35)%

Total Budgetary Resources $245,463,728 $224,048,843 $21,414,885 10%

SAA’s Budgetary Resources increased 10% between FY 2022 and FY 2021. The increase in Budgetary Resources

is primarily due to an $18.9 billion (55%) increase in Contract Authority, driven by sales activity and increased

collections in the FMS Trust Fund. 

FY 2022 SAA TOTAL BUDGETARY RESOURCES 

(AMOUNTS IN THOUSANDS) 

Spending Authority from 

O‘sešng Collec�ons 

$133,740 Appropria�ons 

TOTAL BUDGETARY 

RESOURCES: 

$245,463,728 

Borrowing Authority 

$11,733,266 $184,611 <1% 

5% <1% 

Contract Authority 

Unobligated balance from prior $53,271,225 Year Budget Authority, Net 

22% $180,140,886 

73% 

SAA BUDGET AUTHORITY 

The SAA receives budget authority in multiple ways. For FY 2022, overall SAA budget authority was $245 billion.

The following list breaks down the types of budget authority with descriptions of each, as well as which SAA

funds align with each. Most accounts are funded solely through appropriations, with a few accounts funded 

through contracts, borrowing from the USDT, or through offsetting collections.
29 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

	 	 	 	 	 	

	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	

	 	 	

	 	 	 	 	 	

	 	 	 	 	 	 	

	 	 	 	 	 	

	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	

	 	 	 	

	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 

	 	 	 	

 		 	 	 	 	

 	 	 	 	 	

 

	 	 	 

 

	 	 	 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) | ANALYSIS OF SYSTEMS, CONTROLS, AND

 LEGAL COMPLIANCE

MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) | ANALYSIS OF SYSTEMS, CONTROLS, AND UNAUDITED

 LEGAL COMPLIANCE 

TABLE 5: SAA BUDGET AUTHORITY BREAKDOWN

FORM OF BUDGET 

AUTHORITY FUND CHARACTERISTICS 

APPROPRIATION IMET – 1081 

FMF – 1082 

FMF Program – 1085 

FMS Administrative 

Surcharge Account – 

8242 

An allocated amount of resources authorized by

Congress in the annual appropriations act and 

provided to agencies via Treasury warrants. 

CONTRACT 

AUTHORITY 

FMS Case and Material 

– 8242 

Permits agencies to incur obligations in advance of

an appropriation, offsetting collections, or receipts 

that enable you to make outlays to liquidate the

obligations.

BORROWING 

AUTHORITY 

FMF Financing – 4122 

Military Debt Reduction

– 4174 

Permits agencies to incur obligations and

authorizes agencies to borrow funds to liquidate

the obligations. Usually, the law authorizing the

borrowing specifies that you must borrow from

the Treasury, but in a few cases it authorizes

borrowing directly from the public.

SPENDING 

AUTHORITY FROM 

OFFSETTING 

COLLECTIONS 

SDAF – 4116 

FMF Liquidating - 4121 

Usually provided in permanent law, permits 

agencies to credit offsetting collections to an 

expenditure account, to incur obligations, and

to make payments using offsetting collections. 

ANALYSIS OF SYSTEMS, CONTROLS, AND LEGAL COMPLIANCE 

On behalf of the SAA, DSCA is responsible for managing risks and maintaining effective internal controls to meet

the objectives of Sections 2 and 4 of the FMFIA. DSCA conducted its assessment of risk and internal controls in

accordance with the OMB Circular No. A-123, Management’s Responsibility for Enterprise Risk Management and

Internal Control and the Green Book, GAO-14-704G, Standards for Internal Control in the Federal Government. 

These requirements promote the production of reliable, timely, and accurate financial information through

efficient and effective internal controls, with objectives to provide reasonable assurance of:

 • Effectiveness and efficiency of operations;

• Reliability of financial and non-financial reporting;

 • Compliance with applicable laws and regulations; and

• Financial information systems compliance with the FFMIA. 
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 30 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	

 

						 					 	 	 	 	 	 	

 

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 

 

UNAUDITED MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) | ANALYSIS OF SYSTEMS, CONTROLS, AND

 LEGAL COMPLIANCE 

The evaluation of internal controls extends to every responsibility and activity undertaken by DSCA and applies to

program, administrative, and operational controls. Furthermore, the concept of reasonable assurance recognizes

that (1) the cost of internal controls should not exceed the benefits expected to be derived, and (2) the benefits

include reducing the risk associated with failing to achieve the stated objectives. Moreover, errors or irregularities

may occur and not be detected because of inherent limitations in any system of internal controls, including those

limitations resulting from resource constraints, congressional restrictions, and other factors. Finally, projection of

any system evaluation to future periods is subject to the risk that procedures may be inadequate because of changes

in conditions, or that the degree of compliance with procedures may deteriorate. Therefore, this statement of 

reasonable assurance is provided within the limits of the preceding description.

FMFIA AND OMB CIRCULAR NO. A-123 COMPLIANCE - REPORTING

DSCA conducted its assessment of the effectiveness of internal controls over financial reporting in accordance

with OMB Circular No. A-123. Based on the results of the assessment, DSCA was unable to provide assurance that

internal controls over financial reporting for the SAA are operating effectively as of September 30, 2022 due to six

self-identified material weaknesses in the following areas:

1. Lack of Fund Balance with Treasury Reconciliation 

2. Inadequate Financial Statement Compilation and Reporting, including incomplete 

Universe of Transactions and supportable Beginning Balances

3. Lack of Adequate Controls and Documentation over SAA Business Processes 

4. Lack of Adequate Controls over Property, Plant, and Equipment and Inventory 

5. Lack of Adequate Controls over the Transportation Account 

6. Lack of Adequate Controls over Building Partner Capacity Appropriated Funds

 Transferred to the Foreign Military Sales Trust Fund 

FMFIA AND OMB CIRCULAR NO. A-123 COMPLIANCE - SYSTEMS

Also, in accordance with OMB Circular No. A-123, SAA conducted its assessment of the effectiveness of internal 

controls over financial systems in accordance with OMB Circular No. A-123. Based on the results of the assessment,

DSCA was unable to provide assurance that internal controls over financial systems for the SAA are operating

effectively as of September 30, 2022 due to three self-identified material weaknesses in the following areas:

1. Lack of Adequate Access Controls over SAA Financial Systems 

2. Lack of Adequate Policies and Procedures Governing SAA Financial Systems 

3. Lack of Standard Financial Information Structure Compliant Accounting 

DSCA is engaging with the SC community to remediate these weaknesses by devising and implementing corrective

action plans (CAPs) to strengthen internal controls over financial reporting and systems. The SC Community remains

committed towards financial excellence and improving its ability to provide accurate and reliable financial and

managerial information to support reporting objectives.

A full list of material weaknesses over Financial Reporting and Financial Systems identified by both Management and

the Independent Public Accountant (IPA) can be found in the Other Information Section of the AFR.
31 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

											 	 	 	 	

 		 	 	 	 	 	 	 	 	 	 	 	 	

											 	 	 	 	 	 	 	 	 	 	 	 	 	

											 	 	 	 	 	 	 	 	 	 	 	

 

 	 	 	 	 	 	 	 	 	 	 	

											 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

 

	 	 	 	 	 	 	 	 	 	 	 	 	 		 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

U.S. and partner nation students graduate during IAAFA training cycle. U.S. Air Force photo by Vanessa R. Adame 

LEGAL COMPLIANCE 

The Anti-Deficiency Act (ADA), which is codified in 31 U.S. Code §§ 1341(a)(1), 1342, and 1517(a), stipulates

that federal agencies may not:

 • Obligate or expend funds in excess of the amount available in an appropriation or fund

or in advance of appropriations;

• Accept voluntary services on behalf of the government or employ personal services in

excess of that authorized by law, except as it may be necessary in emergencies

involving the safety of human life or the protection of property; or

• Obligate, authorize, or expend funds that exceed an apportionment or amount permitted

by regulation prescribed for the administrative control of an appropriation.

An ADA violation is a serious matter as it represents a violation of a federal statute. A federal employee who 

violates the ADA may be subject to administrative sanctions (such as suspension from duty without pay

or removal from office) and/or penal sanctions (such as fines or imprisonment). Confirmed ADA violations

are reported to the President of the United States through the Director of the OMB, Congress, and the 

Comptroller General of the United States. 

During FY 2022, no SAA violations or potential violations of the ADA were identified. Furthermore, DSCA is

not aware of any instances of non-compliance or suspected non-compliance with laws, regulations, contracts, 

and grant agreements whose effects should be considered when preparing the SAA financial statements.
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 32 

	 	 	 

 

UNAUDITED MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) | ANALYSIS OF SYSTEMS, CONTROLS, AND

 LEGAL COMPLIANCE 
33 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

	 	 	 

 

	 	 	 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) | ANALYSIS OF SYSTEMS, CONTROLS, AND

 LEGAL COMPLIANCE

MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) | ANALYSIS OF SYSTEMS, CONTROLS, AND UNAUDITED

 LEGAL COMPLIANCE 
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 34 

	 	 	 

 

UNAUDITED MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) | ANALYSIS OF SYSTEMS, CONTROLS, AND

 LEGAL COMPLIANCE 
35 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 36 

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	  	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

Dover AFB conducts Ukraine security assistance mission. U.S. Air Force photo by Airman 1st Class Cydney Lee. 

FORWARD-LOOKING INFORMATION

ONGOING CONFLICT IN UKRAINE 

Events in Ukraine have encouraged Allies and Partners to significantly accelerate their defense capability

modernization; pressure on Russian defense industry has increased demands on the U.S. infrastructure to be

postured to support. 

The DoD will prioritize the challenges posed by the People’s Republic of China followed by Russia.  As Russia

continues to pose an acute threat, as illustrated by its brutal and unprovoked invasion of Ukraine, DSCA and the

SC Community will collaborate with North Atlantic Treaty Organization (NATO) Allies and Partners to reinforce

robust deterrence in the face of Russian aggression. Ukraine and other security challenges have revealed the

urgent need for U.S. defense capability—at scale. The defense industry is undergoing a multi-year process

to backfill arms transfers to Ukraine in partnership with the DoD. This acute crisis reveals that the DoD has

created a system for defense production with constrained surge capacity and resiliency. To build a defense

production system that can surge and stockpile items like munitions excess to the immediate need, the United

States must evaluate the incentives and structures that have governed defense development and procurement 

in recent decades. The United States must be able to support our Allies and Partners both diplomatically

and militarily, including through the provision of weapons and munitions necessary to defend themselves to 

maintain global order and peace.

Answering this “call to action”, DSCA and the SC Community will incorporate ally and partner perspectives,

competencies, and advantages at every stage of security cooperation planning. To ensure U.S Allies and

Partners have the best fighting forces possible to deter aggression while being prepared to prevail in conflict

when necessary, they need integrated defense capabilities well beyond current or legacy systems. The United

States will work with our Allies and Partners to forecast and prioritize defense modernization through a full 

spectrum capability approach, working with the industrial base across the globe to increase capacity, leveraging

the Alliances and partnerships that have been an enduring strength for the United States and are critical to

achieving our objectives. To do that, we need to ensure we have a certified and adequate workforce to proactively

leverage all the available tools and resources necessary to be postured and capable of supporting the defense

modernization of our Allies and Partners. 
37 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

		 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 		 	 	 	

MANAGEMENT’S DISCUSSION	 	 	 AND ANALYSIS (MD&A) | FORWARD-LOOKING INFORMATION UNAUDITED 

To support the DoD’s first Security Cooperation Learning and Evaluation Agenda for Partnerships (LEAP),

DoD has prioritized analyses of the effectiveness of ongoing SC efforts in Ukraine. These efforts will provide 

the SC community with a deeper understanding of the sustainability of SC program effects and help inform

future SC planning approaches. 

IMPACTS OF CLIMATE CHANGE 

Increasing temperatures, changing precipitation patterns, and more frequent, intense, and unpredictable

extreme weather conditions caused by climate change pose new risks to U.S., ally, and partner interests and are

altering strategic and operational requirements for militaries. Changing climate and extreme weather events can

adversely impact both ally and partner military infrastructure, operational readiness, and supply chains. The U.S.

defense industrial base faces similar challenges. Natural disasters resulting from changing climate and extreme

weather events can jeopardize military installations, manufacturing plants, and research and development

facilities due to recurrent flooding, drought, desertification, or wildfires. This can require both militaries and

industry to expend significant resources to recover from these events in the near term and impact long-term

readiness. The necessary time for industry to reconstitute the ability to produce and deliver defense articles

and services can also significantly impact production and procurement timelines. Climate change and extreme

weather events will also likely contribute to political instability as national actors, institutions and populations

react to an increasingly volatile cycle of events that negatively impacts resiliency resulting in insufficient periods

for recovery and substantial, cumulative, long-term impacts. As the DoD develops activities to address these

challenges, the DoD will incorporate appropriate assessment, monitoring, and evaluation procedures and 

processes. The FY 2022 DoD Climate Adaption Plan, which DSCA and SAA leverages, can be found here: https://

www.defense.gov/spotlights/tackling-the-climate-crisis/. 

WORLDWIDE ECONOMIC AND BUDGETARY CHALLENGES 

Budgetary challenges continue to be a significant risk to U.S. security assistance efforts as Allies and Partners

must balance military funding and acquisition decisions with domestic program expenses such as infrastructure

and social economic projects. The global economy continues to face challenges as it recovers from the effects

of the COVID-19 pandemic, increasing negative impacts of inflation, and currency exchange volatility. The

strong U.S. dollar further complicates decision making as the purchasing power of our Allies and Partners 

may be reduced. The threat of a global recession may deter governments from acquiring essential military

capabilities from the U.S., instead shifting their focus to domestic military development programs to bolster

economic security and assuage public concern. In response to global economic and security challenges, Allies and

Partners may increasingly seek U.S. security assistance funding, grant aid, and financing, or turn to lower cost

international sources for defense and military equipment, training and support. Forecasting the international 

demand for U.S. origin systems, support, and training will be highly variable in this dynamic environment. As

countries face a multitude of competing demands - recovery from global pandemic, natural disasters, energy

insecurity, and security threats - increased reactivity in budgetary decision making is expected. Demand for

defense systems may continue to grow as public recognition of significant security threats supports military

expenditures for some countries. Other countries may be forced to defer strategic investments as the

reduced purchasing power of their available budgets is realigned to meet near term, unforeseen, or emergent

requirements. 

INDUSTRIAL CHALLENGE 

The current strains on U.S. and international stockpiles are symptomatic of underlying challenges. The U.S. 

Defense Industrial Base (DIB) must contend with budgetary pressures, inconsistency in demand and orders

causing fluctuations in production line stability and availability and scalability of niche components sourced

from sub-tier suppliers, and compression of the DIB through off-shoring and consolidation. As demand for
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 38 

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

Uploading UH 60 for FMS customer. - US Army photo by Richard Bumgardner, USASAC Public Affairs. 

certain capabilities increase, current suppliers are further overstretched to meet delivery schedules while

experiencing production constraints attributed to factors ranging from COVID-19 pandemic related manpower

shortages to increased energy and materiel costs. Additionally, the rapid recapitalization of U.S. and Allies 

and Partners weapons inventories, following the widespread international donations of equipment to Ukraine, 

could drive continued supply chain issues for the U.S. warfighter, and our Allies and Partners. This scenario

presents an opportunity for innovation and development of alternative solutions and sources to help meet 

the acquisition timeline needs of our Allies and Partners. However, alternative systems, sources, or solutions 

may not yield the benefits typically associated with DoD programs of record, such as cost savings through

economic order quantity or demand consistency. 

ANALYSIS OF EMERGING TYPES OF RISK IN 

PARTNER NATIONS’ OPERATING ENVIRONMENTS 

As part of the Operational Environment Risk Analysis (OPERA) framework, the Administration Office within

DSCA is developing a risk index that measures the extent to which Cyber Security; Space Exploration; Civilian

Harm and Protection; and Women, Peace and Security pose risks and provide potential opportunities to

measure the effectiveness of Security Cooperation in partner nations across the globe. This index consists

of indicators that capture threats to partner nations’ defense and security infrastructure, U.S. military

bases in the partner nation, and partner nation stability. Once developed and integrated into the SC Risks

and Opportunities Dashboard, OPERA will provide a more comprehensive understanding for not only the

Department of Defense, but also the Department of State to visualize types and level risks to Security

Assistance programming and U.S. assets abroad.

LIMITATION TO FINANCIAL STATEMENTS 

The financial statements are prepared to report the financial position, financial condition, and results of

operations, consistent with the requirements of 31 U.S.C. § 3515(b). The statements are prepared from

records of Federal entities in accordance with U.S. GAAP and the formats prescribed by OMB. Reports used

to monitor and control budgetary resources are prepared from the same records. Users of the statements are

advised that the statements are for a component of the U.S. Government, a sovereign entity. 
39 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

Valiant Shield 22 | EA 18G Growler Refuel. -

U.S. Marine Corps photo by Lance Cpl. Gadiel Zaragoza. 

SECTION II 

Financial Section

(Unaudited) 
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 40 

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 		 		 	 	

MESSAGE FROM THE 

CHIEF FINANCIAL OFFICER 

I am honored to join Director Hursch in presenting the first ever Agency

Financial Report for the Security Assistance Accounts. This report is the result 

of years of devoted work by DSCA, the Implementing Agencies, Office of the

Under Secretary of Defense (Comptroller) [OUSD(C)], Defense Finance and 

Accounting Services, and other stakeholders that facilitated the implementation 

of an aggressive audit strategy for the SAA to go under audit in Fiscal Year (FY) 

2022. I am proud of the tremendous progress achieved to date and am ultimately 

focused on developing and executing against compressive corrective actions

that progresses the SAA toward achieving a clean audit opinion. While this 

report is the culmination of years of dedicated work to advance the Security 

Cooperation mission through sound financial management, the real work is

just now beginning. Going forward, the SC community will not be evaluated on

getting ready for audit, but rather on the progress made remediating findings

identified and driving the SAA towards its ultimate audit goal.

A disclaimer of opinion is not the audit result we were looking for, but DSCA

and the SC Community are fully committed to not only remediating findings

identified by our auditors but also addressing self-identified deficiencies.

Through our readiness efforts over the past six years, DSCA and the SC

Community have been aware of the challenges involved in producing audit

ready financial statements and look forward to our continued partnership

with DFAS and the IAs to resolve material weaknesses identified. A clean

audit opinion for the SAA is the top objective for SC leadership as this not

only further promotes trust from our foreign partners but continues to

demonstrate that the U.S. Government is the partner of choice for Foreign 

Military Sales and SC. 

The results of the SAA audit are closely aligned to the results of the 

Department of Defense audit, as the SAA is executed on the infrastructure

of many DoD processes and systems. We are committed to ensuring our 

audit remediation and roadmap strategies are aligned to the Department’s

overall financial management goals, and leveraging its remediation progress

to the maximum extent possible. DSCA will continue to coordinate closely

with OUSD(C) leadership to ensure SAA challenges are addressed in DoDwide remediation efforts, especially in areas of system integration and legacy 

system migration. 

Given the SC community’s continued commitment to these established

priorities, I am confident in our ability to take the necessary steps to eventually

achieve a clean audit opinion and I look forward to continued improvement 

through our annual financial statement audit in the years to come.

J. Aaron Harding | Chief Financial Officer

Defense Security Cooperation Agency 
41 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

 

 

 

FINANCIAL SECTION (UNAUDITED) | REPORT OF INDEPENDENT AUDITORS UNAUDITED 

FINANCIAL SECTION (UNAUDITED)

REPORT OF INDEPENDENT AUDITORS 

INSPECTOR GENERAL DEPARTMENT OF DEFENSE 

4800 MARK CENTER DRIVE 

ALEXANDRIA, VIRGINIA 22350-1500 

November 7, 2022 

MEMORANDUM FOR UNDER SECRETARY OF DEFENSE (COMPTROLLER)/ 

CHIEF FINANCIAL OFFICER, DOD 

DIRECTOR, DEFENSE FINANCE AND ACCOUNTING SERVICE 

DIRECTOR, DEFENSE SECURITY COOPERATION AGENCY 

SUBJECT: Transmittal of the Independent Auditor’s Report on the Defense Security 

Cooperation Agency Security Assistance Accounts Financial Statements 

and Related Notes for FY 2022 (Project No. D2022-D000FP-0069.0000, 

Report No. DODIG-2023-022) 

We contracted with the independent public accounting firm of Cotton & Company 

Assurance and Advisory, LLC (Cotton) to audit the Defense Security Cooperation Agency 

(DSCA) Security Assistance Accounts (SAA) Financial Statements and related notes as of 

and for the fiscal year ended September 30, 2022.1 The contract required Cotton to 

provide a report on internal control over financial reporting and compliance with 

provisions of applicable laws and regulations, contracts, and grant agreements, and to 

report on whether the DSCA’s financial management systems substantially complied 

with the requirements of the Federal Financial Management Improvement Act of 1996. 

The contract required Cotton to conduct the audit in accordance with generally 

accepted government auditing standards (GAGAS); Office of Management and Budget 

audit guidance; and the Government Accountability Office/Council of the Inspectors 

General on Integrity and Efficiency, “Financial Audit Manual,” June 2022, Volume 1, 

Volume 2 (Updated, June 2022), and Volume 3 (Updated, June 2022). Cotton’s 

Independent Auditor’s Report is attached. 

Cotton’s audit resulted in a disclaimer of opinion. Cotton could not obtain sufficient, 

appropriate audit evidence to support the reported amounts within the DSCA SAA’s 

Financial Statements. As a result, Cotton could not conclude whether the financial 

1 Cotton was contracted to express an opinion on the DSCA SAA’s Financial Statements starting in the fiscal 

year ended September 30, 2022. 
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 42 

 

 

UNAUDITED FINANCIAL SECTION (UNAUDITED) | REPORT OF INDEPENDENT AUDITORS 

statements and related notes were presented fairly in accordance with Generally 

Accepted Accounting Principles. Accordingly, Cotton did not express an opinion on the 

DSCA SAA’s FY 2022 Financial Statements and related notes. 

Cotton’s report, “Report on Internal Control Over Financial Reporting and on 

Compliance and Other Matters,” discusses 12 material weaknesses related to the DSCA 

SAA’s internal controls over financial reporting.2 Specifically, Cotton concluded that the 

DSCA did not: 

x have transaction-level detail populations to support material beginning balance 

general ledger accounts; 

x have a consistent and complete universe of transactions in Advana; 

x design and implement entity-level controls that included monitoring its 

implementing agencies’ internal control and reviewing the scope of the 

information systems impacting the DSCA SAA financial statements; 

x record accounts payable accruals to report liabilities in the correct accounting 

period; 

x consistently recognize, measure, record, and report contract authority from 

security assistance activities; 

x consistently recognize, measure, record, and report revenue earned from 

security assistance activities; 

x perform monthly Fund Balance With Treasury reconciliations for Treasury 

accounts that had SAA balances; 

x recognize, value, record, and report General Property, Plant, and Equipment 

procured with security assistance funds; 

x recognize, value, record, and report Inventory & Related Property procured 

with security assistance funds; 

2 A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial 

reporting that results in a reasonable possibility that manage ment will not prevent, or detect and correct, a 

material misstatement in the financial statements in a timely manner. 
43 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

FINANCIAL SECTION (UNAUDITED) | REPORT OF INDEPENDENT AUDITORS UNAUDITED 

x accurately identify SAA intragovernmental transactions, fully reconcile these 

transactions with all federal trading partners, and did not perform receipt and 

acceptance procedures for intragovernmental transactions; 

x record various journal vouchers with proper support; or 

x establish policies and procedures that govern third-party service providers 

monitoring, and complementary user entity controls at the entity-wide level. 

Cotton’s report, also discusses two instances of noncompliance with provisions of 

applicable laws and regulations, contracts, and grant agreements. Specifically, Cotton’s 

report describes instances in which the DSCA did not comply with the Federal Financial 

Management Improvement Act of 1996 and the Federal Manager’s Financial Integrity 

Act of 1982. 

In connection with the contract, we reviewed Cotton’s report and related 

documentation and discussed them with Cotton’s representatives. Our review, as 

differentiated from an audit of the financial statements and related notes in accordance 

with GAGAS, was not intended to enable us to express, and we do not express, an 

opinion on the DSCA SAA FY 2022 Financial Statements and related notes. 

Furthermore, we do not express conclusions on the effectiveness of internal control 

over financial reporting, on whether the DSCA’s financial systems substantially 

complied with Federal Financial Management Improvement Act of 1996 requirements, 

or on compliance with provisions of applicable laws and regulations, contracts, and 

grant agreements. Our review disclosed no instances where Cotton did not comply, in 

all material respects, with GAGAS. Cotton is responsible for the attached 

November 7, 2022 report, and the conclusions expressed within the report. 

We appreciate the cooperation and assistance received during the audit. Please direct 

questions to me. 

Lorin T. Venable, CPA 

Assistant Inspector General for Audit 

Financial Management and Reporting 

Attachment: 

As stated 
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 44 

 

 

 

 

 

 

UNAUDITED FINANCIAL SECTION (UNAUDITED) | REPORT OF INDEPENDENT AUDITORS 

INDEPENDENT AUDITORS’ REPORT 

Director, Defense Security Cooperation Agency (DSCA) 

In our engagement to audit the FY 2022 DSCA Security Assistance Accounts (SAA) financial 

statements, we: 

 ̃ Were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit 

opinion. 

 ̃ Found 12 material weaknesses and 4 significant deficiencies in internal control over 

financial reporting as of September 30, 2022. 

 ̃ Found noncompliance with the Federal Financial Management Improvement Act of 1996 

(FFMIA) and the Federal Managers’ Financial Integrity Act of 1982 (FMFIA) as of 

September 30, 2022. 

The following sections contain: 

1. Our report on the DSCA SAA financial statements and required supplementary information 

included with the financial statements. 

2. Other reporting required by Government Auditing Standards, which is our report on the 

DSCA SAA’s (a) internal control over financial reporting and (b) compliance and other 

matters. This section also includes a summary of DSCA’s comments on our report. 

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS 

Disclaimer of Opinion

We were engaged to audit the accompanying DSCA SAA financial statements, which comprise 

the consolidated balance sheet as of September 30, 2022, the related consolidated statement of 

net cost, consolidated statement of changes in net position, and combined statement of 

budgetary resources for the FY then ended, and the related notes to the financial statements 

(collectively, the basic financial statements). 

We do not express an opinion on the accompanying DSCA SAA financial statements. Because 

of the significance of the matters described in the Basis for Disclaimer of Opinion subsection of 

our report, we were not able to obtain sufficient appropriate audit evidence to provide a basis for 

an audit opinion on these financial statements. 

Basis for Disclaimer of Opinion

The DSCA SAA transaction-level detail does not support material beginning balance general 

ledger accounts that comprise the balance sheet and the statement of budgetary resources as 

of September 30, 2021. See material weakness1 in Appendix A of our report for a discussion of 

this matter and our recommendations for improvement. As a result of this matter, we were 

unable to determine whether any adjustments might have been necessary related to the FY 

2022 beginning balances reported on the accompanying DSCA SAA financial statements. 
45 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

 

 

 

 

 

 

 

 

 

 

 

 

FINANCIAL SECTION (UNAUDITED) | REPORT OF INDEPENDENT AUDITORS UNAUDITED 

Responsibilities of Management for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements 

in accordance with accounting principles generally accepted in the United States of America, 

and for the design, implementation, and maintenance of internal control relevant to the 

preparation and fair presentation of financial statements that are free from material 

misstatement, whether due to fraud or error. 

Auditors’ Responsibilities for the Audit of the Financial Statements

Our responsibility is to conduct an audit of the DSCA SAA financial statements in accordance 

with auditing standards generally accepted in the United States of America (GAAS); standards 

applicable to financial statement audits contained in Government Auditing Standards, issued by 

the Comptroller General of the United States; and guidance contained in Office of Management

and Budget (OMB) Bulletin No. 22-01, Audit Requirements for Federal Financial Statements, 

and to issue an auditors’ report. However, because of the matters described in the Basis for 

Disclaimer of Opinion subsection of our report, we were not able to obtain sufficient appropriate 

audit evidence to provide a basis for an audit opinion on these financial statements. 

We are required to be independent of the DSCA SAA and to meet our other ethical 

responsibilities, in accordance with the relevant ethical requirements relating to our audit. 

Required Supplementary Information

Accounting principles generally accepted in the United States of America and OMB Circular No. 

A-136, Financial Reporting Requirements, require that the Management’s Discussion and 

Analysis (MD&A) and other required supplementary information be presented to supplement the 

basic financial statements. Such required supplementary information is the responsibility of 

management and, although not a part of the basic financial statements, is required by the 

Federal Accounting Standards Advisory Board and OMB, who consider it to be an essential part 

of financial reporting for placing the basic financial statements in an appropriate operational,

economic, and historical context. Because of the significance of the matters described in the 

Basis for Disclaimer of Opinion subsection, we did not perform any procedures related to 

required supplementary information, including the MD&A; accordingly, we do not express an 

opinion or provide any assurance on the required supplementary information. 

Other Matters 

We did not audit, review, or compile the accompanying consolidated balance sheet as of 

September 30, 2021, and the related consolidated statement of net cost, consolidated 

statement of changes in net position, and combined statement of budgetary resources for the 

FY then ended; therefore, we do not express an opinion or any other form of assurance on 

them. 

OTHER REPORTING REQUIRED BY GOVERNMENT AUDITING STANDARDS 

Report on Internal Control over Financial Reporting and on Compliance and Other 

Matters 

Internal Control over Financial Reporting 

In connection with our engagement to audit the DSCA SAA FY 2022 financial statements, upon 

which we disclaimed an opinion because of the matters described above, we attempted to 

consider the SAA’s internal control over financial reporting as a basis for designing the audit 

procedures that are appropriate in the circumstances, for the purpose of expressing our opinion 
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 46 

 

 

 

 

 

 

 

 

 

 

 

 

UNAUDITED FINANCIAL SECTION (UNAUDITED) | REPORT OF INDEPENDENT AUDITORS 

on the financial statements, but not for the purpose of expressing an opinion on the 

effectiveness of the SAA’s internal control over financial reporting. Accordingly, we do not

express an opinion on the effectiveness of the SAA’s internal control over financial reporting. 

We did not consider all internal controls relevant to operating objectives broadly defined by the 

criteria established under FMFIA. 

Our consideration of internal control was for the limited purpose described in the preceding

paragraph and was not designed to identify all deficiencies in internal control that might be 

material weaknesses or significant deficiencies; therefore, material weaknesses or significant 

deficiencies may exist that were not identified. However, as described in Appendix A, we 

identified certain deficiencies in internal control that we consider to be material weaknesses and 

significant deficiencies. 

A deficiency in internal control over financial reporting exists when the design or operation of a 

control does not allow management or employees, in the normal course of performing their 

assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A 

material weakness is a deficiency, or a combination of deficiencies, in internal control over 

financial reporting, such that there is a reasonable possibility that a material misstatement of the 

entity’s financial statements will not be prevented, or detected and corrected, on a timely basis. 

We consider the first 12 deficiencies described in Appendix A to be material weaknesses. 

A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over 

financial reporting that is less severe than a material weakness, yet important enough to merit 

attention by those charged with governance. We consider the last four deficiencies described in 

Appendix A to be significant deficiencies. 

Inherent Limitations of Internal Control over Financial Reporting 

Because of its inherent limitations, internal control over financial reporting may not prevent, or 

detect and correct, misstatements due to fraud or error. 

Compliance and Other Matters

In connection with our engagement to audit the DSCA SAA FY 2022 financial statements, we 

performed tests of the SAA’s compliance with certain provisions of laws, regulations, contracts, 

and grant agreements, noncompliance with which could have a direct and material effect on the 

financial statements. However, providing an opinion on compliance with those provisions was 

not an objective of our engagement, and accordingly, we do not express such an opinion. Our 

tests included testing whether the SAA’s financial management systems substantially comply 

with the requirements of the FFMIA. These requirements are: (1) federal financial management 

systems requirements, (2) federal accounting standards, and (3) the U.S. Government Standard

General Ledger (USSGL) at the transaction level. The results of our tests disclosed instances of 

noncompliance or other matters that are required to be reported under Government Auditing 

Standards and that are described in Appendix B. Additionally, if the scope of our work had been 

sufficient to enable us to express an opinion on the basic financial statements, other instances 

of noncompliance or other matters may have been identified and reported herein. 

DSCA’s Comments 

DSCA’s comments on our report are included in Appendix C. DSCA concurred with the findings 

in our report. We did not audit DSCA’s comments, and accordingly, we express no opinion on 

the comments. 
47 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

 

 

 

 

 

 

FINANCIAL SECTION (UNAUDITED) | REPORT OF INDEPENDENT AUDITORS UNAUDITED 

Purpose of the Other Reporting Required by Government Auditing Standards

The purpose of the “Other Reporting Required by Government Auditing Standards” is solely to

describe the scope of our testing of internal control and compliance and the results of that 

testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on 

compliance. This other reporting is an integral part of an engagement to perform an audit in 

accordance with Government Auditing Standards in considering the entity’s internal control and 

compliance. Accordingly, this other reporting is not suitable for any other purpose. 

COTTON & COMPANY ASSURANCE AND ADVISORY, LLC 

Melinda J. DeCorte, CPA 

Partner 

Alexandria, VA 

November 7, 2022 
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UNAUDITED FINANCIAL SECTION (UNAUDITED) | REPORT OF INDEPENDENT AUDITORS 

APPENDIX A: MATERIAL WEAKNESSES AND SIGNIFICANT DEFICIENCIES 

During our engagement to audit the FY 2022 Defense Security Cooperation Agency (DSCA) 

Security Assistance Accounts (SAA) financial statements, we identified deficiencies in internal 

control over financial reporting. These deficiencies constitute 12 material weaknesses and 4 

significant deficiencies, as described in this Appendix. These results are consistent with the 

DoD agency-wide deficiencies. DSCA management was aware of many of these deficiencies

and had already begun implementing corrective action plans (CAPs). For brevity and clarity, we 

do not provide all the details related to specific programs, systems, or account balances in this 

Appendix. We provided those details separately to DSCA management and other stakeholders 

through Notices of Findings and Recommendations. 

MATERIAL WEAKNESS 1: BEGINNING BALANCES 

Condition: Material beginning balance general ledger (GL) accounts that comprise the balance 

sheet and the statement of budgetary resources are not supported by transaction-level detail 

populations (i.e., GL amounts in the Advana system and non-GL amounts in the Defense 

Departmental Reporting System–Budgetary [DDRS-B]) or by DDRS-B journal vouchers (JVs) as 

of September 30, 2021. 

Criteria: 

 ̃ U.S. Government Accountability Office’s (GAO’s) Standards for Internal Control in the 

Federal Government 

Cause: DSCA has not fully implemented CAPs to reconcile financial statement line-item 

balances to supporting transaction-level detail populations. Furthermore: 

 ̃ Systems do not always contain sufficient historical data to support material beginning 

balance GL accounts. 

 ̃ The data in the systems is not always sufficient to support material beginning balance GL 

accounts at the transaction level. For example, the data may be at a summary level or may 

not always contain certain data elements, such as the document number. 

 ̃ DSCA has material unsupported adjusting entries that impact material beginning balance 

GL accounts. 

Effect: The total unsupported amount of the material beginning balance GL accounts is greater 

than materiality for the financial statements taken as a whole and contributes to a scope 

limitation with respect to testing the related FY 2022 beginning balances. 

Recommendations: We recommend that: 

 ̃ DSCA, in coordination with the Defense Finance and Accounting Service (DFAS), review its 

existing related CAP and determine the extent to which corrective action milestones already 

underway are sufficient to address the causes of the conditions reported in this material 

weakness. 

 ̃ To the extent required, DSCA, in coordination with DFAS, the Office of the Under Secretary 

of Defense (Comptroller)/Chief Financial Officer, system owners, and implementing 

agencies (IAs), prepare new CAPs that include corrective action milestones designed to 

further address the causes of the conditions reported in this material weakness, with a focus 
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on determining the extent to which DSCA can support material beginning balance GL 

accounts with sufficient transaction-level detail. 

MATERIAL WEAKNESS 2: UNIVERSE OF TRANSACTIONS 

Condition: SAA financial data in the transaction-level detail populations from the Advana 

system is inconsistent and incomplete. Specifically: 

 ̃ DSCA self-identified material variances between GL amounts in the Advana system and 

related data in the DDRS-B unadjusted trial balance. 

 ̃ Transactions do not always include required data elements, or the data elements are 

inconsistent or inaccurate across source systems. Data elements that are incomplete, 

inconsistent, or inaccurate include, for example, unique transaction identifiers, funding 

centers, and source systems. 

 ̃ Populations contain debit and credit activity that was unable to be summarized at a 

document level to represent final amounts recorded in the DDRS-B unadjusted trial balance. 

 ̃ Data from the Financial Accounting and Corporate Tracking System had not been ingested 

into the Advana system as of the beginning of FY 2022. 

 ̃ Cash collections recorded in the Defense Integrated Financial System (DIFS) and in the 

General Accounting and Finance System (GAFS) are not included in the populations. 

 ̃ The Advana system does not include financial transactions for proprietary GL accounts from 

the Management Information System for International Logistics. 

Criteria: 

 ̃ Federal Financial Management Improvement Act of 1996 (FFMIA) 

 ̃ Federal Managers’ Financial Integrity Act of 1982 (FMFIA) 

 ̃ GAO’s Standards for Internal Control in the Federal Government 

 ̃ DoD Financial Management Regulation (FMR), Volume 6A, Chapter 2, Internal Controls 

Cause: The DSCA SAA financial statements are comprised of balances, activities, and 

disclosures pertaining to DSCA and 12 IAs, which collectively operate 13 GL systems and 

dozens of feeder systems. Many of the systems in use were not designed to record and 

report activity in a manner that would allow for compliance with Standard Financial 

Information Structure (SFIS) and for the preparation of financial statements in accordance 

with generally accepted accounting principles (GAAP). The information systems’ (IS) 

noncompliance with SFIS, compounded by the legacy nature of the IS in use, has created a 

complex financial reporting environment, resulting in financial data that are incomplete and 

inconsistent. 

Additionally, cash collections recorded in DIFS and GAFS are not included in the populations 

because DIFS is not a GL system and cash collections recorded in GAFS are not ingested into 

the Advana system. 

Effect: Lack of quality information may prevent DSCA from making informed decisions and 

evaluating SAA programs and activities’ performance in achieving key objectives and 

addressing risks, including objectives and risks related to financial reporting. 
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UNAUDITED FINANCIAL SECTION (UNAUDITED) | REPORT OF INDEPENDENT AUDITORS 

Furthermore, the DSCA SAA is not compliant with FFMIA requirements related to federal 

financial management systems requirements and the U.S. Government Standard General

Ledger (USSGL) at the transaction level, or with FMFIA requirements. 

Recommendations: We recommend that DSCA, in coordination with the IAs and DFAS: 

 ̃ Review its existing related CAPs and determine the extent to which corrective action 

milestones already underway are sufficient to address the causes of the conditions reported 

in this material weakness. 

 ̃ Prepare a new CAP that considers how common corrective actions can address the causes 

of the conditions reported in both this material weakness and material weakness 1. 

 ̃ Develop a detailed understanding of financial data across SAA programs and activities, 

including all GL systems and material non-financial systems. 

 ̃ Based on this understanding, develop logic for each material GL account that can be 

applied to produce, on a repeatable basis, reliable populations that support trial balance 

amounts. 

 ̃ Perform internal testing to validate the reliability of populations and refine the developed 

logic, as needed, based on the results of testing. 

 ̃ Coordinate with system owners for all GL systems and material non-financial systems to 

develop and implement standardized data practices. Data practices should include full SFIS 

compliance and complete and consistent use of financial transaction data elements across 

systems. 

 ̃ Modernize or replace material legacy GL systems and material legacy non-financial systems 

to achieve full SFIS compliance and consistent data practices. 

MATERIAL WEAKNESS 3: ENTITY ̃LEVEL CONTROLS 

Condition: DSCA has designed and implemented entity-level controls (ELCs) through its Risk 

Management and Internal Control (RMIC) program. However, the majority of the SAA’s financial 

activity is performed by IAs in separate and distinct control environments that are outside the 

scope of the DSCA RMIC program. DSCA does not have a process in place for overseeing, 

coordinating, and monitoring IA RMIC activities to ensure that it achieves the SAA’s financial 

reporting objectives. 

Furthermore, DSCA, in coordination with the IAs and DFAS, is reviewing the scope of materially

relevant IS supporting the DSCA SAA financial statements. 

Criteria: 

 ̃ FMFIA 

 ̃ GAO’s Standards for Internal Control in the Federal Government 

 ̃ Office of Management and Budget (OMB) Circular No. A-123, Management’s Responsibility 

for Enterprise Risk Management and Internal Control 
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 ̃ DoD FMR, Volume 1, Chapter 3, Federal Financial Management Improvement 

Act Compliance 

 ̃ DoD Instruction 5010.04, Managers’ Internal Control Program Procedures 

Cause: DSCA has not fully implemented corrective actions to assess the entire SAA control 

environment and to implement SAA-wide monitoring controls. Because previous Office of the 

Secretary of Defense guidance did not direct DoD components to include the SAA ELCs in their 

annual Statements of Assurance (SOAs), DoD does not have a policy to direct how each IA 

sustains its RMIC program. DoD is currently undergoing an effort to align RMIC processes and 

procedures pertaining to the SAA. 

Regarding IS, DSCA, in coordination with the IAs and DFAS, has not yet completed its review of 

the scope of materially relevant IS supporting the DSCA SAA financial statements. 

Effect: Without effective oversight, coordination, and monitoring by DSCA, the decentralized 

SAA control environment increases the risk that DSCA, in coordination with the IAs and service 

providers, will not identify and respond to relevant financial reporting risks in an effective 

manner. As a result, management may not identify and disclose all material weaknesses in 

internal control within its SOA in accordance with FMFIA. Further, missing or ineffective 

monitoring controls impede management’s ability to detect and correct misstatements in the 

DSCA SAA financial records during the normal course of business. 

Regarding IS, DSCA, in coordination with the IAs, may not: 

 ̃ Identify and consider (1) material business processes and IAs within its audit readiness 

strategy, and (2) the IS that process the transactions reported on the DSCA SAA financial 

statements. 

 ̃ Design appropriate IS control activities to achieve objectives and respond to risks. 

Recommendations: We recommend that DSCA, in coordination with the IAs: 

 ̃ Review its existing CAP related to ELCs and determine the extent to which corrective action 

milestones already underway are sufficient to address the causes of the conditions reported 

in this material weakness. 

 ̃ To the extent required, update its existing CAP related to ELCs to include additional 

corrective action milestones for designing and implementing effective ELCs across SAA 

programs. 

 ̃ Continue its progress in reviewing the scope of materially relevant IS supporting the DSCA 

SAA financial statements. 

MATERIAL WEAKNESS 4: ACCOUNTS PAYABLE 

Condition: DSCA, in coordination with the IAs and DFAS, does not record an accounts payable 

(AP) accrual to report liabilities in the accounting period in which the SAA incurred the liabilities. 

Criteria: 

 ̃ FFMIA 
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 ̃ Statement of Federal Financial Accounting Standards (SFFAS) 1, Accounting for Selected 

Assets and Liabilities 

 ̃ DoD FMR, Volume 4, Chapter 9 Accounts Payable 

Cause: DSCA does not have policies and procedures in place that prescribe an overall AP 

accrual methodology and monitoring process across the SAA programs and IAs. 

Effect: DSCA may be unable to prevent material misstatement of AP and related expenses 

reported in the DSCA SAA financial statements. DSCA, in coordination with the IAs and DFAS, 

cannot assert to the accuracy and completeness of reported AP on the SAA balance sheet, 

expenses on the statement of net cost, and related obligation activity on the statement of 

budgetary resources. In addition, the DSCA SAA is not compliant with FFMIA requirements 

related to applicable federal accounting standards. 

Recommendations: We recommend that DSCA, in coordination with the IAs and DFAS: 

 ̃ Review its existing related CAP and determine the extent to which corrective action 

milestones already underway are sufficient to address the causes of the conditions reported 

in this material weakness. 

 ̃ To the extent required, update existing CAPs or prepare a new CAP that includes corrective 

action milestones designed to further address the causes of the conditions reported in this 

material weakness, with a focus on developing policies and procedures for recording an AP 

accrual to ensure that DSCA reports liabilities in the accounting period in which the SAA 

incurred the liabilities, consistent with the accounting standards issued by the Federal 

Accounting Standards Advisory Board (FASAB). 

MATERIAL WEAKNESS 5: BUDGETARY RESOURCES 

Condition: According to DSCA management, DSCA, in coordination with the IAs and DFAS, 

does not consistently recognize, measure, record, and report contract authority and contract

authority liquidated from Security Assistance (SA) activities in the DSCA SAA financial 

statements in accordance with the accounting standards issued by FASAB, OMB Circular No. 

A-11, and the requirements of FFMIA. 

Criteria: 

 ̃ FFMIA 

 ̃ GAO’s Standards for Internal Control in the Federal Government 

 ̃ SFFAS 7, Accounting for Revenue and Other Financing Sources and Concepts for 

Reconciling Budgetary and Financial Accounting 

 ̃ OMB Circular No. A-123, Appendix D, Compliance with the Federal Financial Management 

Improvement Act of 1996 

 ̃ OMB Circular No. A-11, Preparation, Submission, and Execution of the Budget 

Cause: According to DSCA management, DSCA, in coordination with the IAs and DFAS, has 

not yet developed and implemented policies and procedures requiring appropriate accounting 

and reporting practices for contract authority and contract authority liquidated from SA activities 

across the SAA. 
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FINANCIAL SECTION (UNAUDITED) | REPORT OF INDEPENDENT AUDITORS UNAUDITED 

Effect: The DSCA SAA financial statements may be materially misstated. In addition, the DSCA

SAA is not compliant with FFMIA requirements related to applicable federal accounting 

standards. 

Recommendations: We recommend that DSCA, in coordination with the IAs and DFAS: 

 ̃ Review its existing related CAP and determine the extent to which corrective action 

milestones already underway are sufficient to address the causes of the conditions reported 

in this material weakness. 

 ̃ To the extent required, update existing CAPs or prepare a new CAP that includes corrective 

action milestones designed to further address the causes of the conditions reported in this

material weakness, with a focus on developing and implementing policies and procedures to 

consistently recognize, measure, record, and report contract authority and contract authority 

liquidated from SA activities in the DSCA SAA financial statements in accordance with the 

accounting standards issued by FASAB, OMB Circular No. A-11, and the requirements of 

FFMIA. 

MATERIAL WEAKNESS 6: EARNED REVENUE 

Condition: DSCA, in coordination with the IAs, does not consistently recognize, measure, 

record, and report revenue earned from SA activities, including deferred revenue and advances

and prepayments, in the DSCA SAA financial statements in accordance with the accounting 

standards issued by FASAB, the DoD FMR, and the requirements of FFMIA. 

Criteria: 

 ̃ FFMIA 

 ̃ GAO’s Standards for Internal Control in the Federal Government 

 ̃ SFFAS 7 

 ̃ OMB Circular No. A-123, Appendix D 

 ̃ DoD FMR, Volume 4, Chapter 16, Revenue, Other Financing Sources, Gains and Losses 

Cause: According to DSCA management, DSCA, in coordination with the IAs, has not yet 

developed and implemented policies and procedures requiring appropriate accounting and 

reporting practices for revenue earned, including deferred revenue and advances and 

prepayments, from SA activities across the SAA. 

Effect: The DSCA SAA financial statements may be materially misstated. In addition, the DSCA 

SAA is not compliant with FFMIA requirements related to applicable federal accounting 

standards. 

Recommendations: We recommend that DSCA, in coordination with the IAs: 

 ̃ Review its existing related CAPs and determine the extent to which corrective action 

milestones already underway are sufficient to address the causes of the conditions reported 

in this material weakness. 
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 ̃ To the extent required, update existing CAPs or prepare a new CAP to include corrective 

action milestones designed to further address the causes of the conditions reported in this

material weakness, with a focus on developing and implementing policies and procedures to 

consistently recognize, measure, record, and report revenue earned from SA activities, 

including deferred revenue and advances and prepayments, in the DSCA SAA financial 

statements in accordance with the accounting standards issued by FASAB, the DoD FMR, 

and the requirements of FFMIA. 

MATERIAL WEAKNESS 7: FUND BALANCE WITH TREASURY 

Condition: DSCA, in coordination with the IAs and DFAS, does not perform monthly Fund 

Balance with Treasury (FBWT) reconciliations for all parent and child Treasury Account 

Symbols (TAS) that have SAA balances. 

Criteria: 

 ̃ FMFIA 

 ̃ GAO’s Standards for Internal Control in the Federal Government 

 ̃ OMB Circular No. A-123 

 ̃ Treasury Financial Manual (TFM), Volume I, Part 2, Chapter 5100, Fund Balance with 

Treasury Accounts 

 ̃ DoD FMR, Volume 4, Chapter 2, Accounting for Cash and Fund Balances with Treasury 

Cause: DSCA, in coordination with the IAs and DFAS, does not have policies, processes, and 

procedures in place that prescribe FBWT reconciliations for all parent and child TAS that have 

SAA balances. 

Effect: DSCA may be unable to prevent material misstatement of FBWT reported in the DSCA 

SAA financial statements. DSCA, in coordination with the IAs and DFAS, cannot assert to the 

accuracy and completeness of reported FBWT on the DSCA SAA financial statements. 

Additionally, the DSCA SAA is not compliant with FMFIA requirements. 

Recommendations: We recommend that DSCA, in coordination with the IAs and DFAS: 

 ̃ Review its existing related CAP and determine the extent to which corrective action 

milestones already underway are sufficient to address the causes of the conditions reported 

in this material weakness. 

 ̃ To the extent required, update existing CAPs or prepare a new CAP to include corrective 

action milestones designed to further address the causes of the conditions reported in this 

material weakness, with a focus on performing monthly FBWT reconciliations for all parent 

and child TAS that have SAA balances. 

MATERIAL WEAKNESS 8: GENERAL PROPERTY, PLANT, AND EQUIPMENT 

Condition: According to DSCA management, DSCA, in coordination with the IAs and DFAS, 

does not recognize, value, record, and report General Property, Plant & Equipment (PP&E) 

procured with SA funds in the DSCA SAA financial statements consistent with the accounting 

standards issued by FASAB, the DoD FMR, and the requirements of FFMIA. 
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Criteria: 

 ̃ FFMIA 

 ̃ GAO’s Standards for Internal Control in the Federal Government 

 ̃ SFFAS 6, Accounting for Property, Plant, and Equipment 

 ̃ SFFAS 10, Accounting for Internal Use Software 

 ̃ OMB Circular No. A-123, Appendix D 

 ̃ DoD FMR, Volume 4, Chapter 25, General Equipment, and Chapter 27, Internal Use 

Software 

Cause: According to DSCA management, DSCA, in coordination with the IAs and DFAS, has 

not yet developed and implemented policies and procedures requiring appropriate accounting 

and reporting practices for General PP&E procured with SA funds across the SAA. Although

DSCA, in coordination with the IAs, began evaluating potential sources of General PP&E 

applicable to the DSCA SAA financial statements in FY 2021, DSCA is still in the process of 

determining the proper financial reporting for SAA General PP&E. 

Effect: The DSCA SAA financial statements may be materially misstated. In addition, the DSCA

SAA is not compliant with FFMIA requirements related to applicable federal accounting 

standards. 

Recommendations: We recommend that DSCA, in coordination with the IAs and DFAS: 

 ̃ Review its existing related CAP and determine the extent to which corrective action 

milestones already underway are sufficient to address the causes of the conditions reported 

in this material weakness. 

 ̃ To the extent required, update existing CAPs or prepare a new CAP that includes corrective 

action milestones designed to further address the causes of the conditions reported in this

material weakness, with a focus on recognizing, valuing, recording, and reporting General 

PP&E procured with SA funds in the DSCA SAA financial statements consistent with the 

accounting standards issued by FASAB, the DoD FMR, and the requirements of FFMIA. 

MATERIAL WEAKNESS 9: INVENTORY & RELATED PROPERTY 

Condition: According to DSCA management, DSCA, in coordination with the IAs and DFAS, 

does not recognize, value, record, and report Inventory & Related Property (I&RP) procured 

with SA funds in the DSCA SAA financial statements consistent with the accounting standards 

issued by FASAB, the DoD FMR, and the requirements of FFMIA. Although DSCA, in

coordination with the U.S. Army, U.S. Navy, and U.S. Air Force, began reporting certain defense 

articles procured through the Special Defense Acquisition Fund (SDAF) as I&RP in the DSCA 

SAA financial statements in FY 2019, this is the only fund for which the SAA currently reports 

I&RP. 

Criteria: 

 ̃ FFMIA 

 ̃ GAO’s Standards for Internal Control in the Federal Government 
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 ̃ SFFAS 3, Accounting for Inventory and Related Property 

 ̃ OMB Circular No. A-123, Appendix D 

 ̃ DoD FMR, Volume 4, Chapter 4, Inventory and Related Property 

Cause: According to DSCA management, DSCA, in coordination with the IAs and DFAS, has 

not yet developed and implemented policies and procedures that require appropriate accounting 

and reporting practices for I&RP procured with SA funds across the SAA. 

Effect: The DSCA SAA financial statements may be materially misstated. In addition, the DSCA 

SAA is not compliant with FFMIA requirements related to applicable federal accounting 

standards. 

Recommendations: We recommend that DSCA, in coordination with the IAs and DFAS: 

 ̃ Review its existing related CAP and determine the extent to which corrective action 

milestones already underway are sufficient to address the causes of the conditions reported 

in this material weakness. 

 ̃ To the extent required, update existing CAPs or prepare a new CAP that includes corrective 

action milestones designed to further address the causes of the conditions reported in this 

material weakness, with a focus on recognizing, valuing, recording, and reporting I&RP 

procured with SA funds in the DSCA SAA financial statements consistent with the 

accounting standards issued by FASAB, the DoD FMR, and the requirements of FFMIA. 

MATERIAL WEAKNESS 10: INTRAGOVERNMENTAL TRANSACTIONS AND ELIMINATIONS 

Condition: DSCA, in coordination with the IAs, cannot accurately identify most SAA 

intragovernmental transactions and is unable to fully reconcile SAA intragovernmental 

transactions with all federal trading partners. 

Furthermore, DSCA, in coordination with the IAs, does not always perform receipt and 

acceptance procedures for intragovernmental transactions. 

Criteria: 

 ̃ FFMIA 

 ̃ GAO’s Standards for Internal Control in the Federal Government 

 ̃ SFFAS 1 

 ̃ TFM Volume I, Part 2, Chapter 4700, Federal Entity Reporting Requirements for the 

Financial Report of The United States Government 

 ̃ DoD FMR, Volume 6A, Chapter 2, Financial Reports, Roles and Responsibilities; Volume 

6B, Chapter 13, Adjustments, Eliminations and Other Special Intragovernmental 

Reconciliation; Volume 11a, Reimbursable Operations Policy 

Cause: As noted above, the DSCA SAA financial statements are comprised of balances, 

activities, and disclosures pertaining to DSCA and 12 IAs, which collectively operate 13 GL 

systems and dozens of feeder systems. Many of the systems in use were not designed to 

record and report activity in a manner that would allow for the preparation of financial 
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statements in accordance with GAAP and do not track the buyer and seller data needed to 

reconcile intragovernmental transactions. 

Furthermore, DSCA, in coordination with the IAs, has not yet fully implemented processes to 

perform receipt and acceptance procedures for intragovernmental transactions. 

The DoD is in the process of enhancing its systems with the SFIS needed to enable it to

correctly report, reconcile, and eliminate intragovernmental balances. The DoD is also 

implementing the G-Invoicing platform as a long-term solution to manage intragovernmental 

buy/sell transactions. 

Effect: Absent reliable data sufficient to identify and match intragovernmental transactions, 

DSCA may be unable to ensure that intragovernmental eliminations reported in the DSCA SAA 

financial statements are complete and accurate. 

Furthermore, the DSCA SAA is not compliant with FFMIA requirements related to federal 

financial management systems requirements and the USSGL at the transaction level. 

Absent processes to perform receipt and acceptance procedures for intragovernmental 

transactions, DSCA and the IAs do not have assurance that trading partners provided the goods 

and/or services before receiving reimbursement from the SAA and may be unable to 

demonstrate that the resulting expended authority transactions occurred and were properly 

recorded in the DSCA SAA financial statements. 

Recommendations: We recommend that DSCA, in coordination with the IAs: 

 ̃ Assess financial management systems used across SAA programs and activities that do not 

completely and accurately incorporate trading partner information for intragovernmental 

transactions. 

 ̃ Where needed, work with system owners to require the inclusion of trading partner 

information within financial management systems. 

 ̃ Assess existing policies and procedures and update them as necessary to ensure that

trading partner information is recorded completely and accurately in the financial 

management systems. 

 ̃ Assess existing policies and procedures and update them as necessary to ensure that 

DSCA and the IAs apply processes for trading partner coordination and reconciliations, as 

well as for the review and approval of adjustments and eliminations, consistently and 

accurately across SAA programs and activities. 

 ̃ Review its existing CAPs related to receipt and acceptance for intragovernmental 

transactions and determine the extent to which corrective action milestones already 

underway are sufficient to address the causes of the conditions reported in this material 

weakness. 

 ̃ To the extent required, update existing CAPs or prepare a new CAP that includes corrective 

action milestones designed to further address the causes of the conditions reported in this 

material weakness, with a focus on implementing the G-Invoicing platform as a long-term 

solution to manage intragovernmental buy/sell transactions. 
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MATERIAL WEAKNESS 11: UNSUPPORTED ACCOUNTING ADJUSTMENTS 

Condition: DSCA, in coordination with the IAs and DFAS, recorded material unsupported JVs 

within DDRS-B and DDRS–Audited Financial Statements (DDRS-AFS) in FY 2022. 

Criteria: 

 ̃ FFMIA 

 ̃ GAO’s Standards for Internal Control in the Federal Government 

 ̃ DoD FMR, Volume 6A, Chapter 2, Financial Reports Roles and Responsibilities 

Cause: As noted above, the DSCA SAA financial statements are comprised of balances, 

activities, and disclosures pertaining to DSCA and 12 IAs, which collectively operate 13 GL 

systems and dozens of feeder systems. Many of the systems in use were not designed to 

record and report activity in a manner that would allow for the preparation of financial

statements in accordance with GAAP. The abundance of IS, compounded by the legacy nature 

of the IS in use, has created a complex financial reporting environment, necessitating a large 

volume of JVs to prepare financial statements. Specific reasons for unsupported JVs include: 

 ̃ Balances that do not pass Government-wide Treasury Account Symbol (GTAS) edit checks, 

resulting in forced balancing entries. 

 ̃ Differences between activity interfaced to DDRS from source systems and activity reported 

from the U.S. Department of the Treasury’s Central Accounting Reporting System (CARS), 

resulting in forced balancing entries. 

 ̃ The accounting systems’ inability to capture trading partner information at the transaction 

level, resulting in adjustments to agree recorded balances to seller-side activity. 

 ̃ Systemic beginning balance JVs to bring forward and summarize JV amounts from prior 

years. 

 ̃ Balances from source GL systems that have invalid USSGL information. 

Effect: The DSCA SAA financial statements may be materially misstated. Furthermore, the 

DSCA SAA is not compliant with FFMIA requirements related to federal financial management 

systems requirements and the USSGL at the transaction level. 

Recommendations: We recommend that DSCA, in coordination with the IAs and DFAS: 

 ̃ Analyze unsupported JVs affecting the DSCA SAA financial statements to determine the 

nature of the adjustments. 

 ̃ Use the results of this analysis to develop a remediation plan. The remediation plan should 

include updating accounting processes to record financial activity completely and accurately 

in source GL systems to reduce the number of JVs. Where reducing JVs is not feasible or 

practical, the remediation plan should include identifying missing support and implementing 

requirements to properly support the JVs. 

 ̃ Based on the remediation plan, update and/or implement policies and procedures and 

Memoranda of Understanding for changes to accounting practices or JV requirements. 
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MATERIAL WEAKNESS 12: OVERSIGHT OF SERVICE PROVIDERS 

Condition: DSCA has not established DSCA-specific entity-wide policies and procedures 

related to third-party service provider monitoring. Furthermore, DSCA has not established 

DSCA-specific entity-wide policies and procedures related to the implementation of 

Complementary User Entity Controls (CUECS) specified in Service Organization Controls 

(SOC) reports for third-party service providers. 

Criteria: 

 ̃ GAO’s Standards for Internal Control in the Federal Government 

 ̃ National Institute of Standards and Technology (NIST) Special Publication (SP) 800-53, 

Revision 5, Security and Privacy Controls for Information Systems and Organizations 

 ̃ DoD Instruction 8500.01, Cybersecurity 

Cause: DSCA followed federal and DoD guidance rather than developing and implementing 

DSCA-specific entity-wide policies and procedures for third-party service providers and 

implementation of CUECs. 

Effect: The absence of DSCA-specific entity-wide policies and procedures for third-party 

service providers and CUECs may prevent DSCA management from standardizing its oversight 

for third-party service providers and the DSCA SAA's system of internal control. 

Recommendations: We recommend that DSCA, in coordination with the IAs: 

 ̃ Review its existing related CAPs and determine the extent to which corrective action 

milestones already underway are sufficient to address the causes of the conditions reported 

in this material weakness. 

 ̃ To the extent required, update existing CAPs or prepare a new CAP that includes corrective 

action milestones designed to further address the causes of the conditions reported in this 

material weakness. 

SIGNIFICANT DEFICIENCY 1: ACCESS CONTROLS 

Condition: DSCA has not established DSCA-specific entity-wide policies and procedures 

related to access control management for DSCA-owned and operated systems. 

Criteria: 

 ̃ GAO’s Standards for Internal Control in the Federal Government 

 ̃ NIST SP 800-53, Revision 5 

 ̃ DoD Instruction 8510.01, Risk Management Framework for DoD Systems 

 ̃ DoD Instruction 8520.03, Identity Authentication for Information Systems 

Cause: DSCA followed federal and DoD guidance rather than developing and implementing 

DSCA-specific entity-wide policies and procedures for access control management. 
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 60 

 

 

 

 

 

 

 

 

 

UNAUDITED FINANCIAL SECTION (UNAUDITED) | REPORT OF INDEPENDENT AUDITORS 

Effect: The absence of DSCA-specific access control management policies and procedures 

increases the risk of inappropriate and unauthorized access to systems if DoD guidance does

not completely cover a control requirement. 

Recommendation: We recommend that DSCA review its existing related CAPs and determine 

the extent to which corrective action milestones already underway are sufficient to address the 

causes of the conditions reported in this significant deficiency. 

SIGNIFICANT DEFICIENCY 2: SEGREGATION OF DUTIES 

Condition: DSCA has not established DSCA-specific entity-wide policies and procedures 

related to segregation of duties for DSCA-owned and operated systems. 

Criteria: 

 ̃ GAO’s Standards for Internal Control in the Federal Government 

 ̃ NIST SP 800-53, Revision 5 

 ̃ DoD Instruction 8510.01 

 ̃ DoD Instruction 8520.03 

Cause: DSCA followed federal and DoD guidance rather than developing and implementing 

DSCA-specific entity-wide policies and procedures related to segregation of duties. 

Effect: The absence of DSCA-specific segregation of duties policies and procedures increases 

the risk that fraud, waste, or abuse may occur without detection if DoD guidance does not 

completely cover a control requirement. 

Recommendation: We recommend that DSCA review its existing related CAPs and determine 

the extent to which corrective action milestones already underway are sufficient to address the 

causes of the conditions reported in this significant deficiency. 

SIGNIFICANT DEFICIENCY 3: CONTINGENT LIABILITIES 

Condition: DSCA has not effectively designed and implemented internal control activities to 

ensure that actual and contingent legal liabilities, as well as other contingent liabilities, are 

presented completely and accurately in the DSCA SAA financial statements. Specifically, DSCA 

has not formally designed and implemented internal controls to identify and monitor legal 

liabilities and contingent liabilities across the SAA, assess these liabilities for recognition or 

disclosure, and report these liabilities in the DSCA SAA financial statements and note 

disclosures in accordance with federal accounting standards. 

Criteria: 

 ̃ FMFIA 

 ̃ GAO’s Standards for Internal Control in the Federal Government 

 ̃ OMB Circular No. A-123 

 ̃ DoD FMR, Volume 4, Chapter 12, Other Liabilities 
61 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

 

 

 

 

 

 

 

 

 

 

FINANCIAL SECTION (UNAUDITED) | REPORT OF INDEPENDENT AUDITORS UNAUDITED 

Cause: DSCA does not have policies and procedures in place that prescribe internal control 

activities designed to ensure that DSCA presents actual and contingent legal liabilities, as well 

as other contingent liabilities, completely and accurately in the DSCA SAA financial statements. 

Effect: DSCA may not be able to prevent material misstatement of actual or contingent legal 

liabilities, as well as other contingent liabilities, and related expenses reported in the DSCA SAA 

financial statements and related notes. Additionally, the DSCA SAA is not compliant with FMFIA 

requirements. 

Recommendations: Regarding the actual and contingent legal liabilities, we recommend that 

DSCA, in coordination with the DSCA Office of General Counsel (OGC) and IAs: 

 ̃ Develop policies and procedures that require DSCA, the OGC, and the IAs to implement

internal control activities designed to ensure that DSCA identifies, assesses, and reports 

actual and contingent legal liabilities in the DSCA SAA financial statements. 

Regarding the other contingent liabilities, we recommend that DSCA, in coordination with the 

IAs: 

 ̃ Perform a documented assessment of SAA programs and activities to identify the types and 

sources of contingent liabilities that may exist related to SAA programs and activities. The 

assessment should include treaties and other international agreements, warranties related 

to foreign military sales, and any other items determined by DSCA. 

 ̃ Develop policies and procedures that require DSCA and the IAs to implement internal 

control activities designed to ensure that DSCA reports contingent liabilities completely and 

accurately in the DSCA SAA financial statements. 

SIGNIFICANT DEFICIENCY 4: ENVIRONMENTAL AND DISPOSAL LIABILITIES 

Condition: DSCA has not developed and implemented policies and procedures that prescribe 

internal control activities designed to identify and assess whether environmental and disposal 

liabilities pertain to the DSCA SAA financial statements and should be reported on the DSCA 

SAA financial statements in accordance with SFFAS 5, Accounting for Liabilities of the Federal 

Government, and SFFAS 6, Accounting for Property, Plant, and Equipment. 

Criteria: 

 ̃ FMFIA 

 ̃ GAO’s Standards for Internal Control in the Federal Government 

 ̃ OMB Circular No. A-123 

 ̃ DoD FMR, Volume 4, Chapter 13, Environmental and Disposal Liabilities 

Cause: DSCA has not fully implemented its existing CAP to identify and report PP&E balances 

across the SAA and IAs, as discussed in material weakness 8. Until DSCA validates the 

completeness of the PP&E balances, it is unable to establish requirements for assessing and 

reporting environmental and disposal liabilities associated with SAA PP&E. 
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 62 

 

 

UNAUDITED FINANCIAL SECTION (UNAUDITED) | REPORT OF INDEPENDENT AUDITORS 

Effect: DSCA may be unable to prevent material misstatement of environmental and disposal 

liabilities reported in the DSCA SAA financial statements and related notes. Additionally, the 

DSCA SAA is not compliant with FMFIA requirements. 

Recommendations: We recommend that DSCA, in coordination with the IAs and DFAS: 

 ̃ Continue its efforts to implement its existing CAP related to PP&E. 

 ̃ Develop policies and procedures that require DSCA and the IAs to implement internal 

control activities designed to identify, assess, and report environmental and disposal 

liabilities in the DSCA SAA financial statements. 
63 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

 

 

 

 

 

 

 

 

 

FINANCIAL SECTION (UNAUDITED) | REPORT OF INDEPENDENT AUDITORS UNAUDITED 

APPENDIX B: NONCOMPLIANCE AND OTHER MATTERS 

During our engagement to audit the FY 2022 Defense Security Cooperation Agency (DSCA) 

Security Assistance Accounts (SAA) financial statements, we identified instances of 

noncompliance, as described in this Appendix. 

FEDERAL FINANCIAL MANAGEMENT IMPROVEMENT ACT OF 1996 

Under the Federal Financial Management Improvement Act of 1996 (FFMIA), we are required to 

report whether the DSCA SAA financial management systems substantially comply with federal 

financial management systems requirements, applicable federal accounting standards, and the 

U.S. Government Standard General Ledger (USSGL) at the transaction level. During FY 2022, 

we identified instances in which the DSCA SAA financial management systems did not

substantially comply with each of the three elements required by FFMIA Section 803(a). 

1. Federal Financial Management Systems Requirements 

We identified instances of noncompliance with federal financial management systems 

requirements, as communicated in Appendix A under material weaknesses 2, 10, and 11. We 

have provided conditions, criteria, causes, effects, and specific recommendations for corrective 

actions necessary to help ensure compliance with federal financial management systems 

requirements as part of Appendix A. 

2. Federal Accounting Standards

We identified instances of noncompliance with federal accounting standards, as communicated 

in Appendix A under material weaknesses 4, 5, 6, 8, and 9. We have provided conditions, 

criteria, causes, effects, and specific recommendations for corrective actions necessary to help 

ensure compliance with federal accounting standards as part of Appendix A. 

3. USSGL at the Transaction Level 

We identified instances of noncompliance with the USSGL at the transaction level, as 

communicated in Appendix A under material weaknesses 2, 10, and 11. We have provided 

conditions, criteria, causes, effects, and specific recommendations for corrective actions 

necessary to help ensure compliance with the USSGL at the transaction level as part of 

Appendix A. 

Additionally, we identified further instances of noncompliance, as described below. 

Condition: According to DSCA management, DSCA, in coordination with the implementing 

agencies (IAs) and the Defense Finance and Accounting Service (DFAS), does not consistently

record accounting events related to Security Assistance (SA) activities in the applicable financial 

management systems, in accordance with the USSGL and FFMIA. 

Criteria: 

 ̃ FFMIA 

 ̃ Office of Management and Budget (OMB) Circular No. A-123, Management’s Responsibility 

for Enterprise Risk Management and Internal Control, Appendix D, Compliance with the 

Federal Financial Management Improvement Act of 1996 

 ̃ OMB Circular No. A-11, Preparation, Submission, and Execution of the Budget 
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 64 

 

 

 

 

 

 

 

 

 

 

 

 

UNAUDITED FINANCIAL SECTION (UNAUDITED) | REPORT OF INDEPENDENT AUDITORS 

 ̃ DoD Financial Management Regulation, Volume 1, Chapter 3, Federal Financial 

Management Improvement Act Compliance 

Cause: According to DSCA management, DSCA, in coordination with the IAs and DFAS, has 

not fully updated and implemented the approved posting models to record the accounting 

events related to SA activities in the applicable financial management systems, in accordance 

with the USSGL and FFMIA. Although the U.S. Department of the Treasury (Treasury) and 

OMB approved these posting models in FY 2021, Treasury and OMB have not yet updated the 

USSGL to include certain transactions that are unique to SA activities. Accordingly, DSCA has 

not yet disseminated the posting logic requirements for SA activities to the IAs and DFAS, and 

the IAs and DFAS have not yet submitted system change requests to incorporate the posting 

logic requirements into the applicable financial management systems. 

Effect: The DSCA SAA financial statements may be misstated. Furthermore, DSCA, the IAs, 

and DFAS may use inconsistent posting logic to record transactions for the same type of 

accounting events. 

Recommendations: We recommend that DSCA, in coordination with the IAs and DFAS: 

 ̃ Review its existing related corrective action plan (CAP) and determine the extent to which 

corrective action milestones already underway are sufficient to address the causes of the 

conditions for this instance of noncompliance. 

 ̃ To the extent required, update existing CAPs or prepare a new CAP that includes corrective 

action milestones designed to further address the causes of the conditions for this instance 

of noncompliance, with a focus on consistently recording the accounting events related to 

SA activities in the applicable financial management systems in accordance with the USSGL 

and FFMIA. 

FEDERAL MANAGERS’ FINANCIAL INTEGRITY ACT OF 1982 

The Federal Managers' Financial Integrity Act of 1982 (FMFIA) requires the head of each 

executive agency to establish internal accounting and administrative controls that reasonably 

ensure that (A) obligations and costs comply with applicable law; (B) all assets are safeguarded 

against waste, loss, unauthorized use, and misappropriation; and (C) revenues and 

expenditures applicable to agency operations are recorded and accounted for properly so that 

accounts and reliable financial and statistical reports may be prepared and accountability of the 

assets may be maintained. 

In its FY 2022 Statement of Assurance, as required under FMFIA, DSCA reported that it is 

unable to provide assurance that the internal controls over reporting (including internal and 

external reporting) and compliance, as well as internal controls over the integrated financial 

management systems, for the Title 22 SAA are operating effectively as of September 30, 2022. 

Because each of the material weaknesses and significant deficiencies described in Appendix A 

represent deficiencies in internal control, they also represent instances of noncompliance with 

FMFIA. We have provided conditions, criteria, causes, effects, and specific recommendations to 

help ensure FMFIA compliance as part of Appendix A. 
65 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

 

 

FINANCIAL SECTION (UNAUDITED) | REPORT OF INDEPENDENT AUDITORS UNAUDITED 

APPENDIX C: DSCA COMMENTS 
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 66 

UNAUDITED FINANCIAL SECTION (UNAUDITED) | NOTES TO THE FINANCIAL STATEMENTS 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	

Vice Adm. Brad Cooper, commander of U.S. Naval Forces Central Command, U.S. 5th Fleet and Combined

Maritime Forces, meets with members of the Lebanese Armed Forces during the start of exercise Resolute Union

22, at Jounieh Naval Base, Lebanon, July 12. Resolute Union 22 is an annual exercise between the U.S. 5th Fleet

and Lebanese Armed Forces to enhance security cooperation. (U.S. Army photo by Spc. Ian Miller) 
67 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

FINANCIAL SECTION (UNAUDITED) | FINANCIAL STATEMENTS UNAUDITED 

FINANCIAL STATEMENTS 

CONSOLIDATED BALANCE SHEETS 

SECURITY ASSISTANCE ACCOUNTS 

(Amounts in Thousands) 

As of September 30, 2022 and 2021 

Assets (Note 2)

 Intragovernmental:

 Fund Balance with Treasury (Note 3)

 Accounts Receivable, Net (Note 6)

 Other Assets (Note 10)

 Total Intragovernmental

 Other Than Intragovernmental:

 Cash and Other Monetary Assets (Note 4)

 Accounts Receivable, Net (Note 6)

 Loans Receivable, Net (Note 7)

 Inventory and Related Property, Net (Note 8)

 Advances and Prepayments (Note 10)

 Total Other Than Intragovernmental

 Total Assets 

Stewardship PP&E (Note 9) 

Liabilities (Note 11)

 Intragovernmental:

 Accounts Payable

 Debt (Note 12)

 Advances from Others and Deferred Revenue (Note 15)

 Other Liabilities (Notes 13 and 15)

 Total Intragovernmental

 Other Than Intragovernmental:

 Accounts Payable

 Federal Employee and Veteran Benefits

 Payable (Note 13)

 Advances from Others and Deferred Revenue (Note 15)

 Other Liabilities (Notes 15, 16 and 17)

 Total Other Than Intragovernmental

 Total Liabilities 

Commitments and Contingencies (Note 17) 

Net Position:

 Unexpended Appropriations - Funds Other than

 Dedicated Collections

 Total Unexpended Appropriations (Consolidated)

 Cumulative Results of Operations - Funds Other than

 Dedicated Collections

 Total Cumulative Results of Operations (Consolidated)

 Total Net Position

 Total Liabilities and Net Position 

2022 2021

$ 

$ 

51,966,897 

3,490 

893 

51,971,280 

$ 

$ 

45,412,296 

2,821 

10,654 

45,425,771 

$ 39,872,408 

(19,132) 

1,446,013 

684,429 

786,930 

$ 38,554,491 

(80,984)

 2,046,177

 525,908

 14,521 

$ 

$ 

42,770,648 

94,741,928 

$ 

$ 

41,060,113 

86,485,884 

$ 

$ 

852,575 

1,021,773 

265,922 

451,657 

2,591,927 

$ 

$ 

634,511

 1,652,162

 -

449,718

 2,736,391

$ 17,480,867 

20,068 

$ 17,455,330 

16,564 

$ 

$ 

167,684,181 

39,928,040 

225,113,156 

227,705,083 

$ 

$ 

126,153,289

 38,603,740 

182,228,923

 184,965,314

$ 12,504,726 $ 7,766,181

$ 12,504,726 

(145,467,881) 

$ 7,766,181 

(106,245,611) 

$ 

$ 

$ 

(145,467,881) 

(132,963,155) 

94,741,928 

$ 

$ 

$ 

(106,245,611) 

(98,479,430)

 86,485,884 

The accompanying notes are an integral part of these statements 
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 68 

UNAUDITED FINANCIAL SECTION (UNAUDITED) | FINANCIAL STATEMENTS 

SECURITY ASSISTANCE ACCOUNTS 

CONSOLIDATED STATEMENTS OF NET COST 

For the Years Ended September 30, 2022 and 2021 

(Amounts in Thousands) 

2022 2021

 Program Costs (Note 19)

 Gross Costs

 Operations, Readiness & Support $ 102,322,370 $ 95,684,584 

(Less: Earned Revenue)

 Net Cost before Losses/(Gains) from Actuarial Assumption Changes

 for Military Retirement Benefits

 Net Program Costs Including Assumption Changes

 Net Cost of Operations

$ 

$ 

$ 

(19,467,727) 

82,854,643 

82,854,643 

82,854,643 

$ 

$ 

$ 

(17,320,368)

 78,364,216 

78,364,216 

78,364,216 

The accompanying notes are an integral part of these statements 
69 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

FINANCIAL SECTION (UNAUDITED) | FINANCIAL STATEMENTS UNAUDITED UNAUDITED 

SECURITY ASSISTANCE ACCOUNTS 

CONSOLIDATED STATEMENTS OF CHANGES IN NET POSITION 

For the Years Ended September 30, 2022 and 2021 

(Amounts in Thousands) 

2022 2021 

Unexpended Appropriations 

Beginning Balances $ 7,766,181 $ 7,244,366 

Prior Period Adjustments: 

Beginning Balances, as Adjusted $ 7,766,181 $ 7,244,366 

Appropriations Received (Note 20) $ 10,803,349 $ 6,288,449 

Appropriations Transferred in/out (21,379) (31,291) 

Other Adjustments (+/-) (14,691) (41,215) 

Appropriations Used (6,028,734) (5,694,128)

Net Change in Unexpended Appropriations $ 4,738,545 $ 521,815

Total Unexpended Appropriations, Ending Balance $ 12,504,726 $ 7,766,181 

Cumulative Results of Operations 

Beginning Balances $ (106,245,611) $ (60,487,427) 

Prior Period Adjustments: 

Beginning Balances, as Adjusted $ (106,245,611) $ (60,487,427)

 Appropriations Used $ 6,028,734 $ 5,694,128 

Non-exchange Revenue 38,739,388 38,548,120 

Donations and Forfeitures of Cash and Cash Equivalents 292,653 273,027 

Transfers in/out Without Reimbursement (11,228) -

Other (1,417,174) (11,909,243)

Net Cost of Operations (+/-) 82,854,643 78,364,216 

Net Change in Cumulative Results of Operations $ (39,222,270) $ (45,758,184) 

Cumulative Results of Operations, Ending $ (145,467,881) $ (106,245,611) 

Net Position $ (132,963,155) $ (98,479,430) 

The accompanying notes are an integral part of these statements 
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 70 

 

 

 

UNAUDITED UNAUDITED FINANCIAL SECTION (UNAUDITED) | FINANCIAL STATEMENTS 

SECURITY ASSISTANCE ACCOUNTS 

COMBINED STATEMENTS OF BUDGETARY RESOURCES 

For the Years Ended September 30, 2022 and 2021 

(Amounts in Thousands) 

2022 2021 

Budgetary Resources: 

Budgetary 

Non-Budgetary 

Credit Reform 

Financing Account Budgetary 

Non-Budgetary 

Credit Reform 

Financing Account 

Unobligated Balance from Prior Year Budget Authority, 

Net (Discretionary and Mandatory) 

Appropriations (Discretionary and Mandatory) (Note 20) 

Borrowing Authority (Discretionary and Mandatory) 

Contract Authority (Discretionary and Mandatory) 

Spending Authority from Offsetting Collections 

(Discretionary and Mandatory) 

$ 180,093,699 

11,733,266 

-

53,271,225 

127,920 

$ 47,187 

-

184,611 

-

5,820 

$ 176,902,203 

11,878,103 

-

34,385,748 

114,942 

$ 32,787 

-

645,684 

-

89,376 

Total Budgetary Resources (Note 21) $ 245,226,110 $ 237,618 $ 223,280,996 $ 767,847 

Status of Budgetary Resources: 

New Obligations and Upward Adjustments (Total) 

Unobligated Balance, End of Year: 

Apportioned, Unexpired Accounts 

Unapportioned, Unexpired Accounts 

Unexpired Unobligated Balance, End of Year 

Expired Unobligated Balance, End of Year 

Unobligated Balance, End of Year (Total) 

Total Budgetary Resources (Note 21) 

$ 

$ 

$ 

$ 

50,073,705 

149,441,211 

45,599,951 

195,041,162 

111,243 

195,152,405 

245,226,110 

$ 

$ 

$ 

$ 

210,200 

27,418 

27,418 

-

27,418 

237,618 

$ 

$ 

$ 

$ 

44,807,911 

106,684,127 

71,608,478 

178,292,605 

180,480 

178,473,085 

223,280,996 

$ 

$ 

$ 

$ 

712,087 

55,760 

55,760 

-

55,760 

767,847 

Outlays, Net: 

Outlays, Net (Total) (Discretionary and Mandatory) 

Distributed Offsetting Receipts (-) 

Agency Outlays, Net (Discretionary and Mandatory) 

$ 

$ 

41,431,775 

(42,187,077) 

(755,302) 

$ 

$ 

-

-

-

$ 

$ 

39,438,639 

(37,718,884) 

1,719,755 

$ 

$ 

-

-

-

Disbursements, Net: 

Disbursements, net (Total) (Mandatory) $ - $ (613,274) $ - $ (128,091) 

The accompanying notes are an integral part of these statements 
71 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 		 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 		 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 		 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

FINANCIAL SECTION (UNAUDITED) | NOTES TO THE FINANCIAL STATEMENTS UNAUDITED 

NOTES TO THE FINANCIAL STATEMENTS 

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. REPORTING ENTITY 

The SAA is a group of programs authorized under Title 22 authorities, by which the United States provides defense

articles, military education and training, and other defense-related services by grant, loan, credit, cash sales,

or lease, in furtherance of national policies and objectives. The security assistance programs are subject to the

continuous supervision and general direction of the Secretary of State to best serve U.S. foreign policy interests.

B. MISSION OF THE REPORTING ENTITY 

The mission of the reporting entity is to lead, direct and manage Security Cooperation programs and resources 

to support the U.S. national security objectives. Such programs build relationships with foreign countries and

international organizations that promote the U.S. interests, develop allied and partner capacities for self-defense 

and coalition participation in overseas contingency operations, and promote peacetime and contingency access for 

U.S. forces. 

C. BASIS OF PRESENTATION 

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

the SAA, which include analysis of the FMS Trust Fund and several other accounts that are, identified in the

President’s Budget Request, appropriated through Department of State, Foreign Operations, and Related Programs

Appropriations Act. These accounts include those that contain U.S. government funds appropriated for Title 22 

security assistance and funds deposited by foreign countries and international organizations, or by other entities

for the use of foreign countries and international organizations. See note 1.D, Appropriations and Funds, for a list of 

these accounts. The FMS Trust Fund and other accounts for funds appropriated for security assistance are managed 

by DSCA on behalf of DoD in accordance with the authority delegated from the EOP, the requirements of the CFO

Act of 1990, as expanded by the Government Management Reform Act of 1994 (GMRA), and other applicable laws

and regulations. 

The financial statements were prepared from accounting records that are maintained by the IAs consisting of the

MILDEPs, Other Defense Organizations, and DFAS in accordance with, and to the extent possible U.S. GAAP,

promulgated by the Federal Accounting Standards Advisory Board (FASAB); the OMB Circular No. A-136, Financial

Reporting Requirements; and the DoD Financial Management Regulation (FMR).

Accounting standards require all reporting entities to disclose that accounting standards allow certain presentations 

and disclosures to be modified, if needed, to prevent the disclosure of classified information. The accompanying

financial statement information encompasses all SAA unless otherwise noted. Information relating to classified

programs and operations is excluded from the statements or otherwise aggregated and reported in such a manner

that it is not discernible.

The DoD accounting processes used to compile SAA financial data are unable to fully implement all elements of

U.S. GAAP and OMB Circular No. A-136 due to limitations of financial management processes, financial systems,

and nonfinancial systems and processes that support the financial statements. Many of the accounts derive their

reported values and other information for major asset and liability categories largely from nonfinancial systems, such

as the SAA’s case management systems. Such legacy systems were designed to support reporting requirements for

maintaining asset accountability and reporting the status of federal appropriations rather than preparing financial

statements consistent with U.S. GAAP. There are ongoing system modernization efforts to implement process and 

system improvements addressing these limitations. The SAA relies heavily on the DoD infrastructure; therefore, the

success of the SAA is dependent on the DoD’s ability to mitigate known material weaknesses.
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 72 

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	

 

 

 

 

 

 

 

 	 	 	 	 	 	

 

	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

UNAUDITED FINANCIAL SECTION (UNAUDITED) | NOTES TO THE FINANCIAL STATEMENTS 

D. APPROPRIATION AND FUNDS 

The FMS Trust Fund is a U.S. Treasury account (Treasury Account Symbol (TAS) 8242) which contains deposits from

FMS foreign country and international organization customers, as well as funds transferred into the account from 

U.S. Government appropriations, for use in carrying out specific programs in accordance with the AECA (22 U.S.C.

§ 2751 et seq.), the FAA (22 U.S.C. § 2151 et seq.), and other legal authorities. The monies in the FMS Trust Fund

are subject to U.S. Treasury account system controls from the date of receipt to the date of expenditure or refund.

At the country or customer level there are distinct subsidiary accounts used by DoD through DSCA and DFAS to

separately and individually account for each FMS customer’s deposits, other collections or deposits, payments of

bills, refunds, and adjustments. At the U.S. Treasury level, the corpus of the FMS Trust Fund represents the total

aggregation of balances (receipts minus disbursements) for all activities and programs.

The SAA is a group of USDT accounts, authorized under Title 22 authorities, that the DoD uses to execute the SA

programs for which DoD has responsibility. DSCA is responsible for the management of the SAA. These accounts

collectively referred to as the “Security Assistance Accounts”, which are granted to the EOP pursuant to the AECA,

as amended are:

• Foreign Military Sales Trust Fund (TAS 8242) 

• International Military Education and Training (TAS 1081) 

• Foreign Military Financing Program Account (TAS 1082) 

• Special Defense Acquisition Fund (TAS 4116) 

• Security Assistance and International Programs, Deposit Account (TAS 6147) 

• Foreign Military Financing, Direct Loan Program Account (TAS 1085) 

• Foreign Military Loan Liquidating Account (TAS 4121) 

• Foreign Military Financing, Direct Loan Financing Account (TAS 4122) 

• Military Debt Reduction Financing Account (TAS 4174)

The SAA designates funds as general, revolving and trust funds. The SAA uses these appropriations and funds to 

execute its mission and subsequently reports on resource usage.

The FMS Trust Fund accounts for receipts and expenditures of funds held in trust by the U.S. Government for use

in carrying out specific purposes or programs in accordance with applicable laws, regulations, and agreements.

Pursuant to the Federal Credit Reform Act of 1990 (FCRA), certain General Fund Receipt Accounts associated with 

loan accounts are consolidated into SAA financial statements for reporting purposes.

The SAA is a party to allocation transfers with other federal agencies as both a transferring (parent) entity and a

receiving (child) entity. Allocation transfers are legal delegations by one entity of its authority to obligate budget

authority and outlay funds to another entity. A separate fund account (allocation account) is created in the U.S. 

Treasury as a subset of the parent fund account for tracking and reporting purposes. All allocation transfers of

balances are credited to this account, and subsequent obligations and outlays incurred by the child entity are

charged to this allocation account as they execute the delegated activity on behalf of the parent entity. Generally,

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

the financial statements of the parent entity from which the underlying legislative authority, appropriations and

budget apportionments are derived. OMB and Treasury Fiscal Service have determined that SAA meets parent

reporting requirements based on OMB Circular No A-136 guidance that “agencies (other than shared service

providers) with administrative or programmatic responsibility for accounts with an account identification code of

011 (Executive Office of the President) must include all such accounts in their AFR."
73 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 		 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	

FINANCIAL SECTION (UNAUDITED) | NOTES TO THE FINANCIAL STATEMENTS UNAUDITED 

E. BASIS OF ACCOUNTING 

The legacy financial management systems utilized by IAs to execute SAA activities are not fully compliant with

full accrual accounting requirements. Many of the IA’s financial and nonfinancial feeder systems and processes

were designed and implemented prior to the issuance of U.S. GAAP guidance. These legacy systems were not 

designed to collect and record financial information on a full accrual accounting basis as required by U.S. GAAP.

The SAA’s financial statements and supporting trial balances are compiled from the underlying financial data

and trial balances of the IAs. The underlying data is largely derived from budgetary transactions (obligations,

disbursements, and collections), from nonfinancial feeder systems, and accruals made for major items such as

payroll expenses, and accounts payable. Some of the sub-entity level trial balances may reflect known abnormal

balances resulting largely from business and system processes. At the consolidated SAA level, these abnormal

balances may not be evident. Disclosures of abnormal balances are made in the applicable footnotes, but only to

the extent that the abnormal balances are evident at the consolidated level.

The SAA, with the IAs, is continuing the actions required to bring its financial and nonfinancial feeder systems

and processes into compliance with U.S. GAAP. One such action is the current revision of accounting systems to 

record transactions based on the USSGL. Until all IA systems and related processes are able to collect and report

financial information as required by U.S. GAAP, there will be instances when the reported financial data is based

on budgetary transactions data from nonfinancial feeder systems.

F. REVENUES AND OTHER FINANCING SOURCES 

As authorized by the FAA and AECA, payments for the sales of defense articles and services are deposited

into the FMS Trust Fund. FMF appropriations provided on an annual or multiyear basis for security assistance

are a financing source and are transferred into the FMS Trust Fund, or deposited into the accounts for funds

appropriated for security assistance. Pricing for defense articles and services, including training, is established

to recover costs as required by the AECA, the FAA, and OMB Circular A-25, “User Charges”. The SAA recognizes

revenue when earned within the constraints of current system capabilities.

The SAA participates in assistance in-kind agreements in its overseas presence. The assistance in kind provided 

in support of security cooperation programs includes the use of facilities and personnel (guards and drivers) at a 

small number of Security Cooperation Offices worldwide.

The SAA collects payments from foreign customers in advance of delivery of goods or services and records 

unearned revenue accordingly. Revenue is considered earned once goods or services have been provided to the

foreign partner. 

G. RECOGNITION OF EXPENSES 

U.S. GAAP requires the recognition of operating expenses in the period incurred. Current financial and

nonfinancial feeder systems utilized by SAA were not designed to collect and record transactions on an accrual

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

revenue. The SAA continues to implement process and system improvements to remediate these limitations. 

H. ACCOUNTING FOR INTRAGOVERNMENTAL ACTIVITIES 

The reporting entity is a component of the U.S Government. For this reason, some of the assets and liabilities

reported by the entity may be eliminated for Government-wide reporting because assets and liabilities of another

U.S. Government entity offset them. These financial statements should be read with the realization that they are

for a component of the U.S. Government, a sovereign entity. Accounting standards require an entity to eliminate 

intra-entity activity and balances from consolidated financial statements to prevent overstatement for business

with itself. However, the SAA cannot accurately identify most of its intragovernmental transactions because IA

systems do not track buyer and seller data needed to match related transactions. The DoD is enhancing systems

and a standard financial information structure incorporating the necessary elements to enable DoD to correctly

report, reconcile, and eliminate intragovernmental balances.
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 74 

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 		 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 		

	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	

UNAUDITED FINANCIAL SECTION (UNAUDITED) | NOTES TO THE FINANCIAL STATEMENTS 

The Treasury Financial Manual Part 2- Chapter 4700, “Federal Entity Reporting Requirements for the Financial

Report of the United States Government,” provides guidance for reporting and reconciling intragovernmental 

balances. The funds within the SAA are unable to fully reconcile intragovernmental transactions with all federal

agencies; however, the SAA is able to reconcile balances pertaining to borrowing from the U.S. Treasury and the

Federal Employees’ Compensation Act (FECA) transactions with the Department of Labor, and benefit program

transactions with the Office of Personnel Management.

Imputed financing represents the costs paid on behalf of the FMS Trust Fund by the Office of Personnel

Management for employee pension, post-retirement health, and life insurance benefits; and the Department of

Labor for post-employment benefits for terminated and inactive employees to include unemployment and workers’

compensation under FECA. 

I. TRANSACTIONS WITH FOREIGN GOVERNMENTS AND INTERNATIONAL ORGANIZATIONS 

To best serve U.S. foreign policy interests around the world, funds within the SAA are used to transact defense

articles and services with foreign governments and international organizations. The signed agreements between

the U.S, and foreign governments and international organizations form the basis for the use of the funds.

J. FUNDS WITH THE U.S. TREASURY

For monetary financial resources maintained in U.S. Treasury accounts, the disbursing offices of DFAS, the

Military Departments, the U.S. Army Corps of Engineers (USACE), and the Department of State financial service

centers process the majority of SAA cash collections, disbursements, and adjustments. Each disbursing station

prepares monthly reports that provide information to the U.S. Treasury on checks issued, electronic fund transfers, 

interagency transfers, and deposits. 

In addition, DFAS and the USACE Finance Center submit reports to the U.S. Treasury, by appropriation, on interagency

transfers, collections received, and disbursements issued. The U.S. Treasury records this information to the applicable

FBwT account. On a monthly basis, the FBwT for the SAA is reviewed and adjusted as required to agree with the U.S.

Treasury accounts. 

The SAA monies are held in U.S. Treasury accounts, with the Federal Reserve Bank in individual accounts 

established by the U.S. for foreign countries and approved commercial banks. Funds held in the Federal Reserve

Bank are transferred to the FMS Trust Fund account to be disbursed for FMS purposes.

K. CASH AND OTHER MONETARY ASSETS 

Cash is the total of cash resources under the control of the SAA including coin, paper currency, negotiable instruments,

which are held for deposit in banks or other financial institutions and is classified as “nonentity” and is restricted.

The FMS Trust Fund only accepts U.S. dollars for payment of defense articles and services per DSCA 5105.38-M 

Security Assistance Management Manual; Chapter 9, "Financial Policies and Procedures".

L. ACCOUNTS RECEIVABLE 

The SAA accounts receivable from other federal entities or the public include: accounts receivable, claims

receivable, and refunds receivable. Allowances for uncollectible accounts due from the public are based upon

analysis of collection experience by fund type. Gross receivables must be reduced to net realizable value by an

allowance for doubtful accounts in accordance with the Statement of Federal Financial Accounting Standard

(SFFAS) No. 1, “Accounting for Selected Assets and Liabilities” and Technical Bulletin 2020-1, “Loss Allowance for

Intragovernmental Receivables.”

M. DIRECT LOANS AND LOAN GUARANTEES 

FCRA governs all amended direct loan obligations and loan guarantee commitments made after FY 1991 resulting

in direct loans or loan guarantees. As required by SFFAS No. 2, “Accounting for Direct Loans and Loan Guarantees”,

the present value of the subsidy costs associated with direct loans and loan guarantees is recognized as costs in the

year the direct or guaranteed loan is disbursed.
75 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 		 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

FINANCIAL SECTION (UNAUDITED) | NOTES TO THE FINANCIAL STATEMENTS UNAUDITED 

Direct loans and loan guarantees are authorized by sections 23 and 24 of the AECA, Public Law 90-269, as amended;

section 503(a) of the FAA; and other specific legislation. These loans and guarantees assist friendly foreign countries

and international organizations in purchasing U.S. defense articles and services. There has been no new loans or loan

guarantees in FY 2022. 

N. INVENTORIES AND RELATED PROPERTY 

The SAA maintain inventories in the SDAF until they are placed on a FMS case. For FMS Trust Fund, the defense 

articles are provided to FMS customers from the U.S. Government or the contractor pursuant to a contract with the 

U.S. Government. Defense articles sold from the DoD or the U.S. Coast Guard are assets of the providing component 

until title is transferred to foreign customer. Currently, the FMS Trust fund does not maintain inventories however, a 

corrective action plan has been developed to remediate this condition.

O. ADVANCES AND PREPAYMENTS 

When advances are permitted by law, legislative action, or presidential authorization, the DoD’s policy is to record

advances and prepayments in accordance with U.S. GAAP. As such, payments made in advance of the receipt of goods 

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

assets when the related goods and services are received. Not all implementing agencies executing on behalf of the SAA

have implemented this policy primarily due to system limitations. 

P. LEASES 

The SAA does not report capital leases and currently is not able to reliably estimate the value of operating leases.

Q. OTHER ASSETS 

Other assets include civil service employee pay advances, travel advances, and certain contract financing payments

not reported elsewhere on the SAA Balance Sheet. 

The SAA conduct business with commercial contractors using two primary types of contracts: fixed price and cost

reimbursable. Contract financing payments are defined in the Federal Acquisition Regulation, Part 32, as authorized

disbursements to a contractor prior to acceptance of supplies or services by the Government. These payments are

designed to alleviate the potential financial burden on contractors performing on certain long-term contracts and

facilitate competition for defense contracts. Contract financing payment clauses are incorporated in the contract

terms and conditions and may include advance payments, performance-based payments, commercial advance and

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

contracts. The DoD FMR states to record certain contract financing payments as other assets.

Contract financing payments do not include invoice payments, payments for partial deliveries, lease and rental

payments, or progress payments based on a percentage or stage of completion. Defense Federal Acquisition

Regulation Supplement (Subpart 232.102(e)(2)) authorizes progress payments based on a percentage or stage of

completion only for construction of real property, shipbuilding, and ship conversion, alteration, or repair. Progress

payments based on percentage or stage of completion are reported as Construction in Progress.

R. CONTINGENCIES AND OTHER LIABILITIES 

SFFAS No. 5, "Accounting for Liabilities of the Federal Government", as amended by SFFAS No. 12, “Recognition

of Contingent Liabilities Arising from Litigation”, defines a contingency as an existing condition, situation, or set of

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

more future events occur or fail to occur. The SAA recognizes contingent liabilities when past events or exchange

transactions occur, a future loss is probable, and the loss amount can be reasonably estimated.

Financial statement reporting is limited to disclosure when conditions for liability recognition do not exist but there

is at least a reasonable possibility of incurring a loss or additional losses. The SAA risk of loss due to contingencies

arise as a result of pending or threatened litigation or claims and assessments due to events such as aircraft, ship, and 

vehicle accidents; medical malpractice; property or environmental damages; and contract disputes.
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 76 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	

UNAUDITED FINANCIAL SECTION (UNAUDITED) | NOTES TO THE FINANCIAL STATEMENTS 

S. ACCRUED LEAVE 

For personnel compensation and benefits, the issue is usually the “timing” of the obligation and not the “amount”

of the obligation. The amount is prescribed by laws that cover the civil service and the uniformed service and

determined by well-established personnel procedures. As for the timing of the obligation, the amounts generally are

recorded as obligations as the amounts are earned during the reporting pay period, with the following exception:

Annual leave at the time it becomes due and payable as terminal leave or taken in lieu

of a lump sum payment because normally, annual leave is unfunded.

The balance of the liabilities for annual leave and other leave (compensatory time and credit hours), including fringe

benefit costs associated with the leave, must be assessed and, as needed, adjusted to reflect all pay increases and

unused leave balances at least quarterly for financial statement purposes. For General funds, unused annual leave is

typically unfunded until the leave is used. 

The FMS Trust Fund reports liabilities for accrued compensatory and annual leave for civilians. Sick leave for

civilians is expensed as taken. The liabilities are based on current pay rates.

T. NET POSITION 

Net position consists of unexpended appropriations and cumulative results of operations. Unexpended

appropriations represent the amounts of budget authority that are unobligated and have not been rescinded or

withdrawn. Unexpended appropriations also represent amounts obligated for which legal liabilities for payments

have not been incurred. Cumulative results of operations represent the net difference between expenses and losses

and financing sources (including appropriations, revenue, and gains) since inception. The cumulative results of

operations also include donations and transfer in and out of assets that were not reimbursed.

U. UNDISTRIBUTED DISBURSEMENTS AND COLLECTIONS 

Undistributed disbursements and collections represent the difference between disbursements and collections

matched at the transaction level to specific obligations, payables, or receivables in the source systems and those

reported by the U.S. Treasury. Supported disbursements and collections may be evidenced by the availability of

corroborating documentation generally supporting the summary level adjustment made to accounts payable and

receivable. Unsupported disbursements and collections do not have supporting documentation for the transactions.

However, both supported and unsupported adjustments may have been made to the SAA trial balances prior to

validating underlying transactions. 

Due to noted material weaknesses in current accounting and financial feeder systems, the SAA is generally unable

to determine whether undistributed disbursements and collections should be applied to federal or nonfederal

accounts payables/receivable at the time accounting reports are prepared. Accordingly, the SAA is to allocate

supported undistributed disbursements and collections between federal and nonfederal categories based on

the percentage of distributed federal and nonfederal accounts payable and accounts receivable. Unsupported

undistributed disbursements and collections are also applied to reduce accounts payable and receivable accordingly.
77 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	

FINANCIAL SECTION (UNAUDITED) | NOTES TO THE FINANCIAL STATEMENTS UNAUDITED 

NOTE 2. NON-ENTITY ASSETS

AS OF SEPTEMBER 30 

(AMOUNTS IN THOUSANDS) 2022 2021 

Intragovernmental Assets

 Fund Balance with Treasury $19,919,746 $20,712,710

 Total Intragovernmental Assets $19,919,746 $20,712,710

Other than Intragovernmental Assets 

Cash and Other Monetary Assets $39,872,408 $38,554,491

Accounts Receivable 451,657 449,775 

Total Other than Intragovernmental Assets $40,324,065 $39,004,266

Total Non-Entity Assets $60,243,811 $59,716,976

Total Entity Assets $34,498,117 $26,768,908

Total Assets $94,741,928 $86,485,884

Nonentity Assets are assets for which the SAA maintain stewardship accountability and reporting responsibility but

are not available for the SAA operations.

Fund Balance with Treasury and Cash and Other Monetary Assets consist of advance deposits from friendly countries 

and international organizations to facilitate the purchase of U.S. defense articles and services based on future

requirement forecasts. The corresponding liabilities associated with non-entity cash are disclosed in note 15.

Accounts Receivable consist of amounts for interest, fines, and penalties due on debt from loans and nonfederal funds

owed to the FMS Trust Fund country accounts in litigation at Department of Justice or collection status at DFAS. 

Some portion of these uncollected funds may be payable to the FMS Administrative Surcharge account but are not

discernible prior to collection.
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 78 

	 	 	 	

 

						 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

UNAUDITED FINANCIAL SECTION (UNAUDITED) | NOTES TO THE FINANCIAL STATEMENTS 

NOTE 3. FUND BALANCE WITH TREASURY

AS OF SEPTEMBER 30 

(AMOUNTS IN THOUSANDS) 2022 2021 

Unobligated Balance

Available $149,441,211 $106,684,126

Unavailable 45,824,899 71,923,797 

Total Unobligated Balance $195,266,110 $178,607,923

Obligated Balance Not Yet Disbursed $63,133,500 $58,639,145

Non-Budgetary FBwT 

Deposit Funds $17,839 $16,669

Total Non-Budgetary FBwT $17,839 $16,669

Non-FBwT Budgetary Accounts

 Contract Authority $(206,450,557) $(191,851,441)

Receivables and Other 5 -

Total Non-FBwT Budgetary Accounts $(206,450,552) $(191,851,441)

Total FBwT $51,966,897 $45,412,296

The Status of FBwT, as presented above, reflects the reconciliation between the budgetary resources supporting

FBwT (largely consisting of Unobligated Balance and Obligated Balance Not Yet Disbursed) and those resources

provided by other means. The Total FBwT reported on the Balance Sheet reflects the budgetary authority remaining

for disbursements against current or future obligations. Unobligated Balance is classified as available or unavailable and

represents the cumulative amount of budgetary authority set aside to cover future obligations. The available balance

consists primarily of the unexpired, unobligated balance that has been apportioned and available for new obligations.

The unavailable balance is not apportioned for current use because it is temporarily precluded from obligation by

law. Certain unobligated balances are restricted for future use and are not apportioned for current use. Unobligated

balances for trust fund accounts are restricted for use by public laws establishing the funds. Obligated Balance Not Yet

Disbursed represents funds obligated for goods and services but not paid.

FBwT increases only after the customer payments for services or goods rendered have been collected. Conversely,

appropriations received increase FBwT upon receipt of the budget authority.

Contract Authority does not increase the FBwT when initially posted, but does provide budgetary resources.

FBwT increases only after the customer payments for services or goods rendered have been collected. Conversely,

appropriations received increase FBwT upon receipt of the budget authority.

The FBwT reported in the financial statements has been adjusted to reflect the SAA’s balance as reported by Treasury.

The difference between FBwT in the SAA’s general ledgers and FBwT reflected in the Treasury accounts is attributable to

transactions that have not been posted to the individual detailed accounts in the DoD Components’ general ledgers as a

result of timing differences or the inability to obtain valid accounting information prior to the issuance of the
79 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

 

 

		 	

 

	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	

 

	 	

 

	 	

FINANCIAL SECTION (UNAUDITED) | NOTES TO THE FINANCIAL STATEMENTS UNAUDITED 

financial statements. When research is completed, these transactions will be recorded in the appropriate detailed

accounts within the IA’s general ledger systems and flow into the SAA financial statements.

NOTE 4. CASH AND OTHER MONETARY ASSETS

AS OF SEPTEMBER 30 

(AMOUNTS IN THOUSANDS) 2022 2021 

Cash $ 39,872,408 $ 38,554,491

Total Cash and Other Monetary Assets $ 39,872,408 $ 38,554,491

The Cash balance as of September 30, 2022 and 2021 includes advance deposits from foreign nations and

organizations in the Federal Reserve Bank and Commercial Banking Accounts which have not been transferred to

the FMS Trust Fund and are not available for agency use (non-entity cash).

NOTE 5. INVESTMENT AND RELATED INTEREST

SAA reported no Investments and Related Interest in FY 2022 and FY 2021. 

NOTE 6. ACCOUNTS RECEIVABLE, NET

AS OF SEPTEMBER 30 

(AMOUNTS IN THOUSANDS) 

2022 

Gross Amount 

Due 

Allowance For Estimated 

Uncollectibles 

Accounts 

Receivable, Net 

Intragovernmental 

Receivables $3,490 $ - $3,490

Non-Federal Receivables

(From the Public) (19,024) (108) (19,132) 

Total Accounts Receivable $(15,534) $(108) $(15,642)

AS OF SEPTEMBER 30 

(AMOUNTS IN THOUSANDS) 

2021 

Gross Amount 

Due 

Allowance For Estimated 

Uncollectibles 

Accounts 

Receivable, Net 

Intragovernmental 

Receivables $2,821 $ - $2,821

Non-Federal Receivables

(From the Public) (80,906) (78) (80,984) 

Total Accounts Receivable $(78,085) $(78) $(78,163)
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 80 

	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	

UNAUDITED FINANCIAL SECTION (UNAUDITED) | NOTES TO THE FINANCIAL STATEMENTS 

Accounts Receivable represent the FMS Trust Fund claim for payment from other entities. Allowances for

uncollectible accounts are based on an estimation methodology using three years of historical collection data and

is calculated on consolidated receivable balances.

The abnormal balance in Non-Federal Accounts Receivables of $19 million and $81 million in FY 2022 and FY 2021

respectively, is due to improper reporting from feeder accounting systems. The effort to remediate and address 

SAA abnormal balances is ongoing.

NOTE 7. LOANS RECEIVABLE, NET AND LOAN GUARANTEE LIABILITIES

DIRECT LOAN AND LOAN GUARANTEE PROGRAMS 

The SAA operates the following direct loan programs:

AECA authorizes funds to be appropriated to the President for financing the sales of defense articles and

defense services to eligible foreign countries. Each loan is reviewed in the light of the purchasing country’s

financial condition, its need for credit, U.S. economic or military assistance programs in the country and region,

and other proposed arms purchases by the country. The President delegates to the Secretary of Defense the

authority to issue and guarantee loans through the designated administering agency, DSCA. The loans are issued 

to friendly, less economically developed countries. Pursuant to the authority contained in the Act, the following 

four funds are reported in the SAA Financial Statements:

Foreign Military Loan Liquidating Account (FMLLA), for pre-1992 loans 

Foreign Military Financing Direct Loan Program Account (FMFDLPA), for post-1991 loans 

Foreign Military Financing Direct Loan Financing Accounts (FMFDLFA), for post-1991 loans 

Military Debt Reduction Financing Account (MDRFA) for reducing loan receivables for eligible countries.

The FMLLA is a liquidating account including all assets, liabilities, and equities for loan balances recorded prior

to FY 1992. No new loan disbursements are made from this account. Certain collections made into this account

are made available for default claim payments. The FCRA provides permanent indefinite authority to cover

obligations for default payments in the event the funds in the liquidating account are otherwise insufficient.

The FMFDLPA is a program account established pursuant to the FCRA to provide the funds necessary for the

subsidy element of loans. Expenditures from this account finance the subsidy element of direct loan disbursements

and are transferred into the FMFDLFA to make required loan disbursements for approved Foreign Military Sales or

commercial sales. 

The FMFDLFA is a financing account used to make disbursements of Foreign Military Loan funds for approved

procurements and for subsequent collections for the loans after September 30, 1991. The account uses permanent

borrowing authority from the U.S. Treasury combined with transfers of appropriated funds from FMFDLPA to

make the required disbursements to loan recipient country borrowers for approved procurements. Receipts of

debt service collections from borrowers are used to repay borrowings from U.S. Treasury.

The MDRFA is a financing account established for the debt relief of certain countries as established by Public Law

103-87. The MDRFA buys the portfolio of loans from the FMLLA, thus transferring the loans from the FMLLA

account to the MDRFA account. The Paris Club negotiates the debt forgiveness with Highly Indebted Poor

Countries (HIPC). The Paris Club has twenty-two member countries that negotiate rescheduling or refinancing
81 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

 

	 	 	 	

	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	

FINANCIAL SECTION (UNAUDITED) | NOTES TO THE FINANCIAL STATEMENTS UNAUDITED 

of debt for HIPC. The Paris Club provides debt reduction initially on payments coming due over a specific period

corresponding to the length of an International Monetary Fund (IMF) supported economic reform program. 

Reduction then is staged, with each successive stage contingent upon debtor country compliance with its IMFsupport program. Under Naples Terms, stock of debt reduction is provided after three years of good performance

with respect to IMF reform programs and payments to Paris Club creditors. The United States incurs the budget

cost of the eventual stock of debt reduction when it agrees to the initial “maturities” reduction of payments coming

due, since bilateral agreements commit us to stock reduction once the Paris Club agrees to provide them.

The FCRA governs all amended direct loan obligations and loan guarantee commitments made after FY 1991

resulting in direct loans or loan guarantees. The SAA loans are reported at the present value basis for post-credit

reform loans and under the allowance-for-loss method for pre-credit reform of the following projected cash

flows: (1) loan disbursements, (2) repayments of principal, and (3) payments of interest and other payments over

the life of the loan after adjusting for estimated defaults, prepayments, fees, penalties, and other recoveries.

There has been no new loans or loan guarantees in FY 2022.

SUMMARY OF DIRECT LOANS AND LOAN GUARANTEES 

AS OF SEPTEMBER 30 

(AMOUNTS IN THOUSANDS) 2022 2021 

LOANS RECEIVABLE, NET 

DIRECT LOANS 

Foreign Military Loan Liquidating Account $449,219 $449,775

Foreign Military Financing Account 957,349 1,557,704 

Military Debt Reduction Financing Account 39,445 38,698 

Total Direct Loans $1,446,013 $2,046,177

Total Loans Receivable, Net $1,446,013 $2,046,177
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 82 

	 	 	

											 	

	 	 	

	 	 	 	 	

	 	 	 	

	 	 	 	 	

									 	

									 	 	 	

									 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 		

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

UNAUDITED FINANCIAL SECTION (UNAUDITED) | NOTES TO THE FINANCIAL STATEMENTS 

DIRECT LOANS OBLIGATED 

AS OF SEPTEMBER 30 

(AMOUNTS IN THOUSANDS) 2022 2021 

DIRECT LOANS OBLIGATED PRIOR TO FY 1992 (ALLOWANCE FOR LOSS METHOD) 

Foreign Military Loan Liquidating Account 

Loans Receivable, Gross $211,430 $219,859

Interest and Fees Receivable 1,795,499 1,734,141 

Present Value Allowance/ Allowance for Loan Losses (1,557,710) (1,504,225) 

Direct Loans, Net $449,219 $449,775

DIRECT LOANS OBLIGATED AFTER FY 1991 (NET PRESENT VALUE METHOD) 

Foreign Military Financing Account 

Loans Receivable, Gross $1,224,821 $1,923,818

Interest and Fees Receivable 15,908 24,511 

Allowance for Subsidy Cost (Present Value) (283,380) (390,626) 

Direct Loans, Net $957,349 $1,557,703

Military Debt Reduction Financing Account

Loans Receivable, Gross $38,637 $38,636

Allowance for Subsidy Cost (Present Value) 808 62 

Direct Loans, Net $39,445 $38,698

TOTAL DIRECT LOANS RECEIVABLES, NET 

Loans Receivable, Gross $1,474,888 $2,182,313

Interest and Fees Receivable 1,811,407 1,758,652 

Allowance for Subsidy Cost (Present Value)

 /Allowance for Loan Losses (1,840,282) (1,894,788)

 Direct Loans, Net $1,446,013 $2,046,177

The SAA bills the countries semiannually for loan repayments. Applying terms of the loans with the countries,

accrued interest receivable is calculated using the simple interest method.

The allowance for credit subsidy account for the FMFDLFA account is calculated taking into consideration three

transactions: (1) transfers of subsidy from the program account to the financing account (the subsidy is the

difference between the expected cash outlays from the U.S. Government and the present value of the expected

collections); (2) interest payments from the U.S. Treasury to the financing fund; and (3) upward adjustments due

to re-estimates as U.S. Treasury borrowing rates change over time from the loan repayment rate and an increase

in estimated defaults on the loan. 
83 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	

			 	 	

 

	 	 	 	 	 	 	 	

	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	

	 	 	 	 	 	 	 	 	 	 	 	

FINANCIAL SECTION (UNAUDITED) | NOTES TO THE FINANCIAL STATEMENTS UNAUDITED 

TOTAL AMOUNT OF DIRECT LOANS DISBURSED (POST-1991)

The SAA reported no Direct Loans Disbursed (Post 1991) for FY 2022 or FY 2021.

SUBSIDY EXPENSE FOR DIRECT LOAN BY PROGRAM 

The SAA reported no Subsidy Expense for Direct Loan by Program for FY 2022 or FY 2021.

BUDGET SUBSIDY RATES FOR DIRECT LOANS BY PROGRAM FOR THE CURRENT YEAR’S COHORTS 

The SAA reported no Budget Subsidy Rates for Direct Loans Program for the Current Year’s Cohorts for

FY 2022 and FY 2021. 

SCHEDULE FOR RECONCILING SUBSIDY COST ALLOWANCE BALANCES (POST-1991 DIRECT LOANS)

AS OF SEPTEMBER 30 

(AMOUNTS IN THOUSANDS) 2022 2021 

Beginning Balance of the Subsidy Cost Allowance $390,564 $857,426

Adjustments

Subsidy Allowance Amortization (107,992) (466,862) 

Ending Balance of the Subsidy Cost Allowance before Reestimates $282,572 $390,564

Ending Balance of the Subsidy Cost Allowance $282,572 $390,564

DEFAULTED GUARANTEED LOANS FROM POST-1991 GUARANTEES

SAA reported no Guaranteed Loans from Post-1991 Guarantees in FY 2022 and FY 2021. 

LOAN GUARANTEE LIABILITIES 

GUARANTEED LOANS OUTSTANDING 

The SAA reported no Guaranteed Loans Outstanding in FY 2022 and FY 2021. 

LIABILITIES FOR LOAN GUARANTEES (PRESENT VALUE)

The SAA reported no Liabilities for Loan Guarantees (Present Value) for FY 2022 and FY 2021.

SUBSIDY EXPENSE FOR LOAN GUARANTEES BY PROGRAM 

The SAA reported no Subsidy Expense for Loan Guarantees by Program for FY 2022 and FY 2021.

BUDGET SUBSIDY RATES FOR LOAN GUARANTEES BY PROGRAM FOR THE 

CURRENT YEAR’S COHORTS 

The SAA reported no Budget Subsidy Rates for Loan Guarantees by Program for the

current Year’s Cohort.

SCHEDULE FOR RECONCILING LOAN GUARANTEE LIABILITY BALANCES 

(POST-1991 LOAN GUARANTEES)

The SAA reported no Reconciling Loan Guarantee Liability Balances (Post 1991 Loan Guarantees)

for FY 2022 or FY 2021. 
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 84 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	

	 	 	 	

	 	 	 	 	

	 	

	 	 	 	 	 	

	 	 	 	

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

UNAUDITED FINANCIAL SECTION (UNAUDITED) | NOTES TO THE FINANCIAL STATEMENTS 

CHANGE IN LOANS RECEIVABLE, NET 

Below is a summary table showing the change in net Loans Receivable for FY 2022. Pursuant to OMB Circular No.

A-136, comparative information is not required in the first year of implementation.

AS OF SEPTEMBER 30 

(AMOUNTS IN THOUSANDS) 2022 

Beginning Balance of Loans Receivable, Net $2,046,177

Less Principal and Interest Payments Received (820,260) 

Add Interest Accruals 323,893 

Less Interest Revenue on Uninvested Funds (775) 

Add Interest Expense on Entity Borrowings 26,336 

Less Downward Reestimates (183,864) 

Less Subsidy Allowance 107,992 

Allowance for Loan and Interest Loss Adjustments (53,486) 

Ending Balance of Loans Receivable, Net $1,446,013

ADMINISTRATIVE EXPENSES 

Administrative expenses for loans are insignificant and as such not funded within the loan program account.

NOTE 8. INVENTORY AND RELATED PROPERTY, NET

AS OF SEPTEMBER 30 

(AMOUNTS IN THOUSANDS) 2022 2021 

Inventory, Net $684,429 $525,908

Total Inventory and Related Property, Net $684,429 $525,908

DSCA is continuing ongoing audit remediation efforts to determine if additional inventory that should be reported

in the SAA financial statements and related footnotes. As DSCA continues to assess this data, reporting and

accounting treatment may change in future periods. 
85 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

FINANCIAL SECTION (UNAUDITED) | NOTES TO THE FINANCIAL STATEMENTS UNAUDITED 

INVENTORY, NET 

INVENTORY CATEGORIES 

AS OF SEPTEMBER 30 

(AMOUNTS IN THOUSANDS) 2022 2021 VALUATION 

METHOD 

Held for Sale $680,871 $522,079 LAC, MAC 

Work-in-Process 3,558 3,829 LAC, MAC 

Total $684,429 $525,908

LEGEND FOR VALUATION METHODS: LAC = Latest Acquisition Cost | MAC = Moving Average Cost 

GENERAL COMPOSITION OF INVENTORY 

Inventory is tangible personal property such as raw materials to be consumed in the production of goods for sale or in

the provision of service for a fee, the value of inventory used in the production process, finished goods held for sale,

and goods held for repair and eventual sale. Inventory includes spare and repair parts, clothing and textiles, and fuels

held for sale. SAA assigns inventory items to a category based on asset type and condition.

INVENTORY RESTRICTIONS 

There are no known restrictions on inventory. 

OPERATING MATERIAL AND SUPPLIES, NET 

OPERATING MATERIAL AND SUPPLIES CATEGORIES 

The SAA reported no Operating Material and Supplies for FY 2022 and FY 2021. 

STOCKPILE MATERIAL, NET 

STOCKPILE MATERIAL CATEGORIES 

The SAA reported no Stockpile Material, Net for FY 2022 or FY 2021. 
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 86 

 

						 	

						 	 	 	 	 	 	 	 			

						 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	

UNAUDITED FINANCIAL SECTION (UNAUDITED) | NOTES TO THE FINANCIAL STATEMENTS 

NOTE 9. STEWARDSHIP PROPERTY, PLANT, AND EQUIPMENT (PP&E)

The SAA currently does not report any stewardship PP&E, general PP&E and heritage assets. However, DSCA 

is continuing ongoing audit remediation efforts to determine if PP&E should be reported in the SAA financial

statements and related footnotes. As DSCA continues to assess this data, reporting and accounting treatment may 

change in future periods. 

NOTE 10. OTHER ASSETS

AS OF SEPTEMBER 30 

(AMOUNTS IN THOUSANDS) 2022 2021 

Intragovernmental 

Advances and Prepayments $893 $10,654

Total Intragovernmental $893 $10,654

Other than Intragovernmental 

Outstanding Contract Financing Payments $10,843 $10,843

 Advances and Prepayments 776,087 3,678 

Subtotal	 $786,930 $14,521

Less: “Outstanding Contract Financing Payments” 

and “Advances and Prepayments” Totaled and Presented on

the Balance Sheet as “Advances and Prepayments”

(786,930) (14,521)

 Net Other than Intragovernmental $ - $ -

Total Other Assets $893 $10,654

NON-FEDERAL OTHER ASSETS

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

Trust Fund that protect the contract work from state or local taxation, liens or attachment by the contractor’s

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

to mean that ownership of the contractor’s work has transferred to the Government. The Government does not

have the right to take the work, except as provided in contract clauses related to termination or acceptance,

and the FMS Trust Fund is not obligated to make payment to the contractor until delivery and acceptance of a

satisfactory product. 

The FY 2022 $10.8 million of Outstanding Contract Financing payments consist of estimated future payments to

contractors upon delivery and government acceptance of a satisfactory product. See additional discussion in Note 

15, Other Liabilities.
87 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	

					 	

	 	

	 	

	 	 	 	 	 	

							 	

						 	 	 	

	 	 	 	 	 	

	 	 	 	 	

	 	 	 	 	

FINANCIAL SECTION (UNAUDITED) | NOTES TO THE FINANCIAL STATEMENTS UNAUDITED 

NOTE 11. LIABILITIES NOT COVERED BY BUDGETARY RESOURCES

AS OF SEPTEMBER 30 

(AMOUNTS IN THOUSANDS) 2022 2021 

Intragovernmental Liabilities

Other $451,657 $449,775

Total Intragovernmental Liabilities $451,657 $449,775

Other than Intragovernmental Liabilities

Accounts Payable $ - $(82)

Federal Employee and Veteran Benefits Payable 4,382 1,217 

Other Liabilities 39,872,419 38,554,502 

Total Other than Intragovernmental Liabilities $39,876,801 $38,555,637

Total Liabilities Not Covered by Budgetary Resources $40,328,458 $39,005,412

Total Liabilities Covered by Budgetary Resources $187,358,786 $145,943,233

Total Liabilities Not Requiring Budgetary Resources $17,839 $16,669

Total Liabilities $227,705,083 $184,965,314

Accounts Payable primarily represents liabilities in canceled appropriations, which if paid, will be disbursed using

current year funds. Other Liabilities consists primarily of the liability to offset Other Cash currently in Federal

Reserve Bank and Commercial Banking Account which have not been transferred to the Foreign Military Sales Trust

Fund and are not available for agency use (nonentity cash).

Budgetary resources include (1) new budget authority, (2) unobligated balances of budgetary resources at the

beginning of the year or net transfers of prior year balances during the year, (3) spending authority from offsetting

collections, and (4) recoveries of unexpired budget authority through downward adjustments of prior year

obligations. Additionally, budgetary resources cover liabilities if they are to be funded by permanent indefinite

appropriations, provided that the resources may be apportioned by OMB without further action by Congress and

without contingency having to be met first.

Liabilities Not Covered by Budgetary Resources require congressional action before budgetary resources can be

provided. Liabilities Not Requiring Budgetary Resources have not in the past and will not in the future require the use

of budgetary resources.
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 88 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 		 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

 

 

	 	 	

	 	 	 

 

	 	 	

	 	 	 

 

UNAUDITED FINANCIAL SECTION (UNAUDITED) | NOTES TO THE FINANCIAL STATEMENTS 

NOTE 12. DEBT

AS OF SEPTEMBER 30 

(AMOUNTS IN THOUSANDS) 

2022 

BEGINNING 

BALANCE 

NET 

BORROWING 

ENDING 

BALANCE 

Source of Debt (Intragovernmental)

Debt Owed to: Treasury Other than 

the Federal Financing Bank $1,652,162 $(630,389) $1,021,773

Total Debt $1,652,162 $(630,389) $1,021,773

AS OF SEPTEMBER 30 

(AMOUNTS IN THOUSANDS) 

2021 

BEGINNING 

BALANCE 

NET 

BORROWING 

ENDING 

BALANCE 

Source of Debt (Intragovernmental)

Debt Owed to: Treasury Other than 

the Federal Financing Bank $1,756,478 $(104,316) $1,652,162

Total Debt $1,756,478 $(104,316) $1,652,162

The FCRA provides financing accounts with indefinite authority to borrow from the U.S. Treasury to fund

disbursements of loans made to sovereign nations for security assistance. This debt to the U.S. Treasury is reflected

in the Foreign Military Financing Direct Loan Financing Account and the Military Debt Reduction Account.

The FCRA governs all direct loan obligations and loan guarantee commitments made after FY 1991. Beginning in

1992, based on the FCRA, the security assistance program began borrowing the funds from the U.S. Treasury.

NOTE 13. FEDERAL EMPLOYEE AND VETERAN BENEFITS PAYABLE

FEDERAL EMPLOYEE AND VETERAN BENEFITS LIABILITY 

AS OF SEPTEMBER 30 

2022 

(AMOUNTS IN THOUSANDS) LIABILITIES (ASSETS AVAILABLE 

TO PAY BENEFITS) 

UNFUNDED

 LIABILITIES 

Federal Employee and Veteran 

Benefits Payable $20,068 $(15,686) $4,382

Total Federal Employee and Veteran 

Benefits Payable $20,068 $(15,686) $4,382
89 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

 

	 	 	

	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	

FINANCIAL SECTION (UNAUDITED) | NOTES TO THE FINANCIAL STATEMENTS UNAUDITED 

AS OF SEPTEMBER 30 

2021 

(AMOUNTS IN THOUSANDS) LIABILITIES (ASSETS AVAILABLE 

TO PAY BENEFITS) 

UNFUNDED

 LIABILITIES 

Federal Employee and Veteran 

Benefits Payable $16,564 $(15,347) $1,217

Other Benefit-Related Payables Included

in Intragovernmental Other Liabilities on

the Balance Sheet 

(57) 57 -

Total Federal Employee and Veteran 

Benefits Payable $16,507 $(15,290) $1,217

RECONCILIATION OF BEGINNING AND ENDING LIABILITY BALANCES FOR MILITARY RETIREMENT 

AND OTHER FEDERAL EMPLOYEE BENEFITS 

The SAA reported no Reconciliation of Beginning and Ending Liability Balances for Military Retirement and

Other Employee Benefits for FY 2022 or FY 2021.

NOTE 14. ENVIRONMENTAL AND DISPOSAL LIABILITIES

The SAA reported no Environmental and Disposal Liabilities in FY 2022 or FY 2021. DSCA is continuing

ongoing audit remediation efforts to determine if there are Environmental and Disposal Liabilities that

should be reported in the financial statements and related footnotes. As DSCA continues to assess this data,

reporting and accounting treatment may change in future periods. 
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 90 

 

	 	 	 	 	

	 	

	 	 

	 	 	 

	 	

-

UNAUDITED FINANCIAL SECTION (UNAUDITED) | NOTES TO THE FINANCIAL STATEMENTS 

NOTE 15. OTHER LIABILITIES

AS OF SEPTEMBER 30 

(AMOUNTS IN THOUSANDS) 

2022 

CURRENT LIABILITY NON CURRENT 

LIABILITY TOTAL 

Intragovernmental 

Liabilities for Non-Entity Assets $ - $451,657 $451,657

 Total Intragovernmental $ - $451,657 $451,657

Other than Intragovernmental 

Accrued Funded Payroll and Leave $41,181 $ - $41,181

Withholdings Payable (66) - (66) 

Liability for Non-Fiduciary Deposit 

Funds and Undeposited Collections 17,840 - 17,840 

Contract Holdbacks (3,345) - (3,345) 

Other Liabilities without Related 

Budgetary Obligations 11 39,872,408 39,872,419 

Other Liabilities with Related 

Budgetary Obligations 11 - 11

 Total Other than Intragovernmental $55,632 $39,872,408 $39,928,040

Total Other Liabilities $55,632 $40,324,065 $40,379,697
91 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

 

					 	 	 	

					 	 	

					 	 	

					

					 	 	 

					 	

					 	 	 

					 	

					 	 	 	 

					 	

	 	

-

FINANCIAL SECTION (UNAUDITED) | NOTES TO THE FINANCIAL STATEMENTS UNAUDITED 

AS OF SEPTEMBER 30 

(AMOUNTS IN THOUSANDS) 

2021 

CURRENT LIABILITY NON CURRENT 

LIABILITY TOTAL 

Intragovernmental 

Liabilities for non-entity assets $ - $ 449,775 $ 449,775

Other Liabilities reported on

 Note 13, Federal Employee and 

Veteran Benefits Payable

(57) - (57)

 Total Intragovernmental $(57) $449,775 $449,718

Other than Intragovernmental

 Accrued funded payroll and leave $33,664 $ - $ 33,664

Withholdings payable (66) - (66) 

Liability for non-fiduciary deposit

 funds and undeposited collections 

16,669 - 16,669 

Contract holdbacks (1,040) - (1,040) 

Other liabilities without related 

budgetary obligations 11 38,554,491 38,554,502 

Other liabilities with related 

budgetary obligations 11 - 11

 Total Other than Intragovernmental $49,249 $38,554,491 $38,603,740

Total Other Liabilities $49,192 $39,004,266 $39,053,458
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 92 

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 		 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

		 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

UNAUDITED FINANCIAL SECTION (UNAUDITED) | NOTES TO THE FINANCIAL STATEMENTS 

NON-FEDERAL OTHER LIABILITIES

Nonfederal Advances from Others are related to contracts authorizing progress payments based on cost as

defined in the Federal Acquisition Regulation (FAR). In accordance with contract terms, specific rights to the

contractors’ work vest with the Federal Government when a specific type of contract financing payment is

made. This action protects taxpayer funds in the event of contract nonperformance. These rights should not

be misconstrued as rights of ownership. The SAA is under no obligation to pay contractors for amounts greater

than the amounts authorized in contracts until delivery and government acceptance. Due to the probability the

contractors will complete their efforts and deliver satisfactory products, and because the amount of potential

future payments are estimable, the SAA has recognized a contingent liability for estimated future payments

which are conditional pending delivery and government acceptance. 

Contract Holdbacks are amounts earned by contractors or suppliers during the production period but not yet

paid to the contractor/supplier to ensure future performance. 

ADVANCES FROM OTHERS AND DEFERRED REVENUE 

AS OF SEPTEMBER 30 

(AMOUNTS IN THOUSANDS) 2022 2021 

Intragovernmental $265,922 $ -

Other than Intragovernmental $167,684,181 $126,153,289

Advances from Others represent liabilities for collections received to cover future expenses or acquisition of assets.

NOTE 16. LEASES

CAPITAL LEASES 

The SAA reported no Capital Leases in FY 2022 or FY 2021. DSCA is continuing ongoing audit remediation efforts 

to determine if capital leases should be reported in the SAA’s financial statements and related footnotes. As DSCA

continues to assess this data, reporting and accounting treatment may change in future periods. 

OPERATING LEASES 

The SAA reported no Operating Leases in FY 2022 or FY 2021. DSCA is continuing ongoing audit remediation 

efforts to determine if operating leases that should be reported in the SAA’s financial statements and related

footnotes. As DSCA continues to assess this data, reporting and accounting treatment may change in future periods. 

NOTE 17. COMMITMENTS AND CONTINGENCIES

SAA has not recorded any contingent liabilities for litigations for FY 2022 or FY 2021. DSCA is continuing ongoing

audit remediation efforts on contingencies. As DSCA continues to assess its data, reporting and accounting 

treatment may change in future periods. 

NOTE 18. FUNDS FROM DEDICATED COLLECTIONS

The SAA reported no Funds from Dedicated Collections in FY 2022 or FY 2021. DSCA is continuing ongoing audit 

remediation efforts to determine if Funds from Dedicated Collections should be reported in the SAA’s financial

statements and related footnotes. As DSCA continues to assess this data, reporting and accounting treatment may 

change in future period. 
93 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

 

				 	 	

					 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 		 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

FINANCIAL SECTION (UNAUDITED) | NOTES TO THE FINANCIAL STATEMENTS UNAUDITED 

NOTE 19. DISCLOSURES RELATED TO THE STATEMENT OF NET COST

COSTS AND EXCHANGE REVENUE BY APPROPRIATION CATEGORY 

YEARS ENDED SEPTEMBER 30 

(AMOUNTS IN THOUSANDS) 2022 2021 

Operations, Readiness & Support

 Gross Cost $102,322,370 $95,684,584

Less: Earned Revenue (19,467,727) (17,320,368) 

Net Program Costs $82,854,643 $78,364,216

Consolidated

 Gross Cost $102,322,370 $95,684,584

Less: Earned Revenue (19,467,727) (17,320,368)

 Losses/(Gains) from Actuarial Assumption 

Total Net Cost $82,854,643 $78,364,216

The SNC represents the net cost of programs and organizations of the SAA supported by appropriations or other

means. The intent of the SNC is to provide gross and net cost information related to the amount of output or 

outcome for a given program or organization administered by a responsible reporting entity. Intragovernmental

costs and revenue represent transactions between two reporting entities within the Federal Government. Public

costs and exchange revenues are transactions made between the reporting entity and a nonfederal entity.

The SAA’s current processes and systems capture costs based on appropriation groups as presented in the

schedule above. The lower level costs for major programs are not presented as required by the Government

Performance and Results Act (GPRA) Modernization Act of 2010. The SAA is in the process of reviewing available

data and developing a cost reporting methodology required by SFFAS No. 4, “Managerial Cost Accounting

Standards and Concepts” as amended by SFFAS No. 55, “Amending Inter-Entity Cost Provisions”.

The systems utilized by the SAA do not fully meet accounting standards. Information presented is based on

budgetary obligations, disbursements, and collection transactions, as well as nonfinancial feeder systems adjusted

to record known accruals for major items, such as payroll expenses and accounts payable.
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 94 

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	

	 	 	 	 	 	 	

	 	

  

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

UNAUDITED FINANCIAL SECTION (UNAUDITED) | NOTES TO THE FINANCIAL STATEMENTS 

NOTE 20. DISCLOSURES RELATED TO THE STATEMENT

OF CHANGES IN NET POSITION 

The below table presents the reconciliation of appropriations in the Statement of Budgetary Resources to

appropriations received in the Statement of Changes in Net Position. The Appropriations on the SBR does not 

agree with the Appropriations Received on the Statement of Changes in Net Position. The reconciling items 

are attributed to Contract Authority, Transfers and Temporary Reductions.

RECONCILIATION OF APPROPRIATIONS ON THE STATEMENT OF BUDGETARY RESOURCES TO 

APPROPRIATIONS RECEIVED ON THE STATEMENT OF CHANGES IN NET POSITION 

YEARS ENDED SEPTEMBER 30 

(AMOUNTS IN THOUSANDS) 2022 2021 

Appropriations, Statement of Budgetary Resources $11,733,266 $11,878,103

Less: Appropriations Received, Statement of Changes in Net Position 10,803,349 6,288,449 

Total Reconciling Amount $929,917 $5,589,654

Items Reported as a Decrease/(Increase) to Appropriations, Statement of Budgetary Resources 

Temporary Reductions $(7,208) $(685)

Transfers (23,318) (29,918) 

Contract Authority 960,443 5,620,257 

Total Reconciling Items $929,917 $5,589,654

NOTE 21. DISCLOSURES RELATED TO THE STATEMENT

OF BUDGETARY RESOURCES 

NET ADJUSTMENTS TO UNOBLIGATED BALANCE, BROUGHT FORWARD, OCTOBER 1 

Net adjustments to the FY 2022 unobligated balance brought forward were $1.6 billion which included

recoveries of prior year unpaid obligations and BPC canceled funds returned to Treasury.

TERMS OF BORROWING AUTHORITY USED 

The SAA utilizes borrowing authority for the FMF Initiatives. Borrowing authority is used in compliance with

OMB Circular No. A-129, “Policies for Federal Credit Programs and Non-Tax Receivables”. See Note 7, Direct

Loans and Loan Guarantees, for additional information related to FMF. 

AVAILABLE BORROWING/CONTRACT AUTHORITY, END OF PERIOD 

There was no available borrowing authority remaining for the years ended September 30, 2022 and 2021.
95 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	

	 	 	 	 	

FINANCIAL SECTION (UNAUDITED) | NOTES TO THE FINANCIAL STATEMENTS UNAUDITED 

UNDELIVERED ORDERS AT THE END OF THE PERIOD 

YEARS ENDED SEPTEMBER 30 

(AMOUNTS IN THOUSANDS) 2022 2021 

Intragovernmental

 Unpaid $1,327,598 $1,055,439

 Total Intragovernmental $1,327,598 $1,055,439

Non-Federal

 Unpaid $41,168,065 $37,269,609

 Prepaid/Advanced 787,822 25,177

 Total Non-Federal $41,955,887 $37,294,786

Total Budgetary Resources Obligated for Undelivered

Orders at the End of the Period $43,283,485 $38,350,225

LEGAL ARRANGEMENTS AFFECTING THE USE OF UNOBLIGATED BALANCES 

A portion of the SAA’s unobligated balances represent trust fund receipts collected in the current fiscal year exceeding

the amount needed to pay benefits or other valid obligations. These receipts are temporarily precluded from

obligation by law due to a benefit formula or other limitation. The receipts, however, are assets of the funds and are

available for obligation in the future. The SAA operates within the constraints of fiscal law and has no additional legal

arrangements affecting the use of unobligated balances.
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 96 

 

 

	 	 	

	 	 	

	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 		

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

UNAUDITED FINANCIAL SECTION (UNAUDITED) | NOTES TO THE FINANCIAL STATEMENTS 

EXPLANATION OF DIFFERENCES BETWEEN THE SBR AND THE BUDGET OF THE U.S. GOVERNMENT

FOR THE YEAR ENDED 

SEPTEMBER 30 

(AMOUNTS IN 

MILLIONS) 

2021 

BUDGETARY 

RESOURCES 

NEW 

OBLIGATIONS 

& UPWARD 

ADJUSTMENTS 

(TOTAL) 

DISTRIBUTED 

OFFSETTING 

RECEIPTS 

AGENCY 

OUTLAYS, 

NET 

Combined Statement of

Budgetary Resources $224,049 $45,520 $(37,719) $39,311

Differences:

Expired Accounts that

are Excluded from the

Budget of the U.S. 

Government 

385 205 - -

Other (4) (5) (37,719) 61 

Budget of the U.S. 

Government $223,668 $45,320 $ - $39,250

The difference reported above for Budgetary Resources and New Obligations and Upward Adjustments

is due to different reporting requirements on the SBR versus the Budget. 

The reconciliation of the Combined Statement of Budgetary Resources and the actual amounts reported in the

Budget of the U.S. Government (Budget) as of September 30, 2021 is presented in the table above. Since these

financial statements are published before the Budget, this reconciliation is based on the 2021 Combined Statement

of Budgetary Resources because actual amounts for 2021 are in the most recently published Budget. The FY 2024

Budget will display the FY 2022 actual values and will be available at a later date at

https://www.whitehouse.gov/omb/budget. 

CONTRIBUTED CAPITAL 

There was no infusion of capital received in FY 2022 or FY 2021. 

NOTE 22. DISCLOSURES RELATED TO INCIDENTAL CUSTODIAL COLLECTIONS

The SAA reported no disclosures related to Incidental Custodial Collections in FY 2022 or FY 2021. 

NOTE 23. FIDUCIARY ACTIVITIES

The SAA reported no Fiduciary Activities in FY 2022 or FY 2021. 
97 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

 

					 	

					 	

 

	 	

		 	

 

		 	

	 	 	

FINANCIAL SECTION (UNAUDITED) | NOTES TO THE FINANCIAL STATEMENTS UNAUDITED 

NOTE 24. RECONCILIATION OF NET COST TO NET OUTLAYS

YEAR ENDED SEPTEMBER 30 

(AMOUNTS IN THOUSANDS) 

2022 

INTRAGOVERNMENTAL OTHER THAN 

INTRAGOVERNMENTAL TOTAL 

Net Cost of Operations $ 4,840,320 $ 78,014,323 $ 82,854,643

Components of Net Cost Not Part of Net Budgetary Outlays 

Change in Inventory and Related 

Property, Net $ - $158,521 $158,521

Increase/(Decrease) in Assets 

Accounts Receivable, Net 673 61,847 62,520 

Loans Receivable, Net - (600,165) (600,165)

 Other Assets (9,762) 2,090,328 2,080,566 

(Increase)/Decrease in Liabilities

Accounts Payable (218,065) (25,536) (243,601)

 Federal Employee and

 Veteran Benefits Payable - (3,504) (3,504) 

Other Liabilities (267,861) (42,854,021) (43,121,882) 

Total Components of Net Cost 

Not Part of Net Budgetary Outlays $(495,015) $(41,172,530) $(41,667,545)

Components of Net Budgetary Outlays Not Part of Net Cost 

Financing Sources: Donated Revenue $ - $(292,653) $(292,653)

Total Components of Net Budgetary 

Outlays Not Part of Net Cost $ - $(292,653) $(292,653)

Miscellaneous Reconciling Items 

Other $2,621,791 $ - $2,621,791

Total Other Reconciling Items $2,621,791 $ - $2,621,791

Total Net Outlays $6,967,096 $36,549,140 $43,516,236

Budgetary Agency Outlays, Net 

(Statement of Budgetary Resources) $(755,302)

Unreconciled Difference $44,271,538
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 98 

 

					 	 	

					 	 	

 

	 	

		 	

 

									 	 	

		 	

	 	 	

	 	

UNAUDITED FINANCIAL SECTION (UNAUDITED) | NOTES TO THE FINANCIAL STATEMENTS 

YEAR ENDED SEPTEMBER 30 

(AMOUNTS IN THOUSANDS) 

2021 

INTRAGOVERNMENTAL OTHER THAN 

INTRAGOVERNMENTAL TOTAL 

Net Cost of Operations $2,419,651 $75,944,565 $78,364,216

Components of Net Cost Not Part of Net Budgetary Outlays 

Change in Inventory and related 

property, net 

20213$ - $(124,373) $(124,373)

Increase/(decrease) in Assets 

Accounts receivable, net (99,334) 25,457 (73,877) 

Loans receivable, net - (360,976) (360,976)

 Other assets 10,655 (8,118,380) (8,107,725) 

(Increase)/Decrease in Liabilities

Accounts payable (56,319) (15,930,131) (15,986,450)

 Federal employee and 

veteran benefits payable - 2,529 2,529 

Other liabilities 233,744 (30,004,348) (29,770,604) 

Total Components of Net Cost 

Not Part of Net Budgetary Outlays $88,746 $(54,510,222) $(54,421,476)

Components of Net Budgetary Outlays Not Part of Net Cost 

Financing sources: Donated Revenue $ - $(273,027) $(273,027)

Total Components of Net Budgetary 

Outlays Not Part of Net Cost $ - $(273,027) $(273,027)

Miscellaneous Reconciling Items 

Distributed offsetting receipts $ - $(781,987) $(781,987)

Other 606,987 (1,671,421) (1,064,434) 

Total Other Reconciling Items $606,987 $(2,453,408) $(1,846,421)

Total Net Outlays $3,115,384 $18,707,908 $21,823,292

Budgetary Agency Outlays, Net 

(Statement of Budgetary Resources) $1,652,418

Unreconciled Difference $20,170,874
99 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	

FINANCIAL SECTION (UNAUDITED) | NOTES TO THE FINANCIAL STATEMENTS UNAUDITED 

The Reconciliation of Net Cost to Net Outlays demonstrates the relationship between the SAA’s Net Cost of

Operations, reported on an accrual basis on the Statement of Net Cost, and Net Outlays, reported on a budgetary

basis on the Statement of Budgetary Resources. While budgetary and financial accounting are complementary, the

reconciliation explains the inherent differences in timing and in the types of information between the two during the

reporting period. The accrual basis of financial accounting is intended to provide a picture of the SAA’s operations

and financial position, including information about costs arising from the consumption of assets and the incurrence of

liabilities. Budgetary accounting reports on the management of resources and the use and receipt of cash by the SAA.

Outlays are payments to liquidate an obligation, other than the repayment to the Treasury of debt principal.

The reconciling difference is due to timing differences between the recognition of expenses/revenues and

disbursements/collections on the SNC and SBR. Additionally, the SAA’s diverse business events may be recorded

using different, but equally valid, transaction scenarios. Research is ongoing to resolve the reconciling difference.

NOTE 25. PUBLIC-PRIVATE PARTNERSHIPS

The SAA reported no Public-Private Partnerships in FY 2022 or FY 2021. DSCA is continuing ongoing efforts to

determine if there are any Public-Private Partnerships that should be reported in the financial statements and related

footnotes. As DSCA continues to assess the data, reporting and accounting treatment may change in future periods. 

NOTE 26. DISCLOSURE ENTITIES AND RELATED PARTIES

The SAA reported no disclosure entities or related parties in FY 2022 or FY 2021. In accordance with FASAB SFFAS 

No. 47 “Reporting Entity”, DSCA is continuing ongoing efforts to determine if any should be reported in the financial

statements and related footnotes. As DSCA continues to assess the data, reporting and accounting treatment may 

change in future periods. 

NOTE 27. RESTATEMENTS

The SAA reported no restatements for FY 2022 or FY 2021. 

NOTE 28. COVID-19 ACTIVITY

The SAA reported no COVID-19 activity for FY 2022 or FY 2021. 

NOTE 29. SUBSEQUENT EVENTS

The SAA reported no subsequent events or transactions that occurred after the date of the Balance Sheet but before

the issuance of the audited financial statements that have a material effect on the financial statements and, therefore,

require adjustments to or disclosure in the statements.
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 100 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

		 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	

UNAUDITED FINANCIAL SECTION (UNAUDITED) | NOTES TO THE FINANCIAL STATEMENTS 

NOTE 30. RECLASSIFICATION OF FINANCIAL STATEMENT LINE ITEMS

FOR FINANCIAL REPORT COMPILATION PROCESS 

The SAA financial statements are included in the Financial Report of the U.S. Government. The FY 2022 Financial

Report will be published by The Bureau of Fiscal Service upon its release.

To prepare the Financial Report, the Department of the Treasury requires agencies to submit an adjusted trial

balance, which is a listing of amounts by U.S. Standard General Ledger account that appear in the financial

statements. Treasury uses the trial balance information reported in the Government-wide Treasury Account Symbol

Adjusted Trial Balance System (GTAS) to develop a Reclassified Balance Sheet, Reclassified Statement of Net Cost,

and a Reclassified Statement of Changes in Net Position for each agency. Treasury eliminates all intragovernmental

balances from the reclassified statements and aggregates lines with the same title to develop the Financial Report

statements. 

The following tables display the relationship between each of the SAA’s financial statements prior to elimination of

intragovernmental balances and prior to aggregation of repeated Financial Report line items.

“Non-Federal” transactions are with individuals, businesses, non-profit entities, and state, local, and

foreign governments. 
101 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

 

		 		 		

		 		 		

	 	 	 	 	

		 	 		 	 		 	

	 	 		 		 		

	 	 	 	

	 	 	 	 	 	 	 	

		 		 		

		 		 		 	 	

 

- -

FINANCIAL SECTION (UNAUDITED) | NOTES TO THE FINANCIAL STATEMENTS UNAUDITED 

FY 2022 SAA STATEMENT OF NET COST 

LINE ITEMS USED TO PREPARE 

FY 2022 GOVERNMENT WIDE 

STATEMENT OF NET COST 

LINE ITEMS USED TO PREPARE FY 2022 GOVERNMENT WIDE STATEMENT

 OF NET COST 

Financial Statement Line Amounts

 Dedicated 

Collections 

Combined

 Dedicated 

Collections 

Eliminations

 Other than 

Dedicated 

Collections (with 

Eliminations) 

 Eliminations 

between 

Dedicated and 

Other than 

Dedicated 

Total Reclassified Financial Statement Line

Gross Costs 

Gross Costs $ 97,311,295 $ 97,311,295 $ 97,311,295 Non-federal Gross Cost 

Total Non-Federal Gross Cost $ 97,311,295 $ 97,311,295 $ 97,311,295 Total non-federal gross cost 

Intragovernmental Costs Intragovernmental Costs 

Gross Costs 4,984,739 4,984,739 4,984,739 Buy/Sell cost 

Gross Costs 26,336 26,336 26,336 Borrowing and other interest expense

Total Intragovernmental Costs $ 5,011,075 $ 5,011,075 $ 5,011,075 Total Intragovernmental Costs 

Total Gross Costs $ 102,322,370 $ 102,322,370 $ 102,322,370 Total Reclassified Gross Costs

Earned Revenue 

Non-Federal Earned Revenue Earned Revenue 

(Less: Earned Revenue) $ (19,296,973) $ (19,296,973) $ (19,296,973) Non-federal earned revenue 

Intragovernmental Earned Revenue Intragovernmental Earned Revenue 

(Less: Earned Revenue) (169,979) (169,979) (169,979) Buy/sell revenue (exchange)

(Less: Earned Revenue) (775) (775) (775) Borrowing and other interest revenue (exchange)

Total Intragovernmental Earned 

Revenue 

$ (170,754) $ (170,754) $ (170,754) Total Intragovernmental Earned Revenue 

Total Earned Revenue $ (19,467,727) $ (19,467,727) $ (19,467,727) Total Reclassified Earned Revenue

Net Cost of Operations $ 82,854,643 $ 82,854,643 $ 82,854,643 Net Cost of Operations 
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 102 

 

		 		 		

	 	 	

	 	 	

	 	 	

		 		 		

	 	 		 	 		 	 	 	 	 	 	

	 	 		 		

	 	 	 	

	 	 	 	 	

	 	 	 	

	 	

	 	 	 	 	

	 	

	 	 	 	 	

	 	 	

	 	 	

	 	

	 	 	

	 	 	

	 	

	 	

	 	 	

	 	 	 	

	 	 	 	

- -

UNAUDITED FINANCIAL SECTION (UNAUDITED) | NOTES TO THE FINANCIAL STATEMENTS 

FY 2022 SAA STATEMENT OF CHANGES IN NET POSITION 

LINE ITEMS USED TO PREPARE FY 2022 

GOVERNMENT WIDE STATEMENT OF 

CHANGES IN NET POSITION 

LINE ITEMS USED TO PREPARE FY 2022 GOVERNMENT WIDE STATEMENT OF CHANGES IN NET POSITION 

Financial Statements Line Amounts

 Dedicated 

Collections 

Combined

 Dedicated 

Collections 

Eliminations

 Other than Dedicated 

Collections (with 

Eliminations) 

 Eliminations between 

Dedicated and Other 

than Dedicated 

Total Reclassified Financial Statements Line

Beginning Balances $ (98,479,430) $ (98,479,430) $ (98,479,430) Net position, beginning of period 

Non-Federal Non-exchange Revenue: 

Non-Exchange Revenue 38,732,147 38,732,147 38,732,147 Other taxes and receipts

Donations and Forftures of Cash and Cash

Equialents 292,653 292,653 292,653 Other taxes and receipts

Others 1,206,500 1,206,500 1,206,500 Other taxes and receipts

Total Non-Federal Non-Exchange

Revenue 

$ 40,231,300 $ 40,231,300 $ 40,231,300

Total non-federal non-exchange

revenue 

Federal Non-Exchange Revenue: Federal Non-Exchange Revenue:

Total Federal Non-Exchange Revenue $ 7,241 $ 7,241 $ 7,241 Total federal non-exchange revenue

Budgetary Financing Sources: Budgetary Financing Sources: 

Appropriations Received $ 10,788,657 $ 10,788,657 $ 10,788,657

Appropriations received as adjusted

(rescissions and other adjustments) (RC

41) /1 

Appropriations Used 6,028,733 6,028,733 6,028,733 Appropriations used (RC 39) 

Appropriations Used (6,028,733) (6,028,733) (6,028,733) Appropriations expended (RC 38) /1

Appropriations Transferred in/out 15,458,879 15,458,879 15,458,879 

Non-expenditure transfers-in of

unexpended appropriations

and financing sources (RC 08) /1

Appropriations Transferred in/out (15,480,258) (15,480,258) (15,480,258) 

Non-expenditure transfers-out of

unexpended appropriations

and financing sources (RC 08) /1

Appropriations Transferred in/out 179,572 179,572 179,572 Expenditure transfers-in of financing

sources (RC 09) /1 

Appropriations Transferred in/out (179,572) (179,572) (179,572) Expenditure transfers-out of financing sources (RC 09) /1 

Transfers-In/Out without Reimbursement 2,437,927 2,437,927 2,437,927 

Non-expenditure transfer-in of

financing sources - capital

transfers (RC 11) 

Transfers-In/Out without Reimbursement (2,449,155) (2,449,155) (2,449,155) 

Non-expenditure transfers-out of

financing sources - capital

transfers (RC 11) 

Transfers-In/Out without Reimbursement (+/-) 183,864 183,864 183,864 Transfers-in without reimbursement

(RC 18) /1 

Transfers-in/out without Reimbursement (+/-) (183,864) (183,864) (183,864) Transfers-out without reimbursement

(RC 18) /1 

Other (+/-) (2,621,791) (2,621,791) (2,621,791) 

Non-entity collections transferred to 

the General Fund of the 

U.S. Government (RC 44) 

Other (+/-) (1,882) (1,882) (1,882) 

Accrual for non-entity amounts to be 

collected and tranferred 

to the Gener Fund of the U.S. Government (RC 48) 

Total Financing Sources $ 8,132,377 $ 8,132,377 $ 8,132,377 Total Financing Sources 

Net Cost of Operations (+/-) $ 82,854,643 $ 82,854,643 $ 82,854,643 Net cost of operations (+/-) 

Net Position, End of Period $ (132,963,155) $ (132,963,155) $ (132,963,155) Net Position, End of Period 
103 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

	 	 	 	 	 	

	 	 	

	 	 	 	

	 	 	 	

	 	

	 	

	 	 	 	

	 	 	 	

	 	 	 	 	

	 	 	

FINANCIAL SECTION (UNAUDITED) | REQUIRED SUPPLEMENTARY INFORMATION (RSI) UNAUDITED 

REQUIRED SUPPLEMENTARY INFORMATION (RSI)

COMBINING STATEMENT OF 

BUDGETARY RESOURCES, BUDGETARY 

FOR THE YEAR ENDED SEPTEMBER 30, 2022 

(AMOUNTS IN THOUSANDS) 

Foreign 

Military Sales 

Trust Fund 

Foreign 

Military 

Financing 

Progam 

Account 

Special 

Defense 

Acquisition 

Fund 

International

Military 

Education and 

Training 

Total 

Budgetary Resources 

Unobligated Balance from Prior Year Budget

Authority, Net (Discretionary and Mandatory) $176,243,932 $3,003,785 $731,929 $114,053 $180,093,699

Appropriations (Discretionary and Mandatory) 953,235 10,667,106 - 112,925 11,733,266 

Contract Authority (Discretionary and Mandatory) 53,271,225 - - - 53,271,225 

Spending Authority from Offsetting Collections 

(Discretionary and Mandatory) - - 127,927 (7) 127,920 

Total Budgetary Resources $230,468,392 $13,670,891 $859,856 $226,971 $245,226,110

Status of Budgetary Resources 

New Obligations and Upward Adjustments

(Total) Unobligated Balance, End of Year

$39,167,791 $10,329,769 $439,788 $136,357 $50,073,705

Unobligated Balance, End of Year:

Apportioned, Unexpired Accounts $149,285,744 $- $146,327 $9,140 $149,441,211

Unapportioned, Unexpired Accounts 42,014,856 3,306,000 252,192 26,903 45,599,951 

Unexpired Unobligated Balance, End of Year $191,300,600 $3,306,000 $398,519 $36,043 $195,041,162

Expired Unobligated Balance, End of Year - 35,122 21,549 54,572 111,243 

Unobligated Balance, End of Year (Total) $191,300,600 $3,341,122 $420,068 $90,615 $195,152,405

Total Budgetary Resources $230,468,391 $13,670,891 $859,856 $226,972 $245,226,110

Outlays, Net 

Outlays, Net (Total) (Discretionary and Mandatory) $34,745,436 $6,743,333 $(164,705) $107,711 $41,431,775

Distributed Offsetting Receipts (-) (42,007,505) - (179,572) - (42,187,077) 

Agency Outlays, Net (Discretionary and Mandatory) $(7,262,069) $6,743,333 $(344,277) $107,711 $(755,302)
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 104 

	 	 	 	 	 	 	 	 	

	 	 	

	 	 	 	

	 	 	 	

	 	

	 	 	 	

	 	 	 	 	

	 	 	

UNAUDITED FINANCIAL SECTION (UNAUDITED) | REQUIRED SUPPLEMENTARY INFORMATION (RSI) 

COMBINING STATEMENT OF BUDGETARY 

RESOURCES, NON-BUDGETARY CREDIT 

REFORM FINANCING 

FOR THE YEAR ENDED SEPTEMBER 30, 2022 

(AMOUNTS IN THOUSANDS) 

Foreign Military 

Financing, Direct 

Loan Financing 

Account 

Military Debt 

Reduction 

Financing 

Account 

Foreign Military 

Loan Liquidating

Account 

Total 

Non-Budgetary Resources 

Unobligated Balance from Prior Year Budget Authority,

Net (Discretionary and Mandatory) $47,187 $ - $ - $47,187

Borrowing Authority (Discretionary and Mandatory) 183,864 747 - 184,611 

Spending Authority from Offsetting Collections 

(Discretionary and Mandatory) 3,381 - 2,439 5,820 

Total Budgetary Resources $234,432 $747 $2,439 $237,618

Status of Budgetary Resources 

New Obligations and Upward Adjustments

(Total) Unobligated Balance, End of Year

$209,453 $747 $ - $210,200

Unobligated Balance, End of Year:

Unapportioned, Unexpired Accounts $24,979 $- $2,439 $27,418

Unexpired Unobligated Balance, End of Year $24,979 - $2,439 $27,418

Unobligated Balance, End of Year (Total) $24,979 - $2,439 $27,418

Total Budgetary Resources $234,432 $747 $2,439 $237,618

Disbursements, Net

Disbursements, Net (Total) (Mandatory) $(600,355) $747 $(13,666) $(613,274)
105 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

Dover	 	 	 AFB delivers helicopters;	 	 bolsters US,Australian alliance.

U.S. Air Force photo by Tech. Sgt. J.D. Strong II 

SECTION III 

Other 

Information
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 106 

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

UNAUDITED OTHER INFORMATION | SUMMARY OF FINANCIAL STATEMENT AUDIT AND MANAGEMENT ASSURANCES 

OTHER INFORMATION 

SUMMARY OF FINANCIAL STATEMENT AUDIT AND MANAGEMENT 

ASSURANCES 

DSCA management has a fiduciary responsibility to develop and maintain effective internal controls to provide

assurance that its resources are used effectively, and its programs operate efficiently to achieve the mission.

Managers throughout the SC community are accountable for ensuring effective internal controls in their areas

of responsibility.

Table 6 lists the material weaknesses identified by the Independent Public Accountant during the SAA financial

statement audit. 

TABLE 6. FISCAL YEAR 2022 SUMMARY OF FINANCIAL STATEMENT AUDIT

AUDIT OPINION: DISCLAIMER OF OPINION 

RESTATEMENT: NO 

MATERIAL 

WEAKNESS 

BEGINNING 

BALANCE NEW RESOLVED CONSOLIDATED ENDING 

BALANCE 

Beginning Balances - 1 - - 1 

Universe of Transactions - 1 - - 1 

Entity-Level Controls - 1 - - 1 

Accounts Payable - 1 - - 1 

Budgetary Resources - 1 - - 1 

Earned Revenue - 1 - - 1 

Fund Balance with Treasury - 1 - - 1 

General Property, Plant, and 

Equipment - 1 - - 1 

Inventory & Related Property - 1 - - 1 

Intragovernmental Transactions and 

Eliminations - 1 - - 1 

Unsupported Accounting 

Adjustments - 1 - - 1 

Oversight of Service Providers - 1 - - 1 

Total Material Weaknesses - 12 - - 12 
107 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

 

	 	 	

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	

		 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

OTHER INFORMATION | SUMMARY OF FINANCIAL STATEMENT AUDIT AND MANAGEMENT ASSURANCES UNAUDITED 

Management-identified weaknesses are determined by assessing internal controls, as required by the Federal

Manager’s Financial Integrity Act of 1982, the Federal Financial Management Improvement Act of 1996, and Office of

Management and Budget Circular A-123, Management’s Responsibility for Enterprise Risk Management and Internal

Control. Assessment of internal controls fall into one of the following categories:

• FMFIA Section 2, Effectiveness of Internal Control over Financial Reporting, 

• FMFIA Section 2, Effectiveness of Internal Control over Operations, or 

• FMFIA Section 4, Compliance with Federal Financial Management Systems Requirements 

Table 7 provides those areas where material weaknesses were identified by DSCA in the above categories and where

remediation work continues. In addition, it includes the status of compliance with Section 803(a) of the FFMIA, which 

requires each federal agency to implement and maintain financial management systems that comply substantially

with (1) federal financial management systems requirements, (2) applicable federal accounting standards, and (3) the

United States Standard General Ledger at the transaction ledger. Note that differences may exist between the material

weaknesses identified by the IPA and those identified by DSCA.

TABLE 7. SUMMARY OF MANAGEMENT ASSURANCES

EFFECTIVENESS OF INTERNAL CONTROLS OVER FINANCIAL REPORTING (FMFIA SECTION 2) 

STATEMENT OF ASSURANCE: NO ASSURANCE 

MATERIAL 

WEAKNESS 

BEGINNING 

BALANCE NEW RESOLVED CONSOLIDATED REASSESSED ENDING 

BALANCE 

Lack of Fund Balance with 

Treasury Reconciliation 1 - - - - 1 

Ineffective Financial 

Statement Compilation 

process and Unreliable

Universe of Transactions 

for the SAA 

1 - - - - 1 

Lack of Adequate Controls 

and Documentation over 

SAA Business Processes 

1 - - - - 1 

Lack of Adequate Controls 

over Property, Plant, and 

Equipment and Inventory 

1 - - - - 1 

Lack of Adequate Controls 

over the Transportation 

Account 

1 - - - - 1 

Lack of Adequate Controls 

over Building Partner 

Capacity Appropriated 

Funds Transferred to the 

Foreign Military Sales 

Trust Fund 

1 - - - - 1 

Total Material Weaknesses 6 - - - - 6 
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 108 

UNAUDITED OTHER INFORMATION | SUMMARY OF FINANCIAL STATEMENT AUDIT AND MANAGEMENT ASSURANCES 

EFFECTIVENESS OF INTERNAL CONTROLS OVER OPERATIONS (FMFIA SECTION 2) 

STATEMENT OF ASSURANCE: UNMODIFIED ASSURANCE 

MATERIAL 

WEAKNESS 

BEGINNING 

BALANCE NEW RESOLVED CONSOLIDATED REASSESSED ENDING 

BALANCE 

No Material Weaknesses 

Identified - - - - - -

Total Material 

Weaknesses - - - - - -

CONFORMANCE WITH FEDERAL FINANCIAL MANAGEMENT SYSTEM REQUIREMENTS (FMFIA SECTION 4) 

STATEMENT OF ASSURANCE: FEDERAL SYSTEMS DO NOT CONFORM TO 

FINANCIAL MANAGEMENT SYSTEM REQUIREMENTS 

MATERIAL 

WEAKNESS 

BEGINNING 

BALANCE NEW RESOLVED CONSOLIDATED REASSESSED ENDING 

BALANCE 

Lack of Adequate Access 

Controls over SAA 

Financial Systems 

1 - - - - 1 

Lack of Adequate Policies 

and Procedures Governing 

SAA Financial Systems 

- 1 - - - 1 

Lack of Standard Financial 

Information Structure 

Compliant Accounting 

1 - - - - 1 

Total Material Weaknesses 2 1 - - - 3 

COMPLIANCE WITH SECTION 803(A) OF THE FEDERAL FINANCIAL MANAGEMENT IMPROVEMENT ACT (FFMIA) 

Agency Auditor 

Federal Financial Management 

System Requirements Lack of Compliance Noted Lack of Compliance Noted 

Applicable Federal

Accounting Standards Lack of Compliance Noted Lack of Compliance Noted 

United States Standard General Ledger 

at Transaction Level Lack of Compliance Noted Lack of Compliance Noted 
109 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

 

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

OTHER INFORMATION | SUMMARY OF FINANCIAL STATEMENT AUDIT AND MANAGEMENT ASSURANCES UNAUDITED 

DEFINITION OF TERMS 

• Beginning Balance: The beginning balance, which reflects weaknesses that were first identified in prior

fiscal years, must agree with the ending balance from the prior year.

• New: The total number of material weakness/non-conformances identified during the current year.

• Resolved: The total number of material weaknesses/non-conformances that dropped below the level

of materiality in the current year. 

• Consolidated: The combining of two or more findings.

• Reassessed: The removal of any finding not attributable to corrective actions (e.g. management has

re-evaluated and determined that a finding does not meet the criteria for materiality or is redefined as

more correctly classified under another heading).

• Ending Balance: The year-end balance, which reflects both new and previously identified material

weaknesses that remain as of fiscal year end, that will be the beginning balance next year.
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 110 

OTHER INFORMATION | SUMMARY OF FINANCIAL STATEMENT AUDIT AND MANAGEMENT ASSURANCES 

	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	 	

 

	 		 	 	 	 	 	 	 	 	 	

	 		 	 	 	 	 	 	 	 	 	

	 		 	 	 	 	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	 	

Dover AFB supports US, Ukraine partnership. U.S. Air Force photo by Airman 1st Class Cydney Lee. 

MANAGEMENT CHALLENGES 

As required by the Reports Consolidation Act of 2000, the Office of the Inspector General (OIG) should prepare

an annual statement that summarizes what they consider to be the most serious management and performance

challenges facing the Agency and provide a brief assessment of progress made to address these identified challenges.

DSCA does not have its own OIG and the DoDIG refers SAA Management to the DoDIG’s FY 2022 Top DoD

Management Challenges report which identified ten challenges related to the DoD mission and its execution.

The SAA is reliant on DoD systems, employees, and infrastructure to complete its mission and all DoD Management 

challenges and associated responses will impact SAA performance. SAA funds are executed in 13 general ledger

accounting systems and over 140 feeder systems, which produces a uniquely complex financial reporting and

systems environment. The execution of SAA funding occurs in many DoD owned systems in addition to SAA specific

systems. DSCA is leading an IT modernization effort to modernize the legacy information technology systems but

is heavily reliant on the DoD’s financial systems strategy. These complexities add additional challenges for SAA

Management in addition to the DoDIG Management Challenges noted below.

From the DoDIG report, the FY 2022 Top DoD Management Challenges are:

1. Maintaining the Advantage in Strategic Competition

 2. Assuring Space Dominance, Nuclear Deterrence, and Missile Defense 

3. Strengthening DoD Cyberspace Operations and Securing Systems, Networks, and Data

 4. Reinforcing the Supply Chain While Reducing Reliance on Strategic Competitors 

5. Increasing Agility in the DoD’s Acquisition and Contract Management

 6. Improving DoD Financial Management and Budgeting

 7. Building Resiliency to Environmental Stresses 

8. Protecting the Health and Wellness of Service Members and their Families

 9. Recruiting and Retaining a Modern Workforce 

10. Preserving Trust and Confidence in the DoD

The FY 2022 Top Management Challenges Report can be found here:

https://www.dodig.mil/Reports/Top-DoD-Management-Challenges/Article/2842057/top-dod-managementchallenges-fiscal-year-2022/
111 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

 

	 	 	 	 	

	 	

	 	

	 	 	 	

	 	 	 	

	 	 	 	 	 	

APPENDIX | GLOSSARY OF ACRONYMS UNAUDITED 

Appendix 

GLOSSARY OF ACRONYMS 

AECA 

AFR 

BPC 

BS 

CAP 

CAS 

CCDR 

CCAD 

CFO 

CRA 

DATT 

DCAA 

DCMA 

DDRS 

DFAS 

DIA 

DIILS 

DISA 

DLA 

DOD

DODIG

DOS

DSCA 

DSCU 

DTRA 

DTS 

EDA 

EOP 

FAA 

FAD 

FAR 

FASAB 

FAST 

FBWT

FCRA 

FECA 

FFMIA 

FMF 

FMFDLFA 

FMFDLPA 

FMFIA 

FMLLA 

Arms Export Control Act of 1976

Agency Financial Report 

Building Partnership Capacity 

Balance Sheet 

Corrective Action Plan 

Contract Administrative Services 

Combatant Commander

Combatant Command

Chief Financial Officer

Continuing Resolution Authority 

Defense Attaché 

Defense Contract Audit Agency 

Defense Contract Management Agency 

Defense Departmental Reporting System 

Defense Finance and Accounting Service 

Defense Intelligence Agency 

Defense Institute of International Legal Studies 

Defense Information Systems Agency 

Defense Logistics Agency 

Department of Defense 

Department of Defense Inspector General 

Department of State 

Defense Security Cooperation Agency 

Defense Security Cooperation University 

Defense Threat Reduction Agency 

Defense Transportation System 

Excess Defense Articles

Executive Office of the President

Foreign Assistance Act of 1961 

Funding Authorization Document 

Federal Acquisition Regulation 

Federal Accounting Standards Advisory Board 

Federal Account Symbols and Titles

Fund Balance with Treasury 

Federal Credit Reform Act of 1990 

Federal Employees’ Compensation Act

Federal Financial Management Improvement Act of 1996 

Foreign Military Financing 

Foreign Military Financing Direct Loan Financing Accounts 

Foreign Military Financing Direct Loan Program Accounts 

Federal Managers’ Financial Integrity Act of 1982

Foreign Military Loan Liquidating Account 
DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT 112 

	 	 	

	 	 	 	

	 	 	

	 	 	 	

	 	 	 	 	 	 	 	 	

	 	

	 	

UNAUDITED APPENDIX | GLOSSARY OF ACRONYMS 

FMR 

FMS 

FY 

GAFS 

GAO 

GPRA 

GMRA 

HIPC 

IA 

IMET 

IMF 

ISG 

JSF 

LEAP 

LOA 

MDA 

MDRFA 

MDS 

MILDEP 

NATO 

NDS 

NGA 

NSA 

ODO 

OIG 

OMB 

OPERA 

OUSD(A&S)

OUSD(C)

OUSD(P)

PP&E

RSI 

SA 

SAA 

SAIP 

SBR 

SC 

SCA 

SCNP 

SCO 

SDAF 

SDO 

SFFAS 

SNC 

TAS 

USACE 

USDT 

USG 

U.S. GAAP

USSGL 

Financial Management Regulation 

Foreign Military Sales 

Fiscal Year 

General Accounting and Finance System 

Government Accountability Office

Government Performance and Results Act 

Government Management Reform Act of 1994 

Highly Indebted Poor Countries

Implementing Agency 

International Military Education and Training 

International Monetary Fund 

Institute for Security Governance 

Joint Strike Fighter 

Learning and Evaluation Agenda for Partnerships 

Letter of Offer and Acceptance 

Missile Defense Agency 

Military Debt Reduction Financing Account

Missile Defense System 

Military Department 

North Atlantic Treaty Organization 

National Defense Strategy 

National Geospatial-Intelligence Agency 

National Security Agency 

Other Defense Organizations 

Office of Inspector General

Office of Management and Budget

Operational Environment Risk Analysis 

Office of the Under Secretary of Defense (Acquisition and Sustainment)

Office of the Under Secretary of Defense (Comptroller)

Office of the Under Secretary of Defense (Policy)

Property, Plant, and Equipment 

Required Supplementary Information 

Security Assistance 

Security Assistance Accounts 

Security Assistance and International Programs 

Statements of Budgetary Resources 

Security Cooperation 

Security Cooperation Accounting 

Statement of Changes in Net Position 

Security Cooperation Organization 

Special Defense Acquisition Fund 

Senior Defense Official

Statement of Federal Financial Accounting Standard 

Statement of Net Cost 

Treasury Account Symbol

U.S. Army Corps of Engineers 

United States Department of Treasury 

United States Government 

United States Generally Accepted Accounting Principles 

United States Standard General Ledger 
113 DEFENSE SECURITY COOPERATION AGENCY | FY 2022 SAA AGENCY FINANCIAL REPORT

	 	 	 	 	

	 	 	 	 	 	 	

	 	 	 	 	 	 	 	 	

Acknowledgements 

Thank you for your interest in the Security Assistance Accounts and 

its Fiscal Year 2022 Agency Financial Report. This report was prepared 

with the energies and talents of many employees within DSCA and 

across the Security Cooperation. To these individuals, we offer our 

sincerest thanks and acknowledgment. 

We are interested in your feedback.

Please send your comments, suggestions, or requests to:

dsca.ncr.obo.mbx.saa-afr@mail.mil 

An electronic version of this document is published online at:

https://www.dsca.mil/resources/reports