◄ Pallet Partners

Airmen prepare to offload a pallet of 

bottled water in Galveston, Texas, Feb. 

19, 2021. This was Federal Emergency 

Management Agency’s request to airlift 

64 tons of bottled water to storm-ravaged 

areas. Photo Credit: Air Force

▼ Filling Out Paperwork

Soldiers in the Maryland Army National 

Guard use fellow soldiers’ backs in front 

of them to fill out their medical paperwork 

to receive the COVID-19 vaccine at the 

Capitol Complex in Washington, D.C., Jan. 

14, 2021. The National Guard will provide 

support to federal and district authorities 

leading up to the 59th Presidential 

Inauguration. Photo Credit: ArmySgt. 

Chazz Kibler

▲ One Aircraft, Two Missions

U.S. Air Force Senior Airman Shea Taylor, 60th 

Aerial Port Squadron traffic management inbound 

technician, unloads skids with N-95 masks Jan. 27, 

2021, at Travis Air Force Base, California. The 60th 

APS palletized one million of N-95 masks bound for 

Ramstein Air Base, Germany. Photo Credit: U.S. Air 

Force photo by Chustine Minoda

► Force Fuel

Marine Corps Cpl. Selina Lopez prepares to refuel a 

UH-1Y Venom during an amphibious combat rehearsal 

in Tabuk, Saudi Arabia, March 9, 2021. Photo Credit: 

Marine Corps Lance Cpl. Brendan Mullin
Agency Financial Report | FY 2021 General Fund | Defense Logistics Agency i

 About the Agency Financial Report

About the Agency Financial Report

All information within this report pertains to DLA GF unless 

specifically noted otherwise. DLA GF’s financial results 

are unaudited because there are limitations to underlying 

processes and internal controls that support the principal 

financial statements. DLA GF continues to implement 

processes and system improvements addressing these 

limitations. The AFR consists of three primary sections:

Management’s Discussion and Analysis

(Unaudited)

This section provides a high-level overview of DLA GF, including 

DLA’s history, mission, and organizational structure; DLA GF’s 

overall performance related to its strategic goals and primary 

objectives; financial analysis; management’s assurance on 

internal controls; system analysis; compliance with laws and 

regulations; and forward-looking information.

The Defense Logistics Agency (DLA) General Fund (GF) 

Agency Financial Report (AFR) provides financial and 

summary performance results enabling the President, 

Congress, and the American people to assess its 

accomplishments, and to understand its financial results 

and operational functions. The AFR consists of DLA GF 

financial statements and other reports. The principal 

financial statements1 have been prepared to report the 

financial position and results of DLA GF’s operations. The 

principal financial statements and accompanying notes have 

been prepared from the books and records of DLA GF using 

guidance from the following applicable laws and regulations 

for which DLA GF is unable to provide assurance:

Financial Section (Unaudited)

This section contains a message from the CFO, audit reports, 

management’s response to the audit reports, financial 

statements and the accompanying notes, as well as required 

supplementary information (RSI).

Other Information (Unaudited)

This section details DLA GF’s performance and management 

analyses, recommendations, payment integrity reporting, and 

grants program reporting.

1 Refer to the Financial Section Introduction for definition of principal financial statements.

♦ Federal Managers’ Financial Integrity Act 

(FMFIA) of 1982;

♦ Chief Financial Officers (CFO) Act of 1990;

♦ Government Management Reform Act 

(GMRA) of 1994;

♦ Federal Financial Management 

Improvement Act (FFMIA) of 1996;

♦ Reports Consolidation Act of 2000;

♦ Government Performance and Results 

Act (GPRA) Modernization Act of 2010;

♦ Improper Payments Elimination and 

Recovery Improvement Act (IPERIA) of 2012;

♦ Fraud Reduction and Data Analytics Act 

 (FRDAA) of 2015;

♦ Office of Management and Budget 

(OMB) Circular A-136, Financial Reporting 

 Requirements, as amended;

♦ OMB Circular A-123, Management’s 

Responsibility for Enterprise Risk Management 

(ERM) and Internal Control; and

♦ OMB Circular A-11, Preparation, Submission, 

 and Execution of the Budget.
Vaccination Day

Army Spc. Victoria Yarborough, a health care specialist for the Maryland Army National Guard 

Medical Detachment, administers a COVID-19 vaccine to a soldier at Camp Fretterd Military 

Reservation in Reisterstown, Md., Jan. 8, 2021. Maryland National Guard soldiers and airmen 

are supporting the state’s COVID-19 vaccination initiative with mobile vaccination support 

teams, which are providing medical and logistical support to county health departments 

during the global pandemic.

 Photo Credit: Air Force Staff Sgt. Sarah M. McClanahan, Maryland Air National Guard

FY 2021 General Fund

Defense Logistics Agency
Table of Contents

iv

Message from the Director

1 SECTION 1

Management’s Discussion 

and Analysis (Unaudited)

4 Mission and Organizational Structure

10 Performance Goals, Objectives, and 

Results

26 Analysis of Financial Statements and 

Stewardship Information 

33 Analysis of Systems, Controls, and Legal 

Compliance 

42 Forward-Looking Information

45 SECTION 2

Financial Section (Unaudited)

48 Message from the Chief Financial Officer

49 Audit Reports 

81 Management’s Response to Audit Reports 

82 Introduction to the Principal Financial 

Statements

83 Principal Financial Statements 

(Unaudited) 

87 Notes to the Principal Financial 

Statements (Unaudited)

115 Required Supplementary Information

The AFR is available on the DLA website at: 

www.dla.mil/HQ/Finance/Offers/FinancialReports/

117 SECTION 3

Other Information (Unaudited)

120 Management Challenges 

124 Summary of Financial Statement Audit 

and Management Assurances 

128 Payment Integrity

129 APPENDIX

131 Appendix A: Summary of FMFIA 

Definitions and Reporting

133 Appendix B: J/D Codes, DLA HQ Program 

Support Structure, Roles and 

Responsibilities 

135 Appendix C: Abbreviations & Acronyms 

137 Acknowledgments
iv

Message from the Director

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

On behalf of the Defense Logistics Agency (DLA), I’m pleased to present the 

Fiscal Year (FY) 2021 Agency Financial Report. This year, the first of October 

is not only the beginning of a new fiscal year – it’s also the anniversary of 

DLA’s founding in 1961. For over six decades, DLA has served the Warfighter, developing 

into a dynamic and forward-leaning agency with vast capabilities, fueled by a dedicated 

and mission-focused workforce. We are “Forged by History, Focused on the Future,” 

and proud to serve as the Nation’s Combat Logistics Support Agency.

DLA continued to fulfill our key mission to deliver readiness and lethality to the Warfighter 

Always and to provide support to our Nation through quality, proactive global logistics. 

Among the FY21 highlights, DLA’s Medical Surgical Prime Vendor Program received 

the Best-in-Class designation from the Office of Management and Budget having 

achieved a 3% cost avoidance. DLA’s Industrial Hardware Supply Chain completed its 

transformational initiative alignment ahead of schedule, creating increased effectiveness 

in logistics support, increased efficiencies through reduced material and operating costs, and improved pricing. DLA quickly 

acted to support Operation ALLIES REFUGE with food, fuel, clothing, and medicine. The agency continued to support efforts 

to combat the COVID-19 pandemic by managing, tracking, and distributing personal protective equipment and vaccines to 

overseas military service members and families and to other Department of Defense customers. DLA supported relief efforts 

for natural disasters, including from Hurricanes Henri and Ida, flooding in Tennessee, and wildfires in California.

The Agency launched a refreshed Strategic Plan (2021-2026) that reflects current challenges. To deliver world-class support 

to the Warfighter while maintaining fiscal accountability, DLA is committed to five key lines of effort and three critical capabilities.

This year, our Independent Public Accounting (IPA) firm, Ernst and Young, LLP, issued a Disclaimer of Opinion on DLA’s 

General Fund (GF) Financial Statements. Information obtained through this report will be extremely valuable in our ongoing 

efforts to improve all aspects of DLA GF operations. The IPA reported material weaknesses in key areas involving policies 

and procedures, critical asset accounting procedures, financial information systems and reporting, and completeness of records. 

DLA also continues to identify material weaknesses in those areas.

DLA’s roadmap to an unmodified audit opinion in the foreseeable future is focused on process improvements, strengthened 

financial management, and improved monitoring and oversight. DLA will review audit results, identify root causes of conditions, 

prioritize resources, and develop corrective action plans. This effort will rely on establishing firm internal controls throughout 

every process, which will better position the agency to address risks effectively and efficiently. In the future, we’ll focus on 

financial and operational system upgrades, reengineering end to end processes, identifying risks, designing and testing 

controls, and prioritizing remediation efforts. In addition, DLA is reviewing all aspects of OMB Circulars A-123, Management’s 

Responsibility for Enterprise Risk Management and Internal Control and A-136, Financial Reporting Requirements, to incorporate 

necessary enterprise-wide operational and financial reporting process changes that will ensure our financial statements are 

complete, accurate and reliable.

Message from the Director

FY 2021 General Fund
Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report v

 Message from the Director

In DLA’s Diamond Anniversary year, I am proud of our history. From its earliest days, DLA’s mission, “...to provide effective 

logistics support to the operating forces of our military services and do so at the lowest possible cost to the taxpayer,” has 

been our focus. With this report, we reaffirm our commitment to supporting our Warfighters and our Nation through efficient 

and accountable resource management and making strides toward stronger fiscal transparency and performance.

WARFIGHTER ALWAYS!

M.C. SKUBIC

VADM, SC, USN

Director

DLA CONTINUED TO FULFILL OUR KEY MISSION TO DELIVER 

READINESS AND LETHALITY TO THE WARFIGHTER ALWAYS 

AND TO PROVIDE SUPPORT TO OUR NATION 

THROUGH QUALITY, PROACTIVE GLOBAL LOGISTICS.
Section 1 | Management’s Discussion and Analysis (Unaudited)

1 Defense Logistics Agency | FY 2021 Working Capital Fund | Agency Financial Report

Vehicle Management ►

Airmen from the 378th Expeditionary Logistic Readiness 

Squadron Vehicle Management conduct maintenance daily to 

keep the base operational at Prince Sultan Air Base, Kingdom 

of Saudi Arabia, Sep. 8, 2020. From ambulances to loaders and 

firetrucks to Humvees, vehicle maintenance can work on and 

repair about anything with wheels, and even some without.

 Photo Credit: U.S. Air Force Staff Sgt. Cary Smith

SECTION 1

Management’s Discussion 

and Analysis (Unaudited)

1

SECTION 1

Special Delivery

Soldiers deliver personal protective equipment to the mayor’s office in Djibouti, Dec. 21, 2020. 

The delivery was part of U.S. Africa Command’s Overseas Humanitarian Disaster Assistance 

and Civic Aid program.

 Photo Credit: Navy Petty Officer 3rd Class Colin Sens

In this section

 4 Mission and Organizational Structure

10 Performance Goals, Objectives, and Results 

26 Analysis of Financial Statements and Stewardship Information 

33 Analysis of Systems, Controls, and Legal Compliance 

42 Forward-Looking Information
 Management’s Discussion and Analysis (Unaudited) | Section 1

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 4

The origins of DLA date back to World War II when America’s 

military buildup required the rapid procurement of vast amounts 

of munitions and supplies. After the war, a commission headed 

by former President Herbert Hoover recommended the central 

management of items common to more than one military 

service. The Department of Defense (DoD) responded by 

assigning procurement responsibilities to individual services. 

The Army became the military’s sole buyer of food, clothing, 

general supplies, and construction supplies; the Navy 

purchased medical supplies, petroleum, and industrial parts for 

every service; and only the Air Force provided airlift services.

Although centralizing wholesale stocks, this “single manager” 

system did not provide the uniform methods recommended by 

the Hoover Commission. Each single manager operated under 

its own rules, giving customers as many sets of procedures 

as there were managers. On October 1, 1961, Secretary 

of Defense Robert McNamara eliminated this complexity 

by forming the Defense Supply Agency (DSA). Beginning 

operations on January 1, 1962, DSA saved money by employing 

fewer people and keeping less inventory.

Mission and Organizational Structure

As the Nation’s combat logistics support agency, the Defense Logistics Agency manages the global supply 

chain – from raw materials to end user to disposition – for the Army, Marine Corps, Navy, Air Force, Space 

Force, Coast Guard, 11 combatant commands, other Federal agencies, and partner and allied nations.

Forged by History, Focused on the Future: 

A Short History of the Defense Logistics Agency
Section 1 | Management’s Discussion and Analysis (Unaudited)

5 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

DSA faced its first real-world test one year after formation. 

Restricted to the continental United States, it was perfectly 

positioned to respond to Soviet Premier Nikita S. Khrushchev’s 

placement of nuclear missiles on Cuba. The agency supported 

the military during the crisis by supplying fuel and photographic 

film and the Nation after it, by providing fallout shelter material. 

DSA grew substantially following the Cuban Missile Crisis. In 

1963 and 1964, it assumed control of additional warehouses 

and supply centers. In 1965, it consolidated contract management offices under its Headquarters (HQ). Through its Defense 

Contract Administration Services (DCAS), DSA oversaw most 

of the Nation’s defense contractors, as well as companies 

manufacturing items for the National Aeronautics and Space 

Administration (NASA).

The war in Vietnam also fueled DSA’s growth. In the summer 

of 1965, the clothing and textile supply chain doubled its 

employees to produce enough warm-weather uniforms and 

jungle boots for the 44 battalions deployed by President 

Lyndon B. Johnson. Warehouses also increased hiring, adding 

shifts so they could operate on a 24-hour schedule. When the 

subsistence supply chain received permission to establish 

offices in the Pacific, it increased its numbers as well.

DSA received additional responsibilities Outside the Continental 

United States (OCONUS) in the last years of the war. In 1972, 

it started conducting property disposal overseas and oversaw 

the worldwide procurement, management, and distribution of 

bulk petroleum. In 1973, it began providing food to mess halls 

and commissaries in Europe. At the same time, the Agency 

became involved in foreign military sales (FMS). The weapon 

systems America sold to partner nations needed repair parts, 

and DSA was the logical provider.

On January 1, 1977, the Department of Defense recognized 

this expanded mission by renaming DSA the Defense Logistics 

Agency. Over the next decade and a half, the retitled Agency 

demonstrated its acquisition prowess by acquiring meals, 

ready-to-eat; filling the Nation’s Strategic Petroleum Reserve; 

and providing parts for the F-16 Fighting Falcon, the mostmanufactured fighter jet in history. Parts production reached 

all-time highs with the Reagan buildup of the 1980s. In 1986, 

DLA grew in purpose and scope when Congress designated 

it a combat support Agency. In 1988, it became even more 

important to DoD when the General Services Administration 

(GSA) transferred strategic materials oversight to it. The 

following year, the Department consolidated nearly all contract 

administration activities under the Agency. To handle the 

increased workload, DLA elevated DCAS to a command: the 

Defense Contract Management Command. 

The Agency continued to reorganize in the 1990s. In April 

1990, it began overseeing the services’ distribution depots. 

This mission eventually became the responsibility of DLA 

Distribution. In March 1993, the Agency reengineered its HQ 

so only 6 organizations, rather than 42, reported directly to the 

Director. In 1995, as a result of Base Realignment and Closure 

(BRAC) 88, DLA HQ moved from Cameron Station, VA, to Fort 

Belvoir, VA. In the mid-1990s, as a result of BRAC 93, the 

Agency merged its Defense Electronic Supply Center in Dayton, 

OH, with its Defense Construction Supply Center in Columbus, 

OH. It called the consolidated center Defense Supply Center 

Columbus. As part of the same BRAC, the Defense Personnel 

1961

The Defense Supply Agency

 is established.

1965 1977 1986

Active combat units deploy 

to Vietnam. By 1969, more 

than 500,000 U.S. troops 

in the country.

DSA is redesignated 

the Defense Logistics 

Agency in recognition of 

its broadened mission 

responsibilities.

The Goldwater-Nichols 

Reorganization Act 

designates DLA a combat 

support agency.

History of DLA

1988

DLA assumes management 

of the nation’s strategic 

stockpile from the General 

Services Administration 

and Federal Emergency 

Management Agency. 

Headquarters and Defense 

Fuel Supply personnel 

learn that they will be 

moving from Cameron 

Station to Fort Belvoir. 
 Management’s Discussion and Analysis (Unaudited) | Section 1

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 6

Support Center collocated with Defense Industrial Supply 

Center in northern Philadelphia to form Defense Supply Center 

Philadelphia. Finally, Defense Printing Services, renamed 

Defense Automated Printing Service, transferred to the Agency 

in October 1996.

The DLA rose to meet new challenges in the new millennium. 

The Agency responded rapidly to terrorist attacks in 2001, 

providing logistical support to multiple commands in Operation 

ENDURING FREEDOM. Beginning that year, DLA supported the 

conflict by processing more than 6.8 million requisitions worth 

more than $6.9 billion, providing $21.2 million in humanitarian 

support, and supplying in excess of 2.3 billion U.S. gallons 

of fuel. To sustain service members fighting Operation IRAQI 

FREEDOM, DLA processed 6.4 million requisitions worth more 

than $6.89 billion, provided 180.5 million field meals, supplied 

nearly 2 million humanitarian daily rations, and sourced more 

than 3 billion U.S. gallons of fuel. 

The DLA supported humanitarian and relief missions in addition 

to military operations in the twenty-first century. In August 2005, 

it offered food, fuel, and housing to the many Louisianians 

displaced by Hurricane Katrina. In October and November 

of 2012, it offered the same services to victims of Hurricane 

Sandy, one of the worst weather events to strike the eastern 

coast of the United States. In September 2014, it helped the 

U.S. Agency for International Development combat the deadly 

Ebola virus in West Africa, not only providing material but 

also developing the sustainment footprint. In the later part 

of the decade, DLA delivered disaster relief to Haiti and the 

Southeastern U.S., sustained Iraqi and Syrian refugees, helped 

the U.S. Forest Service fight fires, and provided resources to 

secure the Nation’s southern border.

Since early 2020, DLA has supported the Nation’s efforts to 

fight COVID-19, its most-sustained non-military mission in 60 

years. Through the Federal Emergency Management Agency 

(FEMA), Department of Health and Human Services (HHS), 

U.S. Army Corps of Engineers (USACE), and military hospitals, 

the Agency provided personal protective equipment (PPE), 

ventilators, food, construction material, and repair parts. 

Among those DLA helped were inhabitants of hard-hit cities, 

residents of assisted-living facilities, and school children. 

In addition to supplying mass quantities of scarce goods at 

low prices, the Agency developed domestically sourced face 

masks, used additive manufacturing to produce face shields, 

and tracked PPE data for the entire Federal government. 

Starting in December 2020, it began distributing vaccines to 

the military’s overseas locations.

As DLA commemorates its 60th anniversary on October 1, 

2021, it continues to provide logistics, acquisition, and technical 

services to DoD and other customers. As it has for sixty years, 

the Agency adds effectiveness and efficiency to governmental 

logistics. Forged in history, it remains focused on supporting 

Warfighters and the Nation they serve. 

1993

DLA forms integrated 

business units for supply 

management, distribution, 

and contract management, 

reducing the number of 

organizations reporting 

directly to the DLA director 

from 42 to 6.

2005

DLA provides support in 

the wake of Hurricane 

Katrina.

2012

DLA delivers more than 

6.2 million meals, 172,500 

blankets, and 14 million 

gallons of fuel to areas 

affected by Hurricane 

Sandy.

2014-15

DLA helps West Africa 

combat the Ebola virus 

by providing goods and 

services in Operation 

United Assistance.

2020-21

DLA supports efforts to combat the 

coronavirus by providing personal 

protective equipment and ventilators 

to the American people through the 

Federal Emergency Management 

Agency and Department of Health 

and Human Services. It also acts as 

a purveyor of information, feeds naval 

crews on lockdown, reutilizes life-saving 

equipment, and delivers vaccines to the 

military’s overseas locations.
Section 1 | Management’s Discussion and Analysis (Unaudited)

7 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

The DLA reports to the Office of the Under Secretary of 

Defense (OUSD) for Acquisition and Sustainment through 

the Assistant Secretary of Defense for Sustainment. As the 

Nation’s Combat Logistics Support Agency, DLA manages 

the global supply chain – from raw materials to end user to 

disposition – for the components of the DoD (including the 

U.S. Army, Navy, and Air Force), other Federal Agencies, 

and public entities. DLA sources and provides nearly all 

the consumable items America’s military forces need to 

operate, from food, fuel and energy to uniforms, medical 

supplies, and construction material. DLA provides support 

around the clock and around the world to meet the needs 

of America’s Armed Forces and other designated customers 

in times of peace, National Emergency, and war. DLA 

supports DoD objectives and missions with involvement 

in the full range of military operations from participation 

with multi-national forces engaged in large-scale combat 

operations, weapons and spares provisions, peacekeeping 

efforts, and emergency support to humanitarian assistance.

The DLA GF employs approximately 415 civilian personnel, 

whose labor is paid from DLA GF.

The National Defense Authorization Act (NDAA) is the U.S. 

Federal law specifying annual budget and expenditures of 

the DoD.

Mission and Vision

The DLA’s mission and vision are integral parts of the Agency which are represented 

through its efforts and impact around the world.

What DLA Does

As the Nation’s Combat Logistics Support Agency and valued partner, we are innovative, 

adaptable, agile, and accountable – focused on the Warfighter Always.

VISION

MISSION

Deliver readiness and lethality to the Warfighter Always and support our Nation through 

quality, proactive global logistics.
 Management’s Discussion and Analysis (Unaudited) | Section 1

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 8

There are five major activities within DLA GF. DLA GF 

receives appropriations under the Agency identifier code 

for the OUSD (Treasury Index (TI)-97), along with Other 

Defense Organizations (ODOs). OUSD (Comptroller) 

(OUSD(C)) uses a data element referred to as a ‘limit’ to 

identify the various ODOs under TI-97. Defense-wide (DW) 

appropriations allotted to DLA GF include: (1) Operation 

and Maintenance (O&M), (2) Procurement Defense-wide 

(PDW), (3) Research, Development, Test and Evaluation 

(RDT&E), (4) Military Construction (MILCON), and (5) 

Family Housing O&M. The appropriations provide the 

funding to incur obligations and to pay for goods and 

services. DLA GF sub-allots RDT&E and MILCON funding 

to other DoD organizations (i.e., Defense Microelectronics 

Activity (DMEA), U.S. Army Corps of Engineers (USACE) 

and U.S. Naval Facilities Engineering Command (NAVFAC). 

DLA GF is responsible for reporting sub-allottee balances 

in the DLA GF AFR.

Operation and Maintenance (O&M)

O&M funds have an availability period of one year. DLA 

GF uses appropriations to support the sustainment of 

ongoing mission support initiatives at the Agency level and 

department wide. The O&M appropriation continues the 

path to achieving full spectrum readiness and advances 

DoD’s multi-pronged, multi-year approach to build a more 

lethal and ready force with targeted investments in training, 

equipment, industrial readiness, microcircuit emulation, 

soldier and family programs. For the years ended 

September 30, 2021 and 2020, O&M was appropriated a 

total of $414.0 million and $416.0 million, respectively.

Procurement Defense – Wide (PDW)

PDW funds have an availability period of three years. 

As the Nation’s Combat Logistics Support Agency, DLA 

procures, manages, stores, and distributes items the 

components of the DoD (including the U.S. Army, Navy, 

and Air Force) needs to operate. Commodities include 

everything from maritime and land weapons systems 

support to medical supplies. DoD uses the appropriations 

to obtain various categories of material, such as: new 

military hardware, aircraft, armored vehicles, and other 

major equipment; upgrades to existing equipment, including 

extending service life or remanufacturing existing systems; 

weapons and ammunition, ranging from air-to-air missiles 

to rounds for individual rifles; and spare parts, particularly 

those that are centrally managed. For the years ended 

September 30, 2021 and 2020, PDW was appropriated a 

total of $390.5 million and $8.5 million, respectively, due to 

funding for equipment.

Research, Development, Test & 

Evaluation (RDT&E)

RDT&E funds have an availability period of two years. To 

maintain technological superiority on the battlefield, DoD 

relies on scientific and technical knowledge developed 

in large measure through RDT&E. DLA’s RDT&E funding 

is appropriated in Title IV Research, Development, Test 

and Evaluation. DLA’s Research & Development (R&D) 

is a program funded by the RDT&E appropriation that 

enables supply-chain innovation that directly supports the 

Warfighter. The program’s goal is to deliver innovative and 

responsive solutions to the Warfighters and other valued 

customers. For the years ended September 30, 2021 and 

2020, RDT&E was appropriated a total of $252.9 million 

and $318.0 million, respectively.

Family Housing (O&M, Defense-Wide)

Family Housing funds have an availability period of one 

year. The Family Housing appropriations encompass 

Military Family Housing (MFH) authorized by law to 

meet the requirements of the DoD and include all DoD 

Component family housing, leases of real property utilized 

by DoD Components for family housing, and associated 

family housing support services. DLA GF did not receive 

Family Housing appropriations in FY 2021 as DLA GF has 

divested all its Family Housing units. Due to the size and 

materiality of Family Housing, DLA GF combined the Family 

Housing program with MILCON in its Statements of Net 

Cost for presentation and reporting purposes.

Military Construction (MILCON)

MILCON funds have an availability period of five years. 

MILCON appropriations are provided to construction 

agents. The three main funding categories include: (1) 

planning for design for the initial engineering phase of 

developing and scoping of all MILCON projects; (2) major 

construction to replace or renovate DoD Fuels, Distribution, 

How DLA GF Accomplishes its Mission
Section 1 | Management’s Discussion and Analysis (Unaudited)

9 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

Organizational Chart

Below is DLA’s organizational chart. Appendix B contains further explanation of the Staff 

Directors and Field Activity Commanders (J/D) Codes.

Figure 1: DLA Organizational Chart

and Inventory Control Point Facilities around the world; 

and (3) unspecified minor construction to address lower 

dollar add-on/related smaller projects, which emerge as 

new requirements during the major construction process, 

and weren’t included in the original scope of the major 

construction projects. For the years ended September 

30, 2021 and 2020, MILCON was appropriated a total 

of $304.8 million and $353.6 million, respectively. DLA’s 

funds are primarily sub-allotted to USACE and NAVFAC 

for execution. Due to the long-term nature of construction 

projects, MILCON funds are held by DLA GF and released 

to suballottees on a scheduled basis based on the project 

phase and related funding categories. In FY 2021 and FY 

2020, USACE was sub-allotted a total of $127.9 million 

and $216.5 million, respectively. In FY 2021 and FY 2020, 

NAVFAC was sub-allotted a total of $60.5 million and $0.0 

million, respectively. 

Ongoing projects include fuel hydrant systems encompassing 

entire aircraft parking ramps, operations and HQ facilities, and 

retail gas stations.
 Management’s Discussion and Analysis (Unaudited) | Section 1

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 10

Performance Goals, Objectives, and Results

Figure 2: Lines of Effort and Critical Capabilities

The DLA has established performance assessments of its 

programs for purposes of evaluating Agency performance 

and improvement, based on the GPRA Modernization Act of 

2010. DoD produces an Annual Performance Report (APR) 

for all its components, including DLA GF, and will include 

its FY 2021 APR with its FY 2023 Congressional Budget 

Justification. The APR is located at: https://dam.defense.

gov/Publications/Annual-Performance-Plan-and-PerformanceReport/.

The Performance Goals, Objectives, and Results within this 

section are aligned to DLA’s 2021-2026 Strategic Plan and 

provides a summary of DLA’s five Lines of Effort (LOEs) 

and three Critical Capabilities (CCs). These goal-oriented 

objectives and forward-looking initiatives are designed to 

strengthen DLA’s efforts in sustaining Warfighter readiness 

and the Nation’s responsiveness as described:

Lines of Effort: Key strategic priority used to link multiple objectives that when combined achieve an operational or 

strategic outcome.

Critical Capabilities: Agency enablers which are 

essential to accomplishing DLA’s strategic objectives and 

LOEs. 

Objectives: Specific goals to be achieved and are 

the most important actions essential to LOEs and Critical 

Capabilities – the “how” of the strategy.

The key initiatives that have specific Director’s emphasis in 

DLA’s Strategic Plan for 2021-2026 are shown in the LOEs 

and CCs below.
Section 1 | Management’s Discussion and Analysis (Unaudited)

11 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

LOE 1: WARFIGHTER ALWAYS

Objective 1.1:Improve end-to-end readiness 

and cost-effectiveness in support of Combatant 

Commander Campaign Plans and Integrated 

Contingency Plans in competitive and contested 

logistics environments

Objective 1.2: Partner with customers at the 

wholesale and retail levels to address Servicespecific challenges and develop solutions

Objective 1.3: Proactively support the DoD 

Nuclear Enterprise and Space Enterprise

DLA’s support to the Warfighter is job one. It’s our core strategic 

priority. We must provide the right support in the right places 

at the right times.

The Military Services and Combatant Commands have unique 

needs and capabilities requiring customized solutions.

It’s imperative for DLA to make smart, disciplined investments 

in innovative tailored logistics solutions to increase and sustain 

weapons system and warfighting readiness – including our 

Nation’s strategic deterrent – to meet today’s requirements and 

prepare for the future fight.

LOE 2: SUPPORT TO THE NATION

Objective 2.1: Implement a deliberate, enterprisewide approach to Whole of Government support

Capitalizing on our scope, scale and skills in acquisition, 

storage, distribution, and surge capabilities, the Nation has 

increasingly called upon DLA to provide Whole of Government 

support.

DoD is redoubling its commitment to a cooperative, whole-ofnation approach to national security that builds consensus, 

drives creative solutions to crises, to guarantee that we lead 

from a position of strength.

The LOEs, CCs and objectives in the section below are derived from DLA’s 2021-2026 

Strategic Plan; however, there are specific objectives and key performance measures 

that are applicable to DLA GF and have been identified accordingly below.

As part of this effort, this LOE clarifies a deliberate approach 

to our Whole of Government mission with no cost trade-off to 

the Warfighter.

LOE 3: TRUSTED MISSION PARTNER

Objective 3.1: Implement customer-centric 

performance metrics and predictive problemsolving culture

Objective 3.2: Provide greater financial 

transparency to customers

Objective 3.3: Provide next generation 

customer service, including a customer feedback 

mechanism

Building trust begins with understanding our customers’ 

priorities. Through a collaborative, data-driven problemsolving culture, we will pursue viable solutions to these critical 

challenges.

DLA will improve trust and transparency by enhancing 

customer-facing tools and software, formalizing customer 

feedback and increasing collaboration at all levels. We will align 

performance metrics and targets to ensure we are accountable 

to our customers.

LOE 4: MODERNIZE ACQUISITION AND 

SMALL CHAIN MANAGEMENT 

Objective 4.1: Expand industry engagement 

to foster innovation and maximize value for our 

customers

Objective 4.2: Improve the end-to-end post-award 

segment to enable collaborative customer support, 

increase responsiveness, and manage costs

Objective 4.3: Develop a market intelligence 

capability to manage supply chain risk and drive 

best value
 Management’s Discussion and Analysis (Unaudited) | Section 1

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 12

Objective 4.4: Enhance our acquisition 

capabilities to improve readiness for contingencies

The global logistics environment is rapidly evolving and 

increasingly interconnected. DLA must work closely with 

industry partners to modernize and streamline our acquisition 

and end-to-end supply chains to deliver increased readiness 

and maintain our competitive advantage.

Through strong partnerships with our suppliers, and an 

enhanced focus on market intelligence capabilities, DLA will 

continue building a diverse, resilient, and agile industrial base 

to reduce supply chain risk and drive the best value for our 

customers.

Given the increasing number of global contingencies, this will 

better position us and our partners to meet the accelerating 

challenges in an ever-changing world.

At the heart of this LOE is the ability to increasingly harness 

and analyze business performance data to make informed, riskbased decisions and develop actionable solutions to improve 

customer outcomes for routine and contingency operations.

LOE 5: FUTURE OF WORK

Objective 5.1: Redefine virtual work models to 

enable our next generation workforce

Objective 5.2: Assess DLA CONUS facilities 

footprint to maximize space utilization

Objective 5.3: Build skillsets of the future

The workplace is increasingly virtual, reducing the need for a 

large physical footprint. Ongoing modernization efforts such as 

the use of mobile tablets, voice technology, autonomous guided 

vehicles and other advances to optimize warehouse operations 

all impact the future of work. DLA will continue adapting to these 

changes as it attracts and sustains a competitive workforce to 

drive increased productivity and employee satisfaction.

Creating an optimal work environment for employees that is 

modern, safe, secure, and well maintained will help increase 

retention and expand our access to diverse talent pools.

DLA Critical Capabilities

The three Critical Capabilities are fundamental to our successful 

transformation. They intersect and support the five LOEs with 

specific underlying objectives, initiatives and metrics.

• CC-A: People and Culture 

 Supporting our people

• CC-B: Fiscal Stewardship 

 Investing in outcomes

• CC-C: Digital-Business Transformation 

 Embracing the future

In these areas, DLA must be ready to act, adapt, reform, and 

embrace change to improve our organizational efficiency and 

effectiveness.

Critical Capability A: People and Culture

Objective A1: People

Objective A2: Culture

Our most important asset as an agency is our people. This

capability aligns DLA’s proven human capital strategies with 

our mission, LOEs, and objectives.

Our ability to attract, develop, and retain a diverse, skilled, and 

agile workforce is vital to our continued success.

To achieve a shared vision with the agency’s Strategic Plan, 

all DLA organizations, employees and leaders must work 

together to fortify the culture, reward high performance, build 

connections, and prioritize safety of the workforce.

Critical Capability B: Fiscal Stewardship

Objective B1: Auditability

Objective B2: Cost visibility and cash 

management

Objective B3: Investment to drive efficiency 

and effectiveness
Section 1 | Management’s Discussion and Analysis (Unaudited)

13 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

In an increasingly resource-constrained environment we will 

drive cost effectiveness while maintaining Service readiness. 

We must effectively manage our resources while making 

smart, transformative investments that increase value for our 

customers and taxpayers.

Through enhanced tools and capabilities, we will improve our 

cost and cash management for the DLA Working Capital Fund.

We will assess our work processes and the effectiveness of 

current internal controls to provide greater transparency, 

improve auditability and prevent fraud, waste, and abuse.

Critical Capability C: Digital Business 

Transformation

Objective C1: Transformational information 

technology capabilities

Objective C2: Advanced analytics and automation

Objective C3: Cybersecurity

Objective C4: Technology governance

Technology is changing at an exponential rate, generating 

new possibilities in logistics and customer support. It is also 

increasing the capabilities of our competitors, the risks to our 

supply chains and operations.

We are focusing our IT and digital capability investments on 

key areas that will enable us to enhance performance, reduce 

costs, and make more predictive and data-driven decisions.

We will transform our systems and processes to improve 

transparency, reliability, and security for our employees, 

customers, and suppliers.

We will work internally and with our partners to ensure the 

agency’s network, systems, and data are protected from 

emerging and complex cyber threats.

DLA Distribution Norfolk fulfills resupply mission for Operation Pacer Goose

Navy Capt. Tommy Neville, commander of Defense Logistics Agency Distribution Norfolk, Virginia, forefront left, 

escorts Navy Rear Adm. Jacquelyn McClelland, commander of the Navy Expeditionary Support Group, around 

DDNV’s Pier 8 to watch cargo operations supporting Operation Pacer Goose, the annual resupply mission to Thule 

Air Base, Greenland. Photo By: DDNV
 Management’s Discussion and Analysis (Unaudited) | Section 1

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 14

 State-wide-PTACs Regional county-wide PTACs Bureau of Indian Affairs PTACs

Figure 3: PTAC presence across the U.S., Puerto Rico and Guam

Procurement Technical Assistance Program

Within DLA, the Office of Small Business Programs (OSBP) 

is responsible for implementation of the Procurement Technical Assistance Program (PTAP). PTAP was established to 

expand the number of businesses capable of participating in 

government contracts; it executes cooperative agreements 

with eligible program participants to establish the Procurement 

Technical Assistance Centers (PTACs) that assist businesses 

in pursuing and executing contracts with DoD, other Federal 

Agencies, and state and local governments. PTACs provide 

day-to-day assistance to businesses in the form of services 

such as helping prepare bids/proposals, marketing to potential 

buyers, setting up or improving quality assurance and accounting systems, complying with cybersecurity requirements, and 

resolving payment problems. All PTACs are staffed with counselors experienced in government contracting and provide a 

wide range of services including classes and seminars, individual counseling and easy access to bid opportunities, contract 

specifications, procurement histories, and other information 

necessary to successfully compete for government contracts.

At the end of FY 2021, there were 95 PTACs assisting business 

in 49 states, Washington, D.C., Puerto Rico, Guam, the U.S. 

Virgin Islands, the Commonwealth of the Northern Marianas, 

and in regions established by the Indian Affairs bureau of the 

U.S. Department of the Interior. For FY 2021, DLA OSBP obligated $46.6 million for the PTAC’s use. As a cost sharing program, $20.9 million in non-federal funding was also committed 

by the states and other local entities. 

Performance Measures (Unaudited)

This performance measure relates to the objective described above:

Objective 4.1: Expand industry engagement to foster innovation and maximize value for our 

customers. 
Section 1 | Management’s Discussion and Analysis (Unaudited)

15 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

Distressed areas represent areas that have a per capita income 

of 80.0% or less of the state average; or an unemployment rate 

that is 1.0% greater than the national average for the most 

recent 24-month period.

Funding for the PTAP and for DLA’s administration of the 

program is provided by an annual O&M appropriation, in 

accordance with 10 USC Ch 142. FY 2021 and FY 2020 

obligations for the PTAP cost sharing program are shown in 

the below chart, for both distressed and non-distressed areas. 

 $-

 $5.0

 $10.0

 $15.0

 $20.0

 $25.0

 $30.0

 $35.0

Distressed Non-Distressed Distressed Non-Distressed

FY 2020 FY 2021

$12.8 

$31.2 

$12.2 

$34.3 

$4.3 

$22.9 

$2.7 

$18.2 

Dollars in Millions

PTAC Contributions for Distressed vs. Non-Distressed Areas

DLA - PTAC Non-Federal Entities

Figure 4: PTAC Contributions for Distressed vs. Non-distressed areas

Midshipman receives the COVID-19 Vaccine

Midshipman 4th Class Matthew Downey receives the COVID-19 vaccine at the U.S. Naval Academy in Annapolis, 

Maryland, on March 11, 2021. All Defense Department personnel and beneficiaries are eligible for vaccination as 

of April 19. Photo By: MC2 Nathan Burke/Navy
 Management’s Discussion and Analysis (Unaudited) | Section 1

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 16

Warstopper Program

This performance measure relates to the objectives described above:

Objective 1.3: Proactively support the DoD Nuclear Enterprise and Space Enterprise; 

Objective 2.1: Implement a deliberate, enterprise-wide approach to Whole of Government 

support; Objective 4.1: Expand industry engagement to foster innovation and maximize value 

for our customers Objective 4.3: Develop a market intelligence capability to manage supply 

chain risk and drive best value; and Objective 4.4: Enhance our acquisition capabilities to 

improve readiness for contingencies.

Readiness Investments

Readiness Investments in industry are made when the 

forecasted readiness demand is higher than the commercial 

industry is willing to invest. These types of investments 

can occur across all DLA Supply Chains including the DoD 

Nuclear Enterprise items. Additionally, DoD policy allows these 

industrial base measures to be used to offset War Reserve 

Material stocks and potentially avoid stock spoilage due to 

shelf-life expiration and changes to system configurations. 

Warstopper investments are like a catastrophe or disaster 

business insurance policy and deliver expedited products to 

our customers (i.e., Military Services) when triggered by an 

event (e.g., war, contingency, National Emergency, or disaster).

Preservation of Capabilities/Capacities

A Warstopper investment can be required to preserve an 

industrial base capability or capacity that would have closed 

but is needed for future readiness demand. The two major 

objectives are: (1) preserving and/or (2) cold start of industrial 

base capabilities and capacities. The goal is to successfully 

preserve identified capabilities and capacities within the 

available funding to prevent more costlier Diminishing 

Manufacturing Sources and Material Shortages (DMSMS) 

solutions. These are targets of opportunity as industry closes 

or discontinues support, typically due to financial reasons. 

Some opportunities exceed available funding in any specific 

fiscal year and become an unfunded requirement.

These investments support Objective 1.3, 4.1 and 4.4 by 

ensuring the ability to acquire critical supplies for military 

operations and the nuclear enterprise.

Risk Analysis

Risk analysis and studies are used to determine the health 

of selected industries, as well as maintaining DLA industrial 

acquisition policies, assessing supplier on their ability to 

address surge and sustainment to meet readiness demand, 

and other program administrative duties.

The risk analysis program analyses support Objective 4.3 that 

enables the DoD to be prepared, in the event of a potential 

threat to the security of the U.S., to take actions necessary 

to ensure the availability of adequate industrial resources and 

production capability, including services and critical technology 

for National defense requirements. These risk analyses and 

studies are an enabler for Objectives 1.3, 2.1, 4.1 and 4.4 by 

providing information to the appropriate decision makers and 

shared with other government agencies as appropriate.

DLA Improved Army Rations 

Give Soldiers an Edge

Enter the Modular Operational Ration 

Enhancement - MORE. In this photo: An 

example of the items found in a MORE

pack.
Section 1 | Management’s Discussion and Analysis (Unaudited)

17 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

IMAGE PLACEHOLDER

Humanitarian Assistance Program

Loadmasters assigned to the 15th Airlift Squadron from Joint Base Charleston, S.C. offload a mobile field 

hospital from a C-17 Globemaster III at Norman Manley International Airport in Kingston, Jamaica, Sept. 

19, 2020. The hospital was procured by DLA Troop Support’s Construction and Equipment supply chain for 

U.S. Southern Command’s ongoing assistance, through their Humanitarian Assistance Program, to nations 

responding to the global pandemic in the Caribbean and Latin America. Photo By: Staff Sergeant Lance 

Valencia
 Management’s Discussion and Analysis (Unaudited) | Section 1

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 18

The Defense Agencies Initiative (DAI) is a financial 

management system of nine integrated business processes as 

displayed in Figure 5 below. The system provides real time, 

web-based accessible capabilities for financial managers and 

other DoD employees to make sound business decisions in 

support of the Warfighter. Currently, 27 Defense Organizations 

use DAI, including Defense Contract Audit Agency (DCAA), 

Defense Information Services Agency (DISA), United States 

Marine Corps (USMC), and Missile Defense Agency (MDA). 

The DAI program continually requires innovation to meet the 

Figure 5: DAI’s Nine Integrated Business Processes

Budget to Report

Acquire to Retire

Time & Labor

Cost

Accounting

Order to 

Cash

Re-Sale

Accounting

Procure to Pay

Budget

Formulation

Grants Financial

Management Accounting

 Defense Agencies Initiative 

This performance measure relates to the objectives described above: 

Objective 1.1: Improve end-to-end readiness and cost-effectiveness in support of Combatant 

Commander Campaign Plans and Integrated Contingency Plans in competitive and contested 

logistics environments; Objective 2.1: Implement a deliberate, enterprise-wide approach to 

Whole of Government support; and Objective 3.2: Provide greater financial transparency to 

customers.

current dynamic technological and operational environment. As 

a result, in addition to O&M funding, the program also receives 

allotments through DLA GF RDT&E appropriations. In FY 2021, 

DAI was allotted $62.0 million of O&M funds, which represents 

15% of DLA’s total O&M appropriation of $414.0 million. In FY 

2021, DAI was allotted $21.4 million of RTD&E funds, which 

constitutes 8.5% of DLA’s total RDT&E appropriation of $252.9 

million.

(continued on next page) 
Section 1 | Management’s Discussion and Analysis (Unaudited)

19 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

In FY 2021, DAI received an unmodified opinion on the operating 

effectiveness of the control objectives stated above. Per the 

SOC-1 report, DAI system availability exceeded the target 

objectives. No adverse performance trends were identified 

during FY 2021. The reported performance information maps to 

the DAI Performance Baseline requirements. This information 

is regularly reviewed with using organizations and DAI 

leadership with a series of system technical reviews ending 

and Authorization to Proceed (ATP) decisions. The most recent 

SOC-1’s favorable report on internal controls over financial 

reporting confirms the reliability of the DAI system-developed 

and reported performance measures for data transmission. In 

the near future, DAI plans to migrate application hosting from 

DISA to commercial Cloud hosting. The date of migration is 

pending final determination by the Functional Sponsor (OSD). 

The shift to Cloud hosting is planned to improve scalability 

of the application to allow for growth in using organizations, 

maximize supportability and reduce cost.

DMEA uniquely accomplishes this mission for the Department 

by providing a guaranteed and trusted source of supply of microelectronics parts that are essential to combat operations. 

In addition, DMEA provides the rare technology and acquisition capabilities to develop, manage and implement innovative 

microelectronic solutions to enhance mission capability for 

customers across the department. DMEA provides decisive, 

quick turn solutions for defense, intelligence, special operations, cyber and combat missions, as well as microelectronic 

components that are unobtainable in the commercial market. 

DMEA accomplishes these missions by provision of internal 

engineering services and production of microelectronic parts 

(MEA-MEB Services), acquisition of microelectronic foundry 

production (TAPO), accelerated acquisition of microelectronDefense Microelectronics Activity

This performance measure relates to the objectives described above: 

Objective 1.4: Predictive Technology and Objective 3.3: Industry Partnerships.

DAI Operating Metrics

FY 2021

Target

FY 2021

Actual 

System 

Availability 98.0% 99.8%

Timeliness and Accuracy of 

Data Transfers 98.0% 99.8%

For FY 2021, DAI targeted to provide assurance that:

● DAI implements and executes an auditable financial 

management system to support customer organizations’ 

financial end-to-end processes. DAI received an 

unmodified opinion in a System and Organization Controls 

Type 2 report for the period October 1, 2020 through June 

30, 2021. (Targets O&M and RDT&E)

● DAI targets to provide system performance availability 

(% system is online and available to end users) (98.0% 

objective (desired performance level); 95.0% threshold 

(minimum acceptable performance). As displayed in Figure 

7 DAI 2021 system availability exceeded the objective. 

(Targets O&M)

● DAI successfully deployed Global Model capabilities to the 

Defense Commissary Agency (DeCA), the Joint Chiefs of 

Staff (JCS) and the National Defense University (NDU) in 

accordance with its implementation plan. (Targets O&M 

and RDT&E)

● DAI is developing and implementing Global Model 

capabilities to the United States Marine Corps (USMC) in 

accordance with its implementation plan. (Targets O&M 

and RDT&E)

● DAI interfaces have data integrity checks in place to ensure 

no loss or corruption of data during transmission, as well 

as no loss of interoperability across business systems 

(timeliness and accuracy of data transfers) (98.0% 

Objective. 95.0% threshold). As displayed in Figure 6, 

DAI system availability for 2021 exceeded the objective. 

(Targets O&M and RDT&E)

Figure 6: DAI Operating Metrics
 Management’s Discussion and Analysis (Unaudited) | Section 1

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 20

The DLA ManTech program enables DLA to explore and 

develop innovative solutions to improve and modernize 

manufacturing processes directly aligned to the National 

Defense Strategy (NDS). The program aims to rebuild military 

readiness for a more lethal force and achieve reform through 

greater performance and affordability, predictive analytics, and 

continuous communication.

For FY 2021, DLA ManTech focused on the following programs:

Battery Network Program 

● Bipolar Lead-acid Prototypes: Designed, assembled, and 

tested advanced batteries to be used virtually in every 

armored and automotive military system. This design established a unique bipolar lead-acid technology design 

for increased power, energy, cycle life, and lighter weight. 

Prototypes were completed and delivered to the US Army 

for testing.

Manufacturing Technology Program

This performance measure relates to the objectives described above:

Objective 1.1: Improve end-to-end readiness and cost- effectiveness in support of Combatant 

Commander Campaign Plans and Integrated Contingency Plans in competitive and contested 

logistics environments; Objective 1.2: Partner with customers at the wholesale and retail levels 

to address Service- specific challenges and develop solutions; Objective 1.3: Proactively 

support the DoD Nuclear Enterprise and Space Enterprise; Objective 2.1: Implement a 

deliberate, enterprise- wide approach to Whole of Government support; Objective 3.3: Provide 

next generation customer service, including a customer feedback mechanism; Objective 

4.1: Expand industry engagement to foster innovation and maximize value for our customers; 

Objective 4.3: Develop a market intelligence capability to manage supply chain risk and drive 

best value; Objective C.1: Enhanced IT Capabilities; and Objective C.2: Advanced Analytics 

and Automation.

● Injection molded nickel-zinc and nickel-cadmium solid-state electrolyte cells: Completed a feasibility for injection molded nickel-zinc and nickel-cadmium solid-state 

electrolyte cells. 

Advanced Microcircuit Emulation Program 

● Obsolete Microcircuit Manufacturing Capability: Developed a continuing manufacturing source for obsolete microcircuits requiring TTL-compatible CMOS family of digital microcircuits introduced in the 1990s.

Defense Logistics Information Research 

Program 

● 3D Technical Data Solutions: Provided alternative of solutions to provide access to technical data from multiple 

proprietary sources to increase the ability of industry to 

ic development solutions in the defense industry (ATSP), and 

through the development of a microelectronic manufacturing 

capability at DMEA.

DMEA assists multiple Department programs every year. 

DMEA has provided its specialized engineering assistance 

and capabilities to older systems, current systems, and even 

to programs not yet in the production phase. This includes the 

Counter-Rocket, Artillery, and Mortar (C- RAM) System, F-18 

Super Hornet, F-22 Raptor, F-35 Lightning II, B-52 Stratofortress, C-5 Galaxy, V-22 Osprey, RQ-4 Global Hawk, MQ-9 

Reaper, AEGIS Advanced Surface Missile System, Advanced 

Medium-Range Air-to-Air Missile (AMRAAM), HH-60G Pave 

Hawk Helicopter, MH-53E Super Stallion Heavy Lift Helicopter, 

Evolved Sea Sparrow Missile (ESSM), Ohio class submarine 

fleet, Upgraded Early Warning Radar, among many other programs. DMEA assists the Combatant Commands (COCOMs) 

including Special Ops, Cyber, Intelligence, and the Radiation-Hard communities.

(continued on next page)
Section 1 | Management’s Discussion and Analysis (Unaudited)

21 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

respond to parts requirements; reviewed 3D technical data 

viewers that provide visibility of technical data from multiple proprietary sources to develop standard guidance the 

development of 3D Technical Data Packages across DoD.

Additive Manufacturing Program

● Creating 3D Technical Data Packages (TDPs) & ANTPQ-36 

Fire Finder Waveguide: Advanced and demonstrated 3D 

Model-based technical data use in procurement for hardto-source parts; produced hard-to- source waveguides for 

the AN/TPQ-36 Fire Finder Radar to test for insertion to 

the supply system.

Subsistence Network Program 

● Horizontal Form Fill Seal (HFFS) Material for MRE Bags: 

Developed improvements to materials and manufacturing 

processes for MRE packaging material and overall food 

quality; developed new MRE meal bags that reduces packaging waste, reduce MRE weight, volume, and cost.

Castings 

● Automated Image Analysis: Designed a semi-automated 

image analysis using Radiographic Testing (RT) to inspect 

steel castings by improving the robustness of feature detection and rating decisions. The software is available to 

other R&D projects and the metal casting industry for use 

through the Steel Founders’ Society of America.

New Construction

Material handlings systems inside the newly completed Consolidated Global Warehouse facility at Defense 

Logistics Agency Maritime Portsmouth. The systems will increase the Defense Logistics Agency Maritime 

Portsmouth’s servicing capability for the submarine fleet. Photo By: Gabriel Mata
 Management’s Discussion and Analysis (Unaudited) | Section 1

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 22

The MILCON program provides funds for major construction 

to replace or renovate DoD fuel depots and Industrial 

Capabilities Program (ICP) facilities around the world. DLA 

sub-allots MILCON funds to USACE and NAVFAC, which are 

DLA’s primary design and construction agents for the MILCON 

program. Projects include fuel hydrant systems encompassing 

entire aircraft parking ramps, numerous operations and HQ 

facilities, and retail gas stations.

For FY 2021, the Facilities Modernization Division within 

Installation Management brought 14 MILCON projects to 

completion as of September 30th. The total value of these 

projects was $193.4 million. Projects ranged in scope from 

replacing fuel tanks to improving wharf refueling capability. 

Prices ranged from just over $0.9 million to $40.6 million. 

The following figures summarize completed DLA MILCON 

projects. FY 2021 results reflect a restatement of expense and 

capitalization amounts, adjusting four FY 2020 projects with 

a combined value of $75.3 million, and increasing FY 2018 

results by four projects with a combined value of $127.9 million.

Military Construction

This performance measure relates to the objectives described above: 

Objective 1.1: Improve end-to-end readiness and cost-effectiveness in support of Combatant 

Commander Campaign Plans and Integrated Contingency Plans in competitive and contested 

logistics environments.

Figure 7: Completed DLA MILCON Projects by Year

(continued on next page)

0

5

10

15

20

25

30

Restated FY 2018 FY 2019 Restated FY 2020 FY 2021

21

12

15

6

17

13

7 8

Number of Projects

MILCON Project Completion - Number of Projects Completed 

NAVFAC USACE
Section 1 | Management’s Discussion and Analysis (Unaudited)

23 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

MILCON Projects Completed in FY 2021 (Amounts in $)

FY 

(Authorized) Project Description Installation /

 Location Name Country 

Actual 

Completion 

Date

Construction Cost

2017 Construct Warehouse & Open Storage Red River Army Depot, TX USA Q2 $ 2,355,833 

2013 Replace Hydrant Fuel System Grissom AFB, IN USA Q2 40,601,903 

2016 Construct Fuel Pipeline North to South Side Spanghahlem AB Germany Q2 5,812,125

2017 Construct Truck Offload & Loading Facilities Iwakuni Japan Q2 7,331,436

2018 Replace Pre-Filter Facility Eielson AFB, AK USA Q2 4,433,413 

2013 Upgrade Fuel Pipeline Andersen AFB, Guam Guam Q2 7,803,983 

2017 Improve Wharf Refueling Capability Diego Garcia, DG Marshall 

Islands Q2 31,100,509 

2015 Replace HQs at Philadelphia - Phase 2 Philadelphia, PA USA Q2 915,238

2019 Consolidated Warehouse Replacement Portsmouth, ME USA Q4 14,057,476

2015 Replace Fuel Storage Tanks Guantanamo Bay Cuba Q4 11,025,846

2017 Construct Fuel Truck Offload Facility Andersen AFB, Guam Guam Q4 23,564,257

2018 Construct Tanker Truck Delivery System Seymour Johnson AFB, NC USA Q4 23,146,235

2019 Operations Facility Replacement Joint Base Elmendorf 

Richardson, AK USA Q4 12,133,259

2015 Replace Access Control Point DLA Aviation Richmond VA USA Q4 9,079,604

FY 2021 Total $ 193,361,117

Figure 9: Completed DLA MILCON Projects by Location

Figure 8: DLA MILCON Value of Completed Projects by Year

0.0

50.0

100.0

150.0

200.0

250.0

300.0

Restated FY 2018 FY 2019 Restated FY 2020 FY 2021

154.7

135.7

260.5

88.5

174.9

53.7

90.0 104.9

Dollars in millions

MILCON Project Completion - Value of Projects Completed 

NAVFAC USACE
 Management’s Discussion and Analysis (Unaudited) | Section 1

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 24

DLA considers a MILCON project completed when the 

Construction in Process (CIP) ledger account has been 

reduced for the first time, reflecting the transfer of the asset 

to the receiving entity. Additional costs will continue to accrue 

in the CIP account after beneficial occupancy has occurred, 

while the construction contract work is being finalized. Once 

the contractor-submitted final invoice is paid and release of all 

claims has been confirmed, the project is readied for closure 

by the design and construction agent. A final Report of Transfer 

and Acceptance of Real Property (DoD Form DD1354) is 

produced at project closure, documenting all project costs.

Sample of Completed DLA MILCON Projects

Top Left: Improve Wharf Refueling Capability, Diego Garcia, Marshall Islands

Top Middle: Replace Hydrant Fuel System, Grissom Air Force Base, IN 

Top Right: Replace HQs, Philadelphia, PA 

Bottom Left: Construct Fuel Pipeline North to South Side, Spangdahlem Air Base, Germany

Bottom Right: Replace Ground Fuel Facility, Fort Belvoir, VA
Section 1 | Management’s Discussion and Analysis (Unaudited)

25 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

DLA Roadmap to Auditability

This performance measure relates to the objective described above: Objective B1 Auditability

Currently, DLA GF receives a disclaimer of opinion on its financial 

statements. DLA GF is striving to obtain an unmodified audit 

opinion from its IPA in the future. Since receiving a disclaimer of 

opinion each year from FY2017, DLA GF has taken a two track 

approach in resolving major impediments in efforts to strive 

for an unmodified audit opinion: (1) improving the reliability 

and fair presentation of financial data reported in the AFR by 

addressing Notice of Findings and Recommendations (NFRs); 

and (2) developing, improving, and refining the underlying endto-end processes that support the compilation of the AFR by 

instilling sound fundamental practices in accordance with U.S. 

GAAP. The following timeline summarizes the occurrence of 

events that propelled DLA into a corrective action posture.

2010

NDAA mandates the DoD to have 

its financial statements validated for 

audit readiness by the end of FY17

2018

DLA’s Audit Task Force was created by 

Operation Order 19-004 in October 2018 

to coordinate, integrate and synchronize 

audit efforts across the Agency.

2016

The IPA began DLA’s initial 

audit for the FY17 TF, WCF, 

and GF financial statements.

2015

DLA completes audit readiness of 

the financial processes of the TF, 

WCF, and GF financial statements.

2017

The IPA Issued a disclaimer of 

opinion on DLA’s FY17 financial 

statements. DLA begins to 

address Notice of Findings and 

Recommendations (NFRs).

2021

The IPA issued a disclaimer of 

opinion on DLA’s FY21 financial 

statements. DLA continues to support 

the audit by identifying root causes of 

conditions, prioritizing resources, and 

developing corrective action plans.

Figure 10: DLA Roadmap to Auditability

Food Distribution

Army Spc. Jermareya Frederick, a 

financial management technician 

assigned to the 160th Financial 

Management Support Detachment, 

Arizona Army National Guard, 

fills boxes with groceries to be 

distributed at a food bank in 

Phoenix, March 8, 2021. Photo By:

Air Force Tech. Sgt. Michael Matkin, 

Arizona Air National Guard

Figure 10: DLA Auditability Timeline
 Management’s Discussion and Analysis (Unaudited) | Section 1

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 26

This analysis presents a summary of DLA GF’s financial position and results of operations and addresses the major changes and 

the related activity in the amounts of assets, liabilities, net position, cost, revenue, budgetary resources, and obligations.

Analysis of Financial Statements and 

Stewardship Information

Overview of Financial Position

The principal financial statements of DLA GF include the 

Balance Sheets, Statements of Net Cost, Statements of 

Changes in Net Position, and the Combined Statements of 

Budgetary Resources. These principal financial statements 

and accompanying notes are included in the Financial Section 

of this AFR.

 

Preparing DLA GF financial statements is a vital component 

of sound financial management and is intended to provide 

accurate, accountable, and reliable financial information that is 

useful for assessing performance, allocating resources, and for 

targeting areas for future programmatic emphasis. DLA GF’s 

management is responsible for the integrity and objectivity of 

the financial information presented in the statements. DLA GF 

is dedicated in its pursuit of financial management excellence.

A summary of DLA GF’s changes in key financial measures for 

FY 2021 and FY 2020 is presented in the following Analysis 

of Key Financial Measures. The table represents assets on 

hand to pay liabilities, and the corresponding net position. 

The net cost of operations is the gross costs of DLA GF five 

programs: O&M, PDW, RDT&E, Family Housing, and MILCON 

less earned revenue. Because of the materiality and nature 

of the program, DLA combines the Family Housing Program 

with MILCON for reporting purposes in the Statements of Net 

Cost. The Financial Results Summary section also includes an 

explanation of significant changes for each DLA GF financial 

statement.

Green Guidance

Navy Petty Officer 2nd Class Devin Call signals to an F-35B Lightning II fighter aircraft from the flight deck of 

the USS America in the Philippine Sea, Jan. 30, 2021. Photo By: Navy Seaman Jonathan Berlier
Section 1 | Management’s Discussion and Analysis (Unaudited)

27 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

Figure 11: Changes In Key Financial Measures

Changes In Key Financial Measures

As of and for the Years Ended September 30, 2021 and 2020 (dollars in millions)

Condensed Principal Financial Statements

FY 2021

FY 2020*

As Restated Increase/Decrease

Financial Condition (Unaudited) (Unaudited) $ %

Fund Balance with Treasury $ 1,928.0 $ 1,600.8 $ 327.2 20.4%

General PP&E, Net 604.8 611.1 (6.3) (1.0%)

Inventory and Related Property, Net 17.4 - 17.4 100.0%

Accounts Receivable and Other Assets 13.6 23.9 (10.3) (43.1%)

TOTAL ASSETS $ 2,563.8 $ 2,235.8 $ 328.0 14.7%

Accounts Payable $ 53.1 $ 55.3 $ (2.2) (4.0%)

Environmental and Disposal Liabilities 90.5 77.7 12.8 16.5%

Federal Benefits and Other Liabilities 15.9 15.9 - 0.0%

TOTAL LIABILITIES $ 159.5 $ 148.9 $ 10.6 7.1%

TOTAL NET POSITION (ASSETS LESS 

LIABILITIES) $ 2,404.3 $ 2,086.9 $ 317.4 15.2%

Total Gross Cost 861.7 755.0 106.7 14.1%

Less: Total Earned Revenue (74.9) (79.6) 4.7 (5.9%)

NET COST OF OPERATIONS $ 786.8 $ 675.4 $ 111.4 16.5%

*In FY 2021, DLA GF restated its FY 2020 financial statements to correct errors in the Balance Sheet, Statement of Net Cost, 

and Statement of Changes in Net Position. Additionally, the FY 2020 Balance Sheet was reclassified to conform to the FY 2021 

financial statement presentation requirements in accordance with OMB Circular No. A-136, Financial Reporting Requirements.

Fresh Fruits and Vegetables Program

The Defense Logistics Agency Troop Support’s 

Subsistence supply chain in Philadelphia works 

with its suppliers to distribute produce to U.S. 

Department of Agriculture customers. The states’ 

demands for grab-and-go and individually 

wrapped items has increased due to the 

pandemic. (U.S. Department of Agriculture photo) 

Photo By: U.S. Department of Agriculture
 Management’s Discussion and Analysis (Unaudited) | Section 1

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 28

Financial Results Summary

Assets – What DLA GF Owns and Manages

Assets represent amounts owned and managed by DLA GF 

that can be used to accomplish its mission as the Nation’s 

Combat Logistics Support Agency and consist of: Fund 

Balance with Treasury (FBwT); General Property, Plant and 

Equipment (PP&E); Inventory and Related Property, Net; and 

Accounts Receivable and Other Assets. DLA GF’s largest 

asset is FBwT, representing $1,928.0 million or 75.2% of Total 

Assets as of September 30, 2021. Compared to the September 

30, 2020 balance, the increase of $327.2 million or 20.4% 

was primarily due to funding for equipment of $390.5 million 

and the net increase in appropriations for the Procurement 

program in FY 2021 compared to FY 2020. PP&E comprised of 

mostly construction-in-progress (CIP), and represents $604.8 

million or 23.6% of Total Assets. The decrease of ($6.3) million 

or (1.0%) from the September 30, 2020 balance was mostly 

due to the decrease in acquisitions with the winding down of 

MILCON projects. 

Figure 12: Total Assets by component as of September 30, 2021 and 2020

$0.0

$200.0

$400.0

$600.0

$800.0

$1,000.0

$1,200.0

$1,400.0

$1,600.0

$1,800.0

$2,000.0

Fund Balance

with Treasury

General PP&E,

Net

Inventory and

Related

Property, Net

Accounts

Receivable &

Other Assets

$1,928.0 

$604.8 

$17.4 

$13.6 

$1,600.8 

$611.1 

$0.0 

$23.9 

Two Year Trend in Components 

of Total Assets (Unaudited)

As of September 30, 2021 and 2020

FY 2021 Assets FY 2020 Assets As Restated

($ in millions)

2,563.8M

Accounts Receivable & Other Assets

($13.6)

General P&E, Net ($604.8)

FBwT ($1,928.0)

Inventory & Related Property, Net

($17.4)

Total Assets (Unaudited) 

As of September 30, 2021

($ in millions)
Section 1 | Management’s Discussion and Analysis (Unaudited)

29 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

Liabilities – What DLA GF Owes

Liabilities are the amounts owed: (1) to Federal and public 

entities for goods and services provided but not yet paid; (2) 

to DLA GF employees for wages and future benefits; (3) for 

Environmental and Disposal Liabilities (EL); and (4) for Other 

Liabilities. EL is the largest liability reported at $90.5 million 

or 56.7% of Total Liabilities. EL shows a net increase of $12.8 

million or 16.5% over the September 30, 2020 balance mostly 

attributable to the additional cost of a new cost estimating 

Figure 13: Total Liabilities by component as of September 30, 2021 and 2020

software that impacted the program management costs to 

improve the liability methodology and an increase in cost 

estimates for environmental site remediation. 

The second largest is Accounts Payable, which comprises 

$53.1 million or 33.3% of Total Liabilities. Federal Benefits 

and Other Liabilities represent $15.9 million or 10.0% of Total 

Liabilities.

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

$80.0

$90.0

$100.0

Accounts Payable Environmental &

Disposal Liabilities

Federal Benefits &

Other Liabilities

$53.1 

$90.5 

$15.9 

$55.3 

$77.7 

$15.9 

Two Year Trend in Components 

of Total Liabilities (Unaudited) 

As of September 30, 2021 and 2020

FY 2021 Liabilities FY 2020 Liabilities As Restated

($ in millions) 

$159.5M

Federal Benefits & Other Liabilities 

($15.9)

Environmental and Disposal Liabilities 

($90.5)

Accounts Payable ($53.1)

Total Liabilities (Unaudited) 

As of September 30, 2021

($ in millions)
 Management’s Discussion and Analysis (Unaudited) | Section 1

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 30

Net position represents the accumulation of Revenue and 

Expenses, and Unexpended Appropriations and Other 

Financing Sources transferred in/out since inception, as 

represented in DLA GF balances reflected in the Statements 

of Changes in Net Position. Total Net Position in the amount of 

$2,404.3 million as of September 30, 2021 is made up of: 

(1) Unexpended Appropriations, and (2) Cumulative Results 

of Operations. The net increase of $317.4 million or 15.2% 

was primarily due to the net increase in appropriations for the 

Procurement program in FY 2021 compared to FY 2020 offset 

with the increase in the EL compared to the September 30, 

2020 balance.

Net Position - What DLA GF Has Done Over Time

Net Cost of Operations - DLA GF Net Operating Results

Figure 14: Comparative Net Cost by Program for years ended September 30, 2021 and 2020

The DLA GF manages five programs: O&M, RDT&E, PDW, 

MILCON, and Family Housing. Net Cost is grouped by four 

major components, combining MILCON and Family Housing 

into one. For the year ended September 30, 2021, O&M 

represents the largest portion of Net Cost of Operations at 

$452.3 million. RDT&E represents the second largest portion 

of Net Cost of Operations at $322.0 million for the year ended 

September 30, 2021. The net increase in Net Cost of Operations 

of $111.4 million or 16.5% was primarily due to NAVFAC CIP 

prior period adjustments, which effectively reduced the costs 

reported.

$0.0

$50.0

$100.0

$150.0

$200.0

$250.0

$300.0

$350.0

$400.0

$450.0

$500.0

$452.3 

$322.0 

$10.3 

$2.2 

$336.3 

$320.2 

$13.2 

$5.7 

Two Year Trend in Net Cost (Unaudited) 

For the Years Ended 

September 30, 2021 and 2020

FY 2021 FY 2020 As Restated

($ in millions)

$786.8M

Procurement ($2.2)

MILCON & Family Housing ($10.3)

RDT&E ($322.0)

O&M ($452.3)

Total Net Cost (Unaudited) 

For the Year Ended September 30, 2021

($ in millions)
Section 1 | Management’s Discussion and Analysis (Unaudited)

31 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

The recognition of budgetary accounting transactions is 

essential for compliance with legal constraints and controls 

over the use of Federal funds. The budget represents the plan 

for efficiently and effectively achieving the strategic objectives 

to carry out the mission and to ensure that DLA GF manages 

its operations within the appropriated amounts using budgetary 

controls. Two key components of budgetary activity include 

Budgetary Resources and Obligations. Budgetary resources 

are funds available for DLA GF to incur obligations to pay 

for goods and services prior to the cancellation of funds. 

Budgetary Activity - DLA GF Obligations and Outlays

Obligations are balances for which there has been legally 

binding action during the year. 

For the year ended September 30, 2021, DLA GF’s total 

Budgetary Resources were $2,066.4 million and incurred a 

total of $1,450.4 million in new obligations from salaries and 

benefits, purchase orders placed, contracts awarded, and 

similar transactions.

Figure 15: Status of Budgetary Resources for the years ended September 30, 2021 and 2020

 $-

 $500.0

 $1,000.0

 $1,500.0

 $2,000.0

 $2,500.0

Total Budgetary Resources New Obligations

$2,066.4 

$1,450.4 $1,605.6 

$989.9 

Two Year Trend in Status of

Budgetary Resources and New Obligations 

(Unaudited)

For the Year Ended September 30, 2021 and 2020

FY 2021 FY 2020

($ in millions)
 Management’s Discussion and Analysis (Unaudited) | Section 1

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 32

Limitations of the Financial Statements

The DLA GF principal financial statements2 and accompanying 

notes are prepared to report the financial position and results 

of operations of DLA GF, as required by the CFO Act of 1990, 

expanded by the GMRA of 1994, and 31 U.S.C. § 3515(b).

The DLA GF is unable to fully implement all elements of 

U.S. GAAP as promulgated by the Federal Accounting 

Standards Advisory Board (FASAB) and the form and content 

requirements for Federal government entities specified by OMB 

Circular A-136, and other authoritative guidance. This is due to 

financial and nonfinancial management system limitations, as 

well as limitations on the underlying processes that support the 

principal financial statements. DLA GF derives reported values 

and information for major asset and liability categories largely 

from nonfinancial systems. These systems were designed to 

support reporting requirements for maintaining accountability 

over assets and reporting the status of Federal appropriations 

rather than preparing financial statements in accordance with 

U.S. GAAP. These systems were not designed to collect and 

record financial information on the full accrual accounting 

basis as required by U.S. GAAP, and most of the financial 

management systems used by DLA GF were designed to 

record information on a budgetary basis.

The DLA continues to address IT and financial audit NFRs 

to strengthen system controls, and financial and regulatory 

compliance with corrective action plans that include developing 

requests for systems changes. DLA has begun planning and 

defining requirements for a major system upgrade to the 4th 

version of System Applications and Products (SAP’s) Data 

processing Enterprise Resource Planning (ERP) Business 

Suite 4 SAP HANA (SAP S/4HANA). SAP S/4 will provide 

enhanced reporting of financial information on the full accrual 

accounting basis and streamline data between IT systems, 

which DLA continues to consolidate and rationalize through the 

migration of major legacy systems. 

The DLA GF continues to develop, improve, and refine the 

underlying financial and nonfinancial end-to-end processes 

and systems that support the compilation of the financial 

statements and notes in accordance with U.S. GAAP as 

promulgated by FASAB and other Federal regulations. DLA GF 

continues to implement interim mitigation processes to address 

known limitations. 

Additionally, DLA GF is remediating material weaknesses 

to the financial statement preparation process. DLA GF has 

several corrective actions underway intended to improve the 

underlying systems, business processes and internal controls.

The financial statements should be read with the realization 

that they are for a component of the U.S. Government.

2 Refer to the Financial Section Introduction for definition of principal 

financial statement.

Going Green

Air Force C-17 Globemaster III pilots take off for a mission from Al Udeid Air Base, Qatar, Oct. 27, 2020. 

Photo By: Air Force Master Sgt. Larry Reid Jr.
Section 1 | Management’s Discussion and Analysis (Unaudited)

33 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

Analysis of Systems, Controls, 

and Legal Compliance

The DLA management is responsible for establishing, 

maintaining, and assessing internal controls to provide 

reasonable assurance that the objectives of OMB Circular 

A-123, Management’s Responsibility for Enterprise Risk 

Management (ERM) and Internal Control, the FMFIA (31 U.S. 

Code (U.S.C.) 3512, Sections 2 and 4), and the FFMIA (Pub. 

Management Assurances 

L. 104-208), as prescribed by U.S. Government Accountability 

Office (GAO) Green Book, Standards for Internal Control in 

the Federal Government, are met. The appendices referenced 

within the annual Statement of Assurance (SOA) below are 

OMB Circular A-123 appendices and are not included in DLA 

GF AFR.
 Management’s Discussion and Analysis (Unaudited) | Section 1

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 34
Section 1 | Management’s Discussion and Analysis (Unaudited)

35 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

Summary of Internal Control Assessment

Federal Managers’ Financial Integrity Act

The DLA management evaluated the system of internal control 

in effect during the current fiscal year according to the guidance 

prescribed in the GAO Green Book and OMB Circular A-123.

The evaluation of internal controls extends to every responsibility 

and activity undertaken by DLA and applies to program, 

administrative, operational controls, and financial reporting. 

Furthermore, the concept of reasonable assurance recognizes 

that: (1) the cost of internal controls should not exceed the 

expected benefits and (2) the benefits include reducing the 

risk associated with failing to achieve the stated objectives. 

Errors or irregularities may occur and not be detected because 

of inherent limitations in any system of internal control, 

including those limitations resulting from resource constraints, 

congressional restrictions, and other factors. The projection 

of any system evaluation to future periods is subject to risks 

that procedures may be inadequate because of changes in 

conditions or that the degree of compliance with procedures 

may deteriorate. Based on the preceding description, DLA is 

providing a statement of no assurance.

DLA considered the five components and seventeen principles 

defined by the GAO Green Book to conclude its determination 

of statement of no assurance. Based on the standards, DLA 

identified gaps in Control Environment, Risk Assessment, 

Control Activities, Information and Communication, and 

Monitoring. The Risk Assessment component evaluates the 

risk facing the entity as it seeks to achieve its objectives and 

provides the basis for developing appropriate risk responses. 

Within this component, gaps exist in fraud risk management. 

Furthermore, DLA lacks sufficient policies and procedures to 

achieve the control activities principles. The Information and 

Communication component lacks data quality that affects 

external communication and the financial statement audit. The 

lack of assessments also identified the need for improvements 

in remediation and timeliness of response to internal control 

failures. Therefore, the overall operating effectiveness of DLA’s 

system of internal control is insufficient to support reasonable 

assurance.

The DLA SOA package only includes self-identified material 

weaknesses and significant deficiencies for internal DoD 

reporting; however, the financial statement audit NFRs continue 

to be monitored by management. The audit related ICOR and 

ICOFS material weaknesses that have not yet been remediated 

are reported in the Summary of Financial Statement Audit and 

Management Assurances Other Information (OI) section. DLA’s 

SOA Package FY 2021 Material Weaknesses and Significant 

Deficiencies template included a total of three ICOR-O material 

weaknesses. 

The objectives of the system of internal control of DLA are to provide reasonable 

assurance of: 

● Effectiveness and efficiency of operations; 

● Reliability of financial and nonfinancial reporting; 

● Compliance with applicable laws and regulations; and 

● Financial information systems compliance with the FMFIA and FFMIA 
 Management’s Discussion and Analysis (Unaudited) | Section 1

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 36

The DLA is working to improve the documentation around 

DLA’s end-to-end business processes and has not performed 

full-scale OMB Circular A-123 internal control testing during 

FY 2021 in order to self-identify and track ICOR and ICOFS 

material weaknesses that remain unremediated from the FY 

2020 SOA package. 

To address these deficiencies, the DLA Enterprise Risk 

Management (ERM) Program Management Office (PMO), 

led by DLA’s Chief Risk Officer, maintain oversight of the 

full spectrum of DLA's risk portfolio and key internal controls 

across all organizational and business aspects. This oversight 

enables DLA to integrate the diverse groups performing 

elements of risk management and internal control activities 

under a single umbrella with the goal of improved mission 

delivery, reduced costs, and response actions focused on key 

risks to DLA’s mission. DLA continues to build the institutional 

capacity to execute an effective OMB Circular A-123 Program 

and demonstrates measurable progress that includes:

● Publishing two comprehensive manuals, DLAM 

5010.40 Risk Management (Vol I) and Internal 

Control (Vol II) that provide the concepts for 

implementing and executing an effective A-123 

program;

● Publishing DLA’s Fraud Risk Management Strategy, 

that defines the framework to protect our agency’s 

assets and resources from fraud, waste, and, abuse; 

coordinate the Agency' s A-123 Program;

● Conducting a Fraud Risk Maturity Assessment 

across major DLA programs to identify and build 

upon activities to mitigate the risks of fraud, waste, 

abuse, and mismanagement;

● Performing regular reviews of ERM and A-123 

efforts and work products through a robust, multilayered ERM governance structure, including a 

Senior Management Council (SMC) to identify, 

escalate, and respond to risks in a methodical way 

and implement internal controls in the high priority 

areas; and

● Publishing a comprehensive A-123 Program 

instruction (DLAI 5010.40) that is sought after by 

the DOD Enterprise Risk Management Community 

of Practice and other DOD organizations to use as 

benchmark for developing the Department’s DODI 

5010.40.

The DLA consistently strives to create a “culture of accountability” to ensure compliance with laws, regulations, policies, 

and the execution of key processes. Examples of this include 

the Agency-wide circulation of the Director’s “Tone at the Top” 

message and monthly employee accountability assessments 

and supervisory assurance certifications.

The DLA has also synchronized its efforts between the ERM 

PMO and Audit Task Force to strengthen the Agency’s OMB 

Circular A-123 Program and audit infrastructure. This new approach leverages a risk-based methodology to facilitate the integration of internal controls, risk management activities and 

audit remediation. 

The DLA’s Summary of Financial Statement Audit and Management Assurances for SOA package and audit related material 

weaknesses are presented in the OI section of this report.

Effectiveness of Internal Control over Operations (FMFIA § 2)

Material Weaknesses Corrective Action Summary

Supply Operations: Lack of policy and procedures in 

place over the management and oversight of First Article 

Test Exhibits

The DLA will establish and implement policies and procedures for identified areas, 

train affected personnel on new procedures, and conduct compliance reviews, 

tests of design, and tests of effectiveness for internal controls.

Business Process Controls: Lack of procedures 

over the scrap management program

The DLA Disposition Services will perform a risk assessment (to include fraud 

risks), define, develop, and publish policy and procedures and controls to 

correct OCONUS Scrap Program.

Contract Administration: Non-verification of supplier 

invoices

The DLA will perform an analysis, develop and update policies and procedures, 

test controls, and conduct implementation procedures to remediate the 

deficiencies associated with this finding. 
Section 1 | Management’s Discussion and Analysis (Unaudited)

37 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

identified high-risk factors associated with all three FFMIA 

Section 803(a) requirements.

FFMSR:

High-risk factors that indicate non-compliance in this area 

include: the disclaimer of opinion on the FY 2020 financial 

statements; and material weaknesses over internal controls 

over reporting and information system non-compliance related 

to financial system security were reported in FY 2020 and FY 

2021 in areas that corresponded to FFMSRs.

Federal Accounting Standards3: 

High-risk factors that indicate non-compliance in this area 

include: the disclaimer of opinion on the FY 2020 financial 

statements and material weaknesses over internal controls 

over reporting reported by DLA in FY 2020 and FY 2021 in 

areas that related to compliance with Federal accounting 

standards.

USSGL at the Transaction Level:

High-risk factors that indicate non-compliance in this area 

include the disclaimer of opinion on the FY 2020 financial 

statements and material weaknesses over internal controls 

over reporting reported in FY 2020 and FY 2021 in areas that 

related to implementation of the USSGL at the transaction 

level.

The table below summarizes the status of unresolved 

deficiencies associated with each of the FFMIA Section 803(a) 

requirements and remediation activities that are planned or 

underway, target dates, and offices responsible for bringing 

systems into compliance. 

Federal Financial Management 

Improvement Act

FFMIA was enacted to advance Federal financial management 

by ensuring that Federal financial management systems 

can routinely provide reliable financial information uniformly 

across the Federal government following OMB Circular 

A-123 Appendix D, Compliance with the Federal Financial 

Management Improvement Act of 1996. The FFMIA requires 

agencies to establish and maintain financial management 

systems that substantially comply with the following three 

FFMIA Section 803(a) requirements:

OMB Circular A-123, Appendix D provides the compliance 

determination framework to evaluate compliance with the 

FFMIA requirements. The FFMIA compliance determination 

framework includes a series of Federal financial management 

goals applicable across all Federal agencies and associated 

compliance indicators that assist the Agency head in 

determining whether the Agency has substantially complied 

with the requirements of FFMIA.

The DLA leveraged the OMB Circular A-123, Appendix D 

compliance determination framework to perform a review of data 

for each of the FFMIA compliance indicators and associated 

analysis in order to determine compliance with FFMIA. Based 

on the application of the framework and associated analysis 

of relevant FFMIA compliance indicators available, DLA had 

3 Refer to the Notes to the Principal Financial Statements; Note 1.C, 

Departures from U.S. GAAP.

● Federal Financial Management System 

 Requirements (FFMSRs)

● Federal Accounting Standards

● U.S. Standard General Ledger (USSGL) at 

the Transaction Level
 Management’s Discussion and Analysis (Unaudited) | Section 1

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 38

FFMIA Section 803(a) 

Requirement

Remediation 

Activities Target Date Responsible Offices

Federal Financial Management 

System Requirements

The DLA will continue to 

develop and document 

policies, procedures, and 

controls in order to comply with standards, laws, 

and regulations that 

promote reliable financial 

reporting and effective 

and efficient operations.

FY 2022 - 

FY 2023

• Finance

• Information Operations

• Acquisition

• Logistics Operations

Federal 

Accounting 

Standards 

Advisory

 Board (FASAB)

The DLA will continue 

to perform a root cause 

analysis to identify 

underlying issues as 

well as develop and 

document policies, 

procedures, and controls 

to maintain accounting 

data to permit reporting 

in accordance with U.S. 

GAAP as established by 

the FASAB.

FY 2022 - 

FY 2023

• Finance

• Information Operations

• Acquisition

• Logistics Operations

USSGL at the 

Transaction Level

To reduce the material 

risks of procedural and 

posting logic deficiencies 

and achieve compliance 

with applicable accounting regulations, DLA will 

identify non-compliant 

areas with a financial impact in processes across 

the enterprise. 

This approach will 

include creating and 

updating policies, 

procedures and internal 

controls, as well as requesting the implementation of system changes 

to address underlying 

errors in the systemic 

posting logic.

FY 2022 - 

FY 2023

• Finance

• Information Operations

• Acquisition

• Logistics Operations
Section 1 | Management’s Discussion and Analysis (Unaudited)

39 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

Compliance with Laws and Regulations

Anti-Deficiency Act

The Anti-Deficiency Act (ADA) Title 31 U.S.C. §1341, prohibits 

Federal employees from obligating funds in excess of an 

appropriation or before funds are available, or from accepting 

voluntary services. As required by the ADA, DLA GF notifies 

all appropriate authorities of any potential ADA violations. At 

this time, there are no known or potential ADA violations for 

DLA GF.

The DLA GF has funds control policies to monitor and track 

commitments, expenditures, and obligations to ensure amounts 

do not exceed available authority, in compliance with the ADA. 

DLA GF is continuously evaluating the existing processes and 

controls to identify areas of improvement.

Digital Accountability 

and Transparency Act of 2014

The Digital Accountability and Transparency Act of 2014 

(DATA Act) expands the Federal Funding Accountability 

and Transparency Act of 2006 to increase accountability 

and transparency in Federal spending, making Federal 

expenditure information more accessible to the public. It 

directs the Federal Government to use government-wide data 

standards for developing and publishing reports and to make 

more information, including award-related data, available on 

USASpending.gov. The standards and data allow stakeholders 

to track Federal spending more effectively.

In accordance with OMB M-20-21, Implementation Guidance 

for Supplemental Funding Provided in Response to the 

Coronavirus Disease 2019, as implemented by Office of the 

Under Secretary of Defense (Comptroller) memorandum, 

Coronavirus Disease 2019 Disaster and Emergency Relief 

Accounting and Reporting Requirements, April 9, 2020, DLA 

has identified data elements in EBS, the accounting system 

of record, to address the COVID-19 reporting requirements. 

These include a fund code for new appropriations specific to 

funding for COVID-19, and the use of specific internal order 

numbers to track additional expenses resulting from COVID-19.

In FY 2021, DLA completed a comprehensive Data Quality 

Plan (DQP) in accordance with OMB Memorandum M-18-16, 

Appendix A to OMB Circular A-123, Management Reporting of 

Data and Data Integrity Risk. This plan leverages several wellestablished processes to monitor and improve procurement 

data quality and sets forth the DLA process for reviewing, 

monitoring, and reporting the required data, as well as how 

DLA will continue to improve the process. During FY 2021, 

DLA began implementation of its DQP and executed test plans 

to assess controls impacting data quality in the core financial 

system, EBS. 

The DLA is unable to provide assurance over compliance with 

the DATA Act.

Debt Collection Improvement Act of 1996

The Debt Collection Improvement Act of 1996 requires Federal 

Agencies to refer legally enforceable, past due, non-tax debts 

to the Secretary of the Treasury after 180 days. Section 5 of the 

Digital Accountability and Transparency Act of 2014 amended 

the Debt Collection Improvement Act of 1996 to reduce the 

time period to 120 days. 

Accordingly, at the end of each fiscal quarter, the Defense 

Finance and Accounting Service (DFAS) prepares the Treasury 

Report on Receivables (TROR) to notify the Secretary of the 

Treasury of receivables due from the public aged more than 

120 days.

In FY 2021, DLA GF had no delinquent debt to report to 

Treasury and noted no instances of noncompliance with the 

Debt Collections Improvement Act. 

Prompt Payment Act, 31 U.S.C. §§ 3901–

3907

In 1982, Congress enacted the Prompt Payment Act (PPA) to 

require Federal Agencies to pay their bills on a timely basis, to 

pay interest penalties when payments are made late, and to 

take discounts only when payments are made by the discount 

date. 

The DLA is unable to provide assurance over compliance with 

the PPA.
 Management’s Discussion and Analysis (Unaudited) | Section 1

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 40

Financial Systems

Financial Systems Strategy

The DLA Information Operations is DLA’s knowledge broker, 

providing comprehensive, best practice IT support to DoD/DLA 

Logistics Business Community. Information Operations provides 

dynamic information systems, customer support, efficient and 

economical computing, data management, electronic business, 

telecommunication services, key management, and secure 

voice systems for DoD and DLA. Although DLA is unable to 

provide assurance that the financial systems are in compliance 

with Federal system security and accounting requirements, 

DLA Information Operations endeavors to improve the control 

posture of systems and processes by testing and correcting 

deficiencies to ensure that DLA’s systems are compliant.

The DLA Information Operations continues to review audit 

findings from prior and current financial statement audits. 

DLA Information Operations works with DLA Finance and 

other business stakeholders to develop CAPs and resolve 

findings. Identified deficiencies are prioritized and aligned to 

the appropriate plans and system enhancements. In addition 

to identified audit findings, DLA Information Operations is 

working to become compliant with the Standard Financial 

Information Structure (SFIS) and Standard Line of Accounting 

(SLOA) in accordance with applicable Federal requirements. 

Improvements to general ledger posting logic to comply with 

the USSGL are also being implemented proactively to ensure 

all business events are mapped to the proper general ledger 

accounts. DLA Information Operations works with DLA Finance 

to build a roadmap for future financial system improvements 

based on budget availability, resource and system constraints. 

Government Charge Card Abuse 

Prevention Act of 2012

The Charge Card Abuse Prevention Act (Charge Card Act) 

requires Agencies to establish and maintain safeguards and 

internal controls for purchase cards, travel cards, integrated 

cards, and centrally billed accounts. Furthermore, the Charge 

Card Act requires Agencies to report purchase card violations, 

and the Inspector General to conduct periodic risk assessments 

of government charge card programs. DLA is unable to provide

assurance over compliance with the Charge Card Act but has

multiple layers of processes and controls in place to identify

fraudulent purchases. 

In order to mitigate the risk of fraud, DLA uses the DoD 

mandated Insight on Demand (IOD) system, which is an 

artificial intelligence data mining platform that automatically 

analyzes Government Purchase Card (GPC) data to identify 

and flag high risk transactions. Agency/Organization Program 

Coordinators (A/OPC) and Approving/Billing Officials (A/BO) 

review 100% of all flagged IOD data mining cases daily. A/OPCs 

complete a monthly checklist within IOD, which is a series of 

oversight questions related to appointment and training, and 

the Component Program Managers (CPMs) review the monthly 

A/OPC reports within IOD to include corrective actions taken 

for any identified non-compliance. A/OPCs complete a semiannual head of activity report within IOD that captures program 

oversight data, including the number of transactions flagged for 

review, findings, and corrective actions assigned. The A/OPCs 

brief their head of activity with the results. CPMs complete a 

semi-annual head of activity report within IOD that captures 

program oversight data at the Agency level and briefs to the 

Senior Procurement Executive.

In addition to IOD, DLA has processes in place for A/BOs, 

A/OPCs, and the CPMs to conduct transaction reviews and 

overall program compliance reviews in order to mitigate the 

risk of fraud and misuse. Major Subordinate Command (MSC) 

audit teams also conduct GPC reviews. As a result of IOD and 

DLA processes, transactions are reviewed by A/BOs, A/OPCs, 

and CPMs daily, monthly, semi-annually, and annually with 

corrective action assigned as appropriate.

Daily, management approves all requirements before the 

cardholder makes the purchase. A/BOs approve the use of the 

GPC as the method of payment and review 100% of purchases 

made by cardholders. The A/OPCs perform a monthly review 

over a minimum of 6.0% of all cardholder transactions, take 

corrective action and provide results to the CPM for review. 

The A/OPCs and CPMs also review all monthly statement 

approval and certifications to identify any A/BO violations of 

segregation of duty policies.

CPM also conducts an annual comprehensive program 

review of each DLA GPC Activity, which includes a random 

sampling of cardholder transactions, appointment and training 

documentation, and overall program oversight responsibilities. 

The CPM assigns corrective actions as appropriate and 

provides results to senior leadership.

During FY 2021, there were no instances of fraud identified as 

a result of reviews or audits.
Section 1 | Management’s Discussion and Analysis (Unaudited)

41 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

The financial systems strategy will support the overarching 

strategy of DLA to make an end-to-end process review 

aligned to financial statements line items with focus on risk 

and controls. DLA Information Operations will also continue 

to focus on remediating any issues associated with material 

weaknesses and DoD Chief Information Officer (CIO) priorities.

Effective April 1, 2020, DLA reduced onsite operations to 

emergency and mission-essential/critical personnel only 

(i.e., meaning only those employees who must be physically 

present to perform necessary functions) in response to the 

COVID-19 pandemic. While operating in an emergency status 

due to COVID-19 precautions, telework-ready personnel not 

required to be onsite are required to telework. DLA is working 

with the Defense Information Systems Agency (DISA) to 

ensure the sustainment of DLA mass telework capability and 

partnering with the DoD CIO, National Security Agency (NSA), 

and industry on a longer-term solution to provide the Secret 

Internet Protocol Router Network for teleworkers.

Financial Management Systems 

Framework

The DLA relies on the Enterprise Business System (EBS) as 

its accounting system of record to process, track and report 

all business transactions which impact DLA GF. The core of 

EBS is Systems Applications and Product’s (SAP) Enterprise 

Resource Planning Central Component (ECC) version 6.0. 

This is an on-premise, commercial off-the-shelf (COTS) 

software which has been configured to meet DLA’s business 

requirements. However, due to system limitations, accurate 

data is not always produced, and DLA is unable to provide 

assurance that the financial systems are in compliance with 

Federal system security and accounting requirements. There 

are numerous systems which interface with EBS. These 

include, but are not limited to, inventory and customer ordering 

systems including the Distribution Standard System (DSS), a 

legacy inventory warehouse management system and multiple 

DFAS systems, including the Defense Departmental Reporting 

System (DDRS), for the creation of financial statements, 

reports and Treasury cash management. DLA EBS has a 

single, enterprise general ledger which resides in SAP ECC 

6.0 and is used for all funds.

Future Financial Management 

Systems Framework

The DLA has begun migrating the existing SAP Enterprise 

Resource Planning (ERP) application environment to SAP’s 

Secure HANA Cloud (SHC) platform. DLA has also begun 

the process for migrating the core financial management 

system SAP ECC 6.0 to SAP S/4 HANA in SAP’s SHC. These 

migrations will provide an improved cyber security posture 

as well as enhanced capabilities for accounting and financial 

reporting and improved auditability. 

The DLA is in its first year of a two phased ERP Migration. 

Phase 1 is ERP Migration to Cloud (M2C) and during this phase 

all applications that are within the EBS accreditation boundary 

will be migrated to SAP’s Secure HANA Cloud platform. Phase 

1 is scheduled to be completed by February 2022. Phase 2 is 

ERP Migration to Standard (M2S) – SAP S/4HANA in SAP's 

SHC. Phase 2 has four sub-phases: Business Transformation 

Study (BTS), Business Process Engineering/Laws Regulations 

and Policy (BPR/LRP) Analysis, Requirements Development, 

and Execution.

The BTS was performed to identify opportunities to decustomize and adopt standard SAP S/4HANA capability. DLA 

will conduct BPR/LRP analysis to identify and challenge DoD 

LRPs that impede the ability to adopt standard capability. DLA 

will consider BPR to use standard capability to the maximum 

extent possible to reduce cost, streamline business processes 

to adopt industry best practices, and allow for better innovation 

going forward. Phase 2 is scheduled to be completed by the 

fourth quarter of FY 2027.

The DLA will also be implementing system changes to 

meet the requirements of Treasury’s G-Invoicing system. 

G-Invoicing will help address government-wide accounting 

elimination problems by ensuring trading partners have the 

same information for intragovernmental transactions. Federal 

Program Agencies (FPAs) will be required to use G-Invoicing to 

process intragovernmental buy/sell transactions. This process 

will remove the seller side over-write requirements and require 

trading partners to reconcile variances. The G-Invoicing 

required use date for FPAs for new orders has been delayed 

from June 2021. The mandated implementation deadline of 

October 2022 for new orders includes orders with a period of 

performance beginning October 1, 2022 or later. FPAs must 

implement G-Invoicing for “In-Flight” Orders by October 2023. 

The mandated implementation deadline of October 2023 for 

“In-Flight” orders includes the conversion of orders with an 

open balance and a period of performance extending beyond 

September 30, 2023.

The implementation of DoD SLOA will improve interoperability 

between DoD business systems and provide better end-toend funds traceability and eliminations reporting to enable 

successful audits in DoD.
 Management’s Discussion and Analysis (Unaudited) | Section 1

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 42

Forward-Looking Information

The following areas present insights into how the Agency 

shapes its programs and responds to challenges posed to DLA 

GF’s goals and missions.

An Ever-Changing Workforce

 

The DLA is a high-performing organization, and DLA’s 

workforce is its greatest asset. We must attract, develop, and 

retain a diverse, skilled and agile workforce. The eight People 

and Culture objectives are the strategies that will assist DLA 

in mitigating several significant external factors that will affect 

DLA and its workforce.

Changing demographics are the first significant external factor. 

There are different generations working side-by-side in the 

DLA workplace and DLA civilians are playing an increasingly 

critical role in supporting global DoD missions. These 

changing demographics will require continued assessment 

of DLA’s current human resources initiatives and new 

strategies to excel in areas such as recruitment, training and 

development, work-life balance, managing in a geographically 

dispersed environment while maintaining strong connections 

to DLA culture, knowledge transfer, leadership skills, labor 

management relations and a culture that fosters diversity, 

equity, inclusion and employee engagement.

Our economy is the second external factor that influences 

the Federal government’s ability to recruit top talent and 

retain its workforce. It is critical that DLA not only recruit and 

retain a diverse workforce, but also ensures the workforce 

has the critical skills necessary to operate in this constrained 

environment.

Technology is the third external factor. COVID-19 has 

accelerated the use of digital technology and has changed the 

way work is being performed. More work is being performed 

virtually than on site or in person. DLA developed a COVID-19 

Vaccine Questionnaire that will replace the manual email 

and spreadsheet tracking currently being performed. The 

Department of Defense expanded efforts to gather data as 

it relates to COVID-19 vaccinations to better focus vaccine 

supply availability. As a result, DLA would like to ascertain the 

percentage of the workforce that has been vaccinated against 

COVID-19. This information will be used to aid in distribution 

at locations with shortfalls and assist in prioritizing Agency/

DoD vaccination efforts. DLA must recruit, develop, and 

sustain a workforce that is technically proficient and agile to 

adopt emerging technologies, which requires innovative human 

capital management strategies.

The work environment is the last significant external factor to 

impact DLA’s workforce. DLA’s success as an organization 

is largely dependent on DLA’s ability to achieve a highperforming, results-driven culture and to sustain that culture in 

light of changes to demographics, economics, and technology. 

These factors will impact each segment of DLA, and DLA 

Human Resources must strategically partner with leadership 

and the workforce to carry out DLA’s mission. The use of 

change management techniques will assist in decreasing 

the uncertainty associated with changes as well as mitigate 

resistance to those changes.

The DLA has a critical mission to support the Military Services, 

Combatant Commands, and other Federal Agencies; that 

includes supporting our Nation’s response to COVID-19. The 

key to DLA’s success is its people, and while DLA will respond 

professionally and swiftly to mission requirements related to 

COVID-19, we will also take necessary steps to protect and 

inform our workforce. The workforce that has been designated 

as “mission-critical onsite,” must come into their respective 

workplace throughout the crisis to continue DLA’s vital work 

of supporting Warfighters and the whole-of-government 

response to the pandemic. This includes deploying overseas; 

executing our wholesale distribution operations; supporting 

our Disposition Services customers; enabling our Service 

customers at shipyards, readiness centers, and depots; keeping 

our installations safe and secure; performing necessary IT 

“touch labor”; issuing Common Access Cards (CACs) and 

fingerprinting new employees; performing classified work; 

and many other functions requiring physical presence. As 

an employer, DLA will follow DoD policies and guidelines in 

taking any actions to address or mitigate the threat posed by 

COVID-19. This includes disseminating official information by 

appropriate public or military health authorities, leveraging 

workplace policies and flexibilities designed to protect our 

workforce, and activating “continuity of operations” plans 

should it become necessary. In response to both Families First 

Coronavirus Response Act (FFCRA) and American Rescue 
Section 1 | Management’s Discussion and Analysis (Unaudited)

43 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

The DoD and the DLA share the responsibility for implementing 

effective ERM to maintain operational efficiency and to protect 

the achievement of mission. ERM is a strategic capability that 

enables DLA to effectively deal with uncertainty and associated 

risk and opportunity. It utilizes a forward-looking, missionoriented, and holistic approach to ERM that links risk to DLA’s 

strategy and objectives. ERM enables the identification of 

potential risks and subsequent responses to those risks. ERM 

enables DLA to more effectively manage enterprise risks, 

consider constraints and dependencies between key risks, 

while creating and preserving the value DLA contributes to 

the National Defense Strategy, National Defense Business 

Operations Plan, and DoD objectives. ERM and Internal 

Control are components of the governance framework.

The DLA’s culture of risk awareness continues to mature. 

Thorough risk assessments can identify, document, and 

communicate risk before it becomes an issue. Through ERM 

and Internal Control, DLA is taking a strategic approach to 

manage risk and drive DLA’s mission.

The DLA faces current and future cyber threats that must 

be countered in a sustained effort to secure and defend the 

Agency’s critical operational data, network, and business 

systems by applying key security principles, which include:

The DLA is providing support to the U.S. response to COVID-19 

in the areas of material support, planning, and acquisition 

and will continue to be a vital part of the worldwide logistics 

response. However, DLA is also a global enterprise, with 

resources and people around the world, both within and outside 

the Continental U.S. As such, DLA is tracking the virus and 

its impact to military operations and locations, as well as how 

communities are responding to the threat. DLA is fully engaged 

and monitoring COVID-19 changes from Occupational Safety 

and Health Administration (OSHA) and DoD as well as providing 

continual communication with employees through staff and site 

directors. DLA host site services are operating based on local 

and state guidance. DLA is continuing to monitor the readiness 

of first responders and documenting the execution of the 

risk manage process and risk acceptance at the appropriate 

leadership levels.

Plan (ARP), DLA added new leave codes so employees will 

be able to record excused absences for virus prevention or for 

care of self or family members with COVID-19. Each DLA major 

population center has its own plan for returning employees to 

the workplace, all based on common guidance for a conditionbased, deliberate, and safe return. Different locations will go 

through the various phases on different timelines accounting 

for local conditions. DLA is monitoring workforce availability 

and conducting site capability and capacity assessments. DLA 

will continue to encourage completion of COVID-19 worksite 

related trainings and to develop methods to effectively hire 

and onboard personnel with a plan for virtual training and 

orientation.

External Threats

 

In response to the President’s call for governmental reform 

and under the Direction of the Chief Management Officer, 

DoD is reviewing, changing, and setting up processes, where 

appropriate, to gain efficiencies and maximize savings to 

reinvest into service readiness. This is aligned to the LOE of 

Warfighter First.

The DoD as a whole faces numerous challenges – ranging 

from strategic competition and aggression from other nations 

and the threat of terrorism, to the concern of securing funding 

necessary to accomplish the mission. These threats directly 

affect DLA’s mission and goals. As the Nation’s Combat 

Logistics Support Agency, DLA monitors these external threats 

to ensure readiness and support of the Warfighter.

In addition, DLA continuously reviews its strategy to meet 

global mission requirements as prescribed by DoD. DLA 

developed a 2021-2026 Strategic Plan and amended the 

plan in April 2021 to meet the evolving requirements of the 

Warfighter and the nation with a targeted transformative 

approach encompassing the most critical priorities for the next 

five years. DLA’s Strategic Plan reaffirms and extends DLA’s 

commitment to Warfighter readiness and lethality and to selfaccountability. The plan describes five LOEs and three CCs 

that DLA leverages to provide global, end-to-end supply chain 

solutions: Warfighter Always, Support to the Nation, Trusted 

Mission Partners, Modernized Acquisition and Supply Chain 

Management, Future of Work, People and Culture, Fiscal 

Stewardship, and Digital-Business Transformation. Each LOE 

or CC has specific objectives. 

● Operations-level situational awareness;

● Layered perimeter defenses; 

● Least privilege for access to data and IT 

capabilities; and

● Physical or logical segmentation of networks, 

services, and applications.
 Management’s Discussion and Analysis (Unaudited) | Section 1

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 44

Technological Advancement and 

Initiatives

 

As part of the 2021-2026 Strategic Plan, DLA has the Digital-Business Transformation. Digital-Business Transformation 

focuses on IT and digital capability investments on key areas 

that will enable DLA to enhance performance, reduce costs, 

and make more predictive and data-driven decisions. This will 

transform systems and processes to improve transparency, 

reliability, and security for DLA’s employees, customers, and 

suppliers. DLA data assets include supply chain, acquisition, 

personnel, information management, and financial data, along 

with the infrastructure and exchanges that move it. Looking 

forward, effective data management will enable DLA to develop 

data and analysis as a service for its business users to facilitate access to it as well as data-driven decisions.

For technology, DLA Information Operations continuously 

evaluates the IT operating environment to identify potential 

opportunities to streamline and automate processes as well 

as ensure alignment with DoD and DLA Strategic Initiatives. 

One example of these types of efforts currently in process 

include increasing the use of cloud computing technologies 

and solutions. Many applications have already begun migration 

to cloud computing.

Finally, DLA provides Congressionally appropriated funding 

for the development of the Defense Agencies Initiative (DAI). 

The DAI mission is to deliver auditable, CFO Act compliant 

business environments for Defense Agencies. The goal is to 

provide accurate, timely, and authoritative financial data in 

support of DoD goals to standardize financial management 

practices, improve financial decision support, and support 

audit readiness. The DAI is a critical DoD effort to modernize 

the Defense Agencies’ financial management capabilities.

Finished Shelter

The first of five Alaska Medical Shelters awaits use after NMRTC employees raise the structure at the Navy’s 

medical clinic in Newport, Rhode Island, on July 7, 2020. The Defense Logistics Agency partnered with Air Force 

and Navy medical to provide shelters for COVID-19 screening at naval medical facilities in the Northeast. 

Photo By: Navy Lt. Lindsey Estey
Thunderbolt Maintenance ►

Air Force Airman 1st Class Zane Campbell performs routine 

maintenance on an A-10 Thunderbolt II at Nellis Air Force Base, 

Nevada., June 26, 2021.

 Photo Credit: Air Force Airman 1st Class Zachary Rufus

SECTION 2

Financial Section (Unaudited)

45

Section 2 | Financial Section (Unaudited)

47 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

SECTION 2

Air Force, Army Joint Petroleum Training

Senior Master Sgt. Paul Franklin, 302nd Logistics Readiness Squadron fuel shop noncommissioned 

officer in charge, prepares a group of 59th Quartermaster Company Army petroleum systems 

technicians to enter a C-130 aircraft Jan. 29, 2021, at Peterson Air Force Base, Colorado

 Photo Credit: Air Force Tech. Sgt. Justin Norton

In this section

48 Message from the Chief Financial Officer

49 Audit Reports

81 Management’s Response to Audit Reports

82 Introduction to the Principal Financial Statements

83 Principal Financial Statements (Unaudited)

87 Notes to the Principal Financial Statements (Unaudited)

115 Required Supplementary Information

Balance Sheets Statements of Net Cost

Statements of Changes 

in Net Position

Combined Statements 

of Budgetary Resources

83

85 86

84
Financial Section (Unaudited) | Section 2

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 48

Message from the Chief Financial Officer

I am proud to join the Director in issuing our Fiscal Year (FY) 2021 Agency Financial 

Report (AFR), the fifth Defense Logistics Agency (DLA) has issued since starting the 

financial statement audit process. DLA General Fund’s (GF) FY 2021 AFR highlights 

certain valuable insights into the overall financial operations, accomplishments, and 

challenges of the Agency, and this section of the AFR provides a comprehensive view 

of DLA GF financial activities. DLA remains committed to ensuring value, efficiency, 

and effectiveness, as well as ensuring outstanding stewardship to protect against fraud, 

waste, and abuse in every program we manage.

Although DLA received a Disclaimer of Opinion on the Agency’s GF financial statements, 

which denotes that the auditor conducted audit procedures but was unable to express an 

opinion on the financial statements, DLA continues to make tremendous strides. DLA’s 

continued efforts consist of establishing the framework to correct material weaknesses 

by reviewing and establishing end-to-end business processes, evaluating operational 

impacts on the financial statements, identifying the financial statement and financial reporting risks, and designing and 

implementing the appropriate controls to address those risks.

The DLA enterprise continues to document and evaluate critical processes, identify risks, and develop internal controls to 

address risks associated with reporting of financial information. Efforts include initiatives to improve budgeting, financial 

operations, and accounting to enhance the value provided to the Warfighter and our partners. DLA continues to focus efforts 

and resources towards improving the financial reporting data, upgrading financial and operational systems, concentrating 

remediation of Notice of Findings and Recommendations in areas with the greatest impact to DLA readiness and lethality, 

and improved financial data and internal controls with the goal of achieving an unmodified audit opinion. For DLA GF, we are 

enhancing our internal controls over operations, financial reporting, and financial systems.

As DLA continues to evolve in the audit process, we will continue to learn and use that knowledge to improve and protect 

our business processes, allowing us to maximize our resources in support of the Warfighter. One of our highest priorities 

is to provide enhanced financial management and strong governance in support of our goals to identify and address risks, 

successfully manage challenges including audit findings, and accomplish associated remediation actions necessary to address 

material weaknesses. Our commitment to fiscal stewardship is paramount in supporting the Warfighter and demonstrates 

prudent use of the American taxpayer funds entrusted to us.

WARFIGHTER ALWAYS!

J.ARTHUR HAGLER

Director, DLA Finance

Chief Financial Officer

November 2021 (GF) 
Section 2 | Financial Section (Unaudited)

49 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

Audit Reports

INSPECTOR GENERAL

DEPARTMENT OF DEFENSE

4800 MARK CENTER DRIVE

ALEXANDRIA, VIRGINIA 22350-1500

November 8, 2021

MEMORANDUM FOR UNDER SECRETARY OF DEFENSE (COMPTROLLER)/

CHIEF FINANCIAL OFFICER, DOD

DIRECTOR, DEFENSE LOGISTICS AGENCY

SUBJECT: Transmittal of the Independent Auditor’s Reports on the Defense Logistics 

Agency General Fund Financial Statements and Related Notes for FY 2021 and 

FY 2020 (Project No. D2021-D000FE-0057.000, Report No. DODIG-2022-031)

We contracted with the independent public accounting firm of Ernst & Young, LLP (EY),

to audit the Defense Logistics Agency (DLA) General Fund Financial Statements and 

related notes as of and for the fiscal years ended September 30, 2021, and 2020. The 

contract required EY 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 DLA’s financial management systems 

substantially complied with the requirements of the Federal Financial Management 

Improvement Act of 1996. The contract required EY 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 2018,

Volume 1 (Updated, April 2020), Volume 2 (Updated, March 2021), and Volume 3 

(Updated, September 2021). EY’s Independent Auditor’s Reports are attached.

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

appropriate audit evidence to support the reported amounts within the DLA General 

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

statements and related notes were presented fairly in accordance with Generally 

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

General Fund FY 2021 and FY 2020 Financial Statements and related notes. 

EY’s separate report, “Report of Independent Auditors on Internal Control Over 

Financial Reporting,” discusses seven material weaknesses related to the DLA’s internal 
Financial Section (Unaudited) | Section 2

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 50

controls over financial reporting.* Specifically, EY’s report concluded that the DLA did 

not design or implement effective internal controls to:

• value, record, and reconcile Property, Plant, and Equipment;

• reconcile Fund Balance With Treasury;

• record Accounts Receivable and revenue transactions properly;

• support Accounts Payable, expenses, and related budgetary balances;

• review inaccurate financial statement balances and footnote disclosures;

• document end-to-end business processes, monitor internal control risks, and 

remediate audit findings in a timely manner; and

• ensure the effective design and operation of financial reporting information 

systems.

EY’s additional report, “Report of Independent Auditors on Compliance and Other 

Matters,” discusses two instances of noncompliance with provisions of applicable laws 

and regulations, contracts, and grant agreements. Specifically, EY’s report describes 

instances in which the DLA’s financial management systems did not comply with the 

Federal Financial Management Improvement Act of 1996 and the Federal Managers’ 

Financial Integrity Act of 1982. 

In connection with the contract, we reviewed EY’s reports and related documentation 

and discussed them with EY’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 DLA General 

Fund FY 2021 and FY 2020 Financial Statements and related notes. Furthermore, we do 

not express conclusions on the effectiveness of internal control over financial reporting, 

on whether the DLA’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 EY did not comply, in all material respects, with GAGAS. 

 

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

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

material misstatement in the financial statements in a timely manner.
Section 2 | Financial Section (Unaudited)

51 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

EY is responsible for the attached November 8, 2021 reports, and the conclusions 

expressed within the reports. 

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

Attachments: 

As stated
Financial Section (Unaudited) | Section 2

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 52

A member firm of Ernst & Young Global Limited

2111-3902072

Ernst & Young LLP

1775 Tysons Blvd

Tysons, VA 22102

Tel: +1 703 747 1000

Fax: +1 703 747 0100

ey.com

Report of Independent Auditors

The Director of the Defense Logistics Agency and the

Inspector General of the Department of Defense

Report on the Financial Statements

We were engaged to audit the accompanying financial statements of the General Fund of the 

Defense Logistics Agency (DLA), which comprise the balance sheets as of September 30, 2021

and 2020, and the related statements of net cost and changes in net position and combined 

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

statements (the financial statements).

Management’s Responsibility for the Financial Statements

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

in conformity with U.S. generally accepted accounting principles; this includes the design, 

implementation and maintenance of internal control relevant to the preparation and fair 

presentation of the financial statements that are free of material misstatement, whether due to fraud 

or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on conducting the 

audit in accordance with auditing standards generally accepted in the United States of America, 

the standards applicable to financial audits contained in Government Auditing Standards, issued 

by the Comptroller General of the United States and the Office of Management and Budget

Bulletin No. 21-04, Audit Requirements for Federal Financial Statements. Because of the matters

described in the Basis for Disclaimer of Opinion paragraph, however, we were not able to obtain 

sufficient appropriate audit evidence to provide a basis for an audit opinion.

Departure from U.S. Generally Accepted Accounting Principles

As described in Note 1, DLA has not implemented certain accounting standards for the Department 

of Defense and the Federal Government. The effect of these matters on the financial statement 

amounts and related disclosures involved is not currently determinable by DLA and could be 

material.
Section 2 | Financial Section (Unaudited)

53 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

A member firm of Ernst & Young Global Limited

2111-3902072

Basis for Disclaimer of Opinion

DLA continues to have unresolved accounting issues and material weaknesses in internal controls 

that cause DLA to be unable to provide sufficient evidential support for complete and accurate 

financial statements on a timely basis. As a result, we cannot determine the effect of the lack of 

sufficient appropriate audit evidence on DLA’s financial statements as of and for the years ended 

September 30, 2021 and 2020.

Disclaimer of Opinion

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

paragraph, we have not been able to obtain sufficient appropriate audit evidence to provide a basis 

for an audit opinion. Accordingly, we do not express an opinion on these financial statements.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the 

Management’s Discussion and Analysis and Required Supplementary Information, as listed in the 

Table of Contents, be presented to supplement the financial statements. Such information, although 

not a part of the financial statements, is required by the Federal Accounting Standards Advisory 

Board who considers it to be an essential part of financial reporting for placing the financial 

statements in an appropriate operational, economic, or historical context. We were unable to apply

certain limited procedures to the required supplementary information in accordance with auditing 

standards generally accepted in the United States of America because of the significance of the 

matters described in the Basis for Disclaimer of Opinion paragraph. We do not express an opinion 

or provide any assurance on the information.

Other Information

We were engaged for the purpose of forming an opinion on the financial statements that 

collectively comprise DLA’s financial statements. The Other Information, as listed in the Table of 

Contents, is presented for purposes of additional analysis and is not a required part of the financial 

statements.

The Other Information has not been subjected to the auditing procedures applied in the engagement 

to perform an audit of the financial statements, and, accordingly, we do not express an opinion or 

provide any assurance on it.
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Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we also have issued our reports dated 

November 8, 2021, on our consideration of DLA’s internal control over financial reporting and on 

our tests of its compliance with certain provisions of laws, regulations, contracts, grant 

agreements and other matters. The purpose of those reports is solely to describe the scope of our 

testing of internal control over financial reporting and compliance and the results of that testing, 

and not to provide an opinion on the effectiveness of DLA’s internal control over financial 

reporting or on compliance. Those reports are an integral part of an engagement to perform an 

audit in accordance with Government Auditing Standards in considering DLA’s internal control 

over financial reporting and compliance.

November 8, 2021


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Ernst & Young LLP

1775 Tysons Blvd

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Report of Independent Auditors on Internal Control Over Financial Reporting 

Based on an Engagement to Audit the Financial Statements

Performed in Accordance with Government Auditing Standards

The Director of the Defense Logistics Agency and the

Inspector General of the Department of Defense

We were engaged to audit, in accordance with auditing standards generally accepted in the United 

States of America, the standards applicable to financial audits contained in Government Auditing

Standards issued by the Comptroller General of the United States and the Office of Management 

and Budget (OMB) Bulletin No. 21-04, Audit Requirements for Federal Financial Statements, the 

financial statements of the General Fund of the Defense Logistics Agency (DLA), which comprise 

the balance sheet as of September 30, 2021, and the related statement of net cost, statement of

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

and the related notes to the financial statements, and have issued our report thereon dated 

November 8, 2021. Our report disclaims an opinion on such financial statements because DLA 

was not able to provide sufficient appropriate audit evidence due to matters discussed further in 

the Basis for Disclaimer of Opinion paragraph.

Internal Control Over Financial Reporting

In connection with our engagement to audit the financial statements, we considered DLA’s internal 

control over financial reporting (internal control) as a basis for designing audit procedures that are 

appropriate in the circumstances for the purpose of expressing our opinion on the financial 

statements, but not for the purpose of expressing an opinion on the effectiveness of DLA’s internal 

control. Accordingly, we do not express an opinion on the effectiveness of DLA’s internal control.

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

Federal Managers’ Financial Integrity Act of 1982 (FMFIA), such as those controls relevant to 

preparing performance information ensuring efficient operations.

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

of this section and was not designed to identify all deficiencies in internal control that might be 

material weaknesses or significant deficiencies and therefore, material weaknesses or significant 

deficiencies may exist that have not been identified. However, as described below, we identified 

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

deficiencies.

A deficiency in internal control 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 such that there is a reasonable possibility that a 

material misstatement of the entity’s financial statements will not be prevented, or detected and 
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corrected, on a timely basis. We consider the deficiencies described below and in Appendix A as 

items I through VII to be material weaknesses.

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

less severe than a material weakness, yet important enough to merit attention by those charged 

with governance. We consider the deficiencies described below and in Appendix B as items I and 

II to be significant deficiencies.

Material Weaknesses

We identified the following matters involving internal control over financial reporting and its 

operation that we consider to be material weaknesses, as defined above:

I. Property, Plant and Equipment (PP&E) – PP&E includes internal use software (IUS) and 

construction-in-progress (CIP). DLA does not have policies, procedures and controls to 

identify and support the costs associated with the construction and completion of assets in 

order to properly value the assets and has weaknesses in the processes of maintaining and 

reconciling PP&E records. In addition, DLA does not have sufficient policies to account 

for leasing arrangements and whether the leasing arrangements should be accounted for as 

a capital or an operating lease. Therefore, DLA is unable to support the existence, 

completeness, rights and valuation of its PP&E. The combination of deficiencies in 

aggregate results in a material weakness in internal control related to PP&E. The matters 

identified related to PP&E are further described in Appendix A.

II. Fund Balance with Treasury (FBwT) – FBwT represents the aggregate amount of funds in 

DLA’s account with U.S. Treasury. DLA is unable to reconcile the FBwT ending balances 

from the general ledger directly to U.S. Treasury. DLA, in conjunction with Defense 

Finance and Accounting Services (DFAS), has implemented the Cash Management 

Reconciliation (CMR) and Department 97 Reconciliation and Reporting Tool (DRRT) 

processes as mechanisms to reconcile DLA’s general ledger to U.S. Treasury. However, 

these tools have known control deficiencies and reconciling issues. In addition, DLA does 

not have sufficient policies, procedures and internal controls in place for the end-to-end 

FBwT process. The combination of these deficiencies in aggregate results in a material 

weakness in internal control related to FBwT. The matters identified related to FBwT are 

further described in Appendix A.

III. Accounts Receivable (AR) and Revenue – AR consists of amounts owed to DLA primarily 

related to providing services to other federal agencies. Revenue is earned when DLA 

provides services to the public or other federal entities. DLA was unable to support the 

balances recorded as AR, properly identify valid unfilled customer orders and had not 

supported transactions recorded. In addition, DLA did not have adequate policies, 

procedures and controls to record AR and revenue transactions in the proper period and

accurately in accordance with U.S. generally accepted accounting principles (GAAP). The 
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combination of these deficiencies in aggregate results in a material weakness in internal 

control related to AR and revenue. The matters identified related to AR and revenue are 

further described in Appendix A.

IV. Accounts Payable (AP) and Expense – AP represents the amount owed to third parties by 

DLA for goods and services received. Expenses are incurred and recognized when DLA 

receives goods and services from the public or other federal entities. DLA was unable to 

support the AP balance, expenses and related budgetary balances. In addition, DLA did not 

have adequate policies, procedures and internal controls for the procure to pay process, 

including the process to create and approve obligations and the process to review, record 

and pay invoices. Furthermore, DLA lacked adequate procedures to record obligations and

accrue for liabilities incurred but not paid; to review and close invalid obligations; and it 

recorded transactions in the procure to pay process in incorrect periods. The combination 

of these deficiencies in aggregate results in a material weakness in internal control related 

to AP and expense. The matters identified related to AP and expense are further described 

in Appendix A.

V. Financial Reporting – Financial reporting encompasses all aspects of operations affecting 

DLA’s ability to produce reliable financial statements and disclosures. DLA’s financial 

statement preparation process lacks sufficient controls to review and identify inaccurate

balances within the financial statements and incomplete and inaccurate footnote 

disclosures. In addition, DLA lacks policies and procedures to validate account balances 

and monitor reporting variances between source systems, resulting in DLA recording 

unsupported journal vouchers (JV) to correct the variances. Furthermore, DLA is unable 

to provide detailed listings for budgetary accounts that reconcile to the general ledger. The 

combination of these deficiencies in aggregate results in a material weakness in internal 

control related to financial reporting. The matters identified related to financial reporting

are further described in Appendix A.

VI. Oversight and Monitoring – Oversight and monitoring relate to DLA’s lack of 

establishment and implementation of a sufficient enterprise-wide control environment as 

required by OMB Circular A-123, Management’s Responsibility for Enterprise Risk 

Management Internal Control. DLA does not have an effective OMB Circular A-123 

program, which impacted DLA’s ability to appropriately identify and address significant 

risks for all key business processes. DLA has not implemented appropriate internal 

controls, including the documentation of policies and procedures that describe DLA’s 

environment related to end-to-end business processes, monitoring of service providers, sub

allottees, related parties, systems, risks, controls and remediation of audit findings. In 

addition, DLA does not perform proper review of data/reports used in the execution of key 

controls. The combination of these deficiencies in aggregate results in a material weakness

in internal control related to oversight and monitoring. The matters identified related to 

oversight and monitoring are further described in Appendix A.
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VII. Information Systems – Our assessment of DLA’s information technology (IT) controls and 

the computing environment identified deficiencies which, collectively, constitute a 

material weakness in the design and operation of information systems controls over 

financial data. Based on our review, we have identified four areas of deficiency, which, 

when aggregated, result in a material weakness. The deficiencies relate to the following 

four areas:

• Access Controls

• Configuration Management

• Segregation of Duties Controls

• Security Management/Governance Over Implementation of Security Controls

The matters identified related to information systems are further described in Appendix A.

Significant Deficiencies

We identified the following matters involving internal control over financial reporting and its 

operation that we consider to be a significant deficiency, as defined above:

I. Environmental Liabilities (EL) – ELs are comprised of cleanup costs associated with the 

restoration of sites on real property that DLA manages. DLA lacks adequate policies, 

procedures and controls to validate its estimation methodology. The matters identified related 

to EL are further described in Appendix B.

II. Accounting for Long-Term Production Contracts – A long-term production contract is an 

agreement between two or more parties to produce goods, which is expected to be performed 

over a period of more than 12 months. The progress payment clause of the Federal 

Acquisition Regulation (FAR) allows the government to make payments to the contractor as 

work is performed. DLA lacks adequate policies, procedures and controls to record progress 

payments in accordance with GAAP. The matters identified related to accounting for longterm production contracts are further described in Appendix B.

Management’s Response to Findings

DLA’s response to the findings identified in our engagement, and relevant comments from DLA’s 

management are provided in their accompanying letter dated November 8, 2021. Management’s

response was not subjected to the auditing procedures applied in the engagement to audit the 

financial statements, and, accordingly, we express no opinion on it.
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Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control and the 

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

control. This report is an integral part of an engagement to perform an audit in accordance with 

Government Auditing Standards in considering the entity’s internal control. Accordingly, this 

communication is not suitable for any other purpose.

November 8, 2021

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Appendix A – Material Weaknesses

I. Property, Plant and Equipment

Property, Plant and Equipment (PP&E) is comprised of internal use software (IUS) and 

construction-in-progress (CIP). In accordance with FMFIA, management is responsible for 

establishing and maintaining effective controls to achieve proper accountability for property and 

other assets for which the agency is responsible. However, DLA was not able to support the 

existence, completeness, rights and obligations, or valuation of its PP&E.

A. Lack of or Inadequate Documentation of Accounting Policies and Procedures, Including 

Controls. PP&E process documentation, policy memoranda and standard operating 

procedures fail to document the end-to-end processing of PP&E transactions and related 

internal control activities. Specifically, a complete inventory of IUS and a reconciliation of 

CIP has not been performed. DLA is in the process of establishing or revising its policies and 

procedures for performing the inventories and reconciliations on an ongoing basis and 

transferring of CIP and IUS assets upon completion.

B. Lack of or Inadequate Documentation to Substantiate PP&E and PP&E-Related 

Transactions. DLA was unable to provide documentation that PP&E balances exist, that 

transactions occurred or that DLA has rights to the PP&E recorded in the financial statements. 

Specifically, documentation was not available to support:

• IUS. The existence and rights of completed IUS assets recorded on the financial statements. 

• CIP. The existence and completeness of CIP assets. 

C. Lack of or Inadequate Policies, Procedures and Controls Over PP&E Processes. DLA 

lacks or has inadequate policies, procedures and controls, including the design of controls over 

the following:

• Inadequately Designed Controls Over PP&E Processes. Controls that have been 

implemented are not designed adequately. For example, the information used in the control 

activity is not assessed for completeness and accuracy. In addition, sufficient 

documentation does not exist to evidence the performance of the control activities. As a 

result, DLA is unable to demonstrate that the control is operating effectively. 

• IUS. DLA policy states that IUS assets are recorded as in-service PP&E upon the 

completion of the asset. However, IUS activity is not evaluated to determine whether the 

activity should be capitalized or expensed and to identify when assets are completed and 

should be placed in service. 

D. Lack of Policies, Procedures and Controls to Effectively Implement Accounting 

Standards. DLA does not have policies, procedures and controls to effectively implement 

accounting standards, causing inaccurate presentation of PP&E on the balance sheet and in the 

related footnote disclosure. Specifically, DLA has neither implemented nor applied the 

accounting and valuation methodologies set forth by Statement of Federal Financial 
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Accounting Standards (SFFAS) No. 5, Accounting for Liabilities of the Government; SFFAS 

No. 6, Accounting for Property, Plant and Equipment; SFFAS No. 10, Accounting for Internal 

Use Software; and SFFAS No. 50, Establishing Opening Balances for Property, Plant and 

Equipment. For example:

• DLA is unable to support the values assigned to IUS in accordance with SFFAS No. 10. 

• DLA has not established a policy to account for its leasing arrangements, nor assessed 

whether the leasing arrangements should be accounted for as a capital or an operating lease. 

As a result, the financial statements do not include disclosures for DLA’s policy to account 

for lease arrangements, any operating lease commitments and future minimum payments 

due. 

Recommendations

Consider the following corrective actions related to the deficiencies identified above:

A. Lack of or Inadequate Documentation of Accounting Policies and Procedures, Including 

Controls. Document, update and finalize the process cycle memoranda (PCM) that document 

the end-to-end processes and controls for PP&E, including the transfer of CIP assets to the 

military services when they are placed into service. Complete the inventory of IUS and CIP to 

verify the existence and completeness of the accounting records. 

B. Lack of or Inadequate Documentation to Substantiate PP&E and PP&E-related 

Transactions.

• IUS. Develop documentation to substantiate that all of DLA’s IUS assets exist and that 

DLA has the rights to the assets. 

• CIP. Develop documentation to substantiate that all of DLA’s CIP assets exist and are 

recorded completely and accurately. 

C. Lack of or Inadequate Policies, Procedures and Controls Over PP&E Processes.

• Inadequately Designed Controls Over PP&E Processes. Design and implement internal 

control activities that include criteria, analyses, reviews and supporting thresholds used in 

the execution of all relevant internal controls. Specifically, evidential matter should be 

available to demonstrate that the control activity was performed; the scope of the review 

should be sufficient to identify and correct errors in the procedures performed; and the 

assessment of any variances should be performed appropriately.

• IUS. Design and implement policies and procedures that require IUS activity to be 

reviewed for proper capitalization, recorded in the appropriate period and classified 

appropriately when assets are completed and placed in service.
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D. Lack of Policies, Procedures and Controls to Effectively Implement Accounting 

Standards. Design policies, procedures and control to implement the appropriate accounting 

standards, specifically SFFAS No. 5, SFFAS No. 6, SFFAS No. 10 and SFFAS No. 50. The 

policies, procedures and controls should include:

• Assessing whether the values assigned to IUS assets are in accordance with SFFAS No. 10. 

In addition, evaluate alternative valuation methodologies available under SFFAS No. 50. 

SFFAS No. 50 permits the exclusion of IUS and IUS under development from the opening 

balance as of the opening balance date. 

• Establishing an accounting policy to identify and account for leasing arrangements, 

including whether the leases should be accounted for and reported as capital or operating 

leases in accordance with SFFAS No. 5 and SFFAS No. 6. In addition, include the required 

disclosures for capital and operating leases in the financial statements in accordance with 

OMB Circular A-136.

II. Fund Balance with Treasury

Fund Balance with Treasury (FBwT) represents the aggregate amount of funds in DLA’s account 

with U.S. Treasury. Treasury’s Financial Manual (TFM) Chapter 5100, Sections 5125 and 5130 

requires agencies to implement effective and efficient reconciliation processes and perform timely 

reconciliations. However, deficiencies exist related to DLA’s processes of recording and 

reconciling transactions involving FBwT. 

A. Lack of or Inadequate Documentation of FBwT Accounting Policies, Procedures and 

Controls. DLA has not documented the end-to-end process to account for, monitor and report 

FBwT and FBwT-related transactions. Documentation does not include the process to 

determine the amounts recorded in suspense accounts and research and resolve differences 

between U.S. Treasury, disbursing system records and accounting system records within a 

timely basis.

B. Lack of Controls for the Reconciliation of FBwT Between the General Ledger and the 

U.S. Treasury. DLA, in conjunction with DFAS, has implemented the CMR and DRRT 

processes as mechanisms to attempt to tie the general ledger to U.S. Treasury. However, the 

CMR and DRRT processes are not sufficient to produce a complete and accurate reconciliation 

of DLA’s general ledger to U.S. Treasury. As a result, DLA is unable to accurately reconcile 

to U.S. Treasury.
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Recommendations

Consider the following corrective actions related to the conditions described above:

A. Lack of or Inadequate Documentation of FBwT Accounting Policies, Procedures and 

Controls. Finalize the documentation of the end-to-end process for FBwT. The documentation 

should include the process to perform regular and recurring reconciliations of the suspense 

account data and the process to research and resolve differences between U.S. Treasury, 

disbursing system records and accounting system records within a timely basis.

B. Lack of Controls for the Reconciliation of FBwT Between the General Ledger and the

U.S. Treasury. In coordination with DFAS, obtain a system and organization controls (SOC) 

report for the CMR and DRRT and reconcile the transactions recorded in the general ledger to 

the transactions sent to the U.S. Treasury systems in order to verify that the data was processed 

correctly. 

III. Accounts Receivable and Revenue

Accounts receivable (AR) consists of amounts owed to DLA. Revenue is earned when DLA 

provides services to the public or other federal entities. AR and revenue fall within the scope of 

DLA’s order-to-cash process. In accordance with FMFIA, management is responsible for 

establishing and maintaining internal controls that provide reasonable assurance that revenues 

applicable to the agency’s operations are properly recorded and accounted for to permit the 

preparation of reliable financial reports and maintain accountability of assets. DLA has a 

significant volume of intra-governmental transactions in the order-to-cash process, which 

represent reimbursable agreements to provide services to its ultimate consumers. The volume of 

these transactions makes it critical for DLA to properly record and reconcile these transactions to 

ensure timely, appropriate recognition of costs to the end users. However, DLA is unable to support 

the existence of accounts receivable and unfilled customer orders and the occurrence of revenue 

transactions.

A. Lack of or Inadequate Documentation of AR and Revenue Accounting Policies, 

Procedures and Controls. DLA has not documented the end-to-end process to account for 

Unfilled Customer Orders (UCOs).

• UCOs. Documentation does not include the process to identify, research and resolve 

unreconciled amounts for UCOs and the process to review the validity of significantly aged 

UCOs in the general ledger despite being closed through other business processes and 

systems. 
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B. Lack of or Inadequate Documentation to Substantiate UCOs, AR and Revenue 

Transactions. DLA was unable to provide documentation that UCO and AR balances exist, 

revenue balances occurred and that transactions were recorded in the proper period. 

Specifically, documentation was not available to support:

• UCOs. The balance of UCO transactions is complete and accurate and reconciles to the 

general ledger.

• Revenue. Revenue transactions occurred and were recorded accurately and in the proper 

period. As a result, ten out of ten samples tested were not appropriately supported. 

• AR. Receivable balances are valid and have not been collected (i.e., existence and 

completeness). As a result, ten out of ten samples were not appropriately supported.

C. Lack of Policies, Procedures and Controls to Effectively Implement Accounting 

Standards. DLA does not have policies, procedures and controls to effectively implement 

accounting standards, causing inaccurate presentation of revenue on the statement of net cost 

and in the related footnote disclosure. Specifically, DLA does not assess the proper revenue 

recognition for services produced to order in accordance with SFFAS No. 7, Accounting for 

Revenue and Other Financing Sources and Concepts for Reconciling Budgetary and Financial 

Accounting.

Recommendations

Consider the following corrective actions related to the deficiencies identified above:

A. Lack of or Inadequate Documentation of Accounting Policies and Procedures, including 

Controls. Documentation should include the process to reconcile UCOs between the general 

ledger and sales legacy module completely, accurately and timely and the process to review 

the aged UCO balances for validity. 

B. Lack of or Inadequate Documentation to Substantiate UCOs, AR and Revenue 

Transactions. Develop documentation, including detailed listings of account balances, to 

substantiate that the balance of UCO, AR (federal and with the public) and revenue transactions 

are complete, accurate and recorded in the proper period and that the balances exist or have 

occurred. The listing should be reconciled to the general ledger. 

C. Lack of Policies, Procedures and Controls to Effectively Implement Accounting 

Standards. Design policies, procedures and control to implement the appropriate accounting 

standards, specifically SFFAS No. 7. The policies, procedures and controls should include 

assessing the method used to recognize revenue for specific services produced to order. 

Specifically, DLA should assess whether the percentage-of-completion method should be 

used, as prescribed by SFFAS No. 7. 
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IV. Accounts Payable and Expenses

Accounts payable (AP) consists of amounts owed to vendors. Expenses are incurred and 

recognized when DLA obtains goods and services from the public or other federal entities. 

Undelivered Orders (UDOs) represent the amount of goods and/or services ordered which have 

not been received. AP, expenses and UDOs fall within the scope of DLA’s procure-to-pay process. 

In accordance with FMFIA, management is responsible for establishing and maintaining internal 

controls that provide reasonable assurance that expenses and budgetary transactions applicable to 

the agency’s operations are properly recorded and accounted for to permit the preparation of 

reliable financial reports. Because of the nature of the operations, DLA has a significant volume 

of transactions to procure goods and services. Deficiencies exist in DLA’s processes for recording 

and supporting the accounts payable and accruals, expenses and related budgetary balances; 

recording obligations and accounts payable in the proper period; documenting policies, procedures 

and controls; and designing and executing controls over the processes to create and approve 

obligations and to review, record and pay invoices. 

A. Lack of or Inadequate Documentation of UDO, AP, Unliquidated Obligation (ULO) and 

Expenses Accounting Policies, Procedures and Controls. DLA has not documented the endto-end process to account for UDO, AP and expense transactions.

• UDO. The documentation does not include the process to review the validity of 

significantly aged UDO and UDO funded by expired and cancelling authority.

• AP. The documentation does not include the process to evaluate the validity of AP, 

including significantly aged AP and negative payables; the process to record invoices in 

the general ledger and submit to DFAS for payment timely; and the process to pay invoices 

timely or assess interest penalties for late payments in accordance with the Prompt Payment 

Act. 

• ULO. The documentation does not include the process to review the validity of 

significantly aged ULO.

B. Lack of or Inadequate Controls over UDO, AP, Expenses and Cash Disbursement 

Processes. DLA lacks or has inadequate controls, including the design of controls, over the 

following:

• UDO. DLA lacks controls to approve and record obligations in a timely manner; controls 

to record upward and downward adjustments to UDO accurately and timely; and controls 

to review and close invalid UDO in a timely manner. For example, two of our three samples 

lacked evidence to support that UDOs were reviewed after 90 days of inactivity.

Additionally, approximately $20.6M (or 5% of the total balance) in UDOs had no activity 

(payables, expenses and outlays) for at least two years, and approximately $7.7M (or 2% 

of the total balance) in UDOs have a fund cancellation date of FY 2021.

• Vendor Contracts. DLA lacks controls to execute contracts in accordance with the Federal 

Acquisition Regulation (FAR) and to record obligations timely for contracts, including 

Indefinite Quantity Contracts (IQC). For example, IQCs awarded did not have an 
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obligation recorded at the contract award date because the IQC did not have a guaranteed 

minimum at the contract award date.

• AP and Cash Disbursements. DLA lacks controls to post goods receipts in a timely 

manner; review invoices prior to payment and review payments that fail to post 

systematically in a timely manner. 

• Expenses Recorded in the Appropriate Period. DLA lacks controls to record expense 

transactions appropriately and accurately in the period that the transactions occurred. As a 

result, four instances in our sample of four expense transactions were recorded in the 

incorrect period. 

• Transactions Recorded at the Detailed Level. DLA lacks controls to comply with the 

Federal Financial Management Improvement Act (FFMIA), which requires transactions to 

be recorded at the detailed transaction level. DLA recorded transactions at a summary level 

for certain budgetary and proprietary accounts. As a result, each summary-level record 

contained multiple individual transactions. A reconciliation is not performed between 

detailed transactions posted to the proprietary accounts and the summarized postings to the 

corresponding budgetary accounts. 

C. Lack of or Inadequate Documentation to Substantiate AP and Expense Transactions. 

DLA was unable to provide documentation to support the existence of accounts payable 

balances, or expense transactions that occurred are accurately recorded in the financial 

statements. Specifically, documentation was not available to support the transactions and 

balances for various accounts, such as accounts payable, accounts payable from canceled 

appropriations, negative payables, UDO (paid and unpaid), and upward and downward 

adjustments to delivered and undelivered orders. For example, DLA was unable to support five 

samples of five to test the UDO balance brought forward.

D. Lack of Policies, Procedures and Controls to Effectively Implement Accounting 

Standards. DLA does not have policies, procedures and controls to effectively implement 

accounting standards. Specifically, DLA has not implemented or applied the accounting set 

forth by SFFAS No. 1, Accounting for Selected Assets and Liabilities, No. 4, Managerial Cost 

Accounting Standards and Concepts and No. 5, Accounting for Liabilities of the Federal 

Government. For example:

• DLA processes allow for payment without receipt, thus resulting in a negative payable 

balance. This occurs when payment is made prior to the goods receipts being posted in the 

general ledger, and it results in an understatement of expenses and payables and a 

misstatement of UDO. 

• Accounts payable and accrued liabilities are not recorded appropriately. For example, DLA 

applied the straight-line method to calculate the accrual amount but did not perform any 

assessment to determine whether this is an appropriate methodology. Particularly, for 

agreements that do not have a fixed monthly cost, the straight-line method is not 

appropriate. 
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Recommendations

Consider the following corrective actions related to the conditions described above:

A. Lack of or Inadequate Documentation of UDO, AP, ULO and Expenses Accounting 

Policies, Procedures and Controls. Update and finalize the PCMs that document the end-toend processes for UDO, AP, ULO and expenses.

• UDO. The documentation should include the processes to review the validity of 

significantly aged UDO and UDOs funded by expired and cancelling authority and include

a process to write off residual UDO for completed transactions. 

• AP. The documentation should include the process to evaluate the validity of accounts 

payable, including significantly aged AP and negative payables; the process to record 

invoices in the general ledger and submit to DFAS for payment timely; and the process to 

pay invoices timely or assess interest penalties for late payment in accordance with the 

Prompt Payment Act. 

• ULO. The documentation should include the process to review the validity of significantly 

aged ULO, including the process to write off residual ULO for completed transactions. 

B. Lack of or Inadequate Controls over UDO, AP, Expenses and Cash Disbursement 

Process

• UDO. Design and implement controls to approve and record obligations in a timely 

manner; controls to record upward and downward adjustments to UDO accurately and 

timely; and controls to review and close invalid UDOs in a timely manner. 

• Vendor Contracts. Design and implement controls to execute contracts in accordance 

with the FAR and record obligations timely for contracts, including IQCs. For example, 

controls that prevent contracts from being completed and executed without the appropriate 

terms and conditions required by the FAR.

• AP and Cash Disbursements. Design and implement controls to post goods receipts in a 

timely manner; review invoices prior to payment; and review payments, including 

payments that fail to post systematically, and ensure that they are posted in a timely 

manner. 

• Expenses Recorded in the Appropriate Period. Design and implement controls to record 

expense transactions appropriately and accurately and in the period that the transaction 

occurred, and controls to monitor expense transactions at or near period-end.

• Transactions Recorded at the Detailed Level. Design and implement controls to comply 

with the FFMIA and reconcile the transaction-level detail to the summarized postings in 

each account. 

C. Lack of or Inadequate Documentation to Substantiate AP and Expense Transactions. 

Develop documentation to support that AP and corresponding budgetary balances exist, or that 

expense transactions occurred and are accurately recorded in the financial statements.
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D. Lack of Policies, Procedures and Controls to Effectively Implement Accounting 

Standards. Design and implement policies and procedures to record expenses incurred in the 

proper period and classify costs and payables in accordance with SFFAS No. 1, No. 4 and 

No. 5. 

V. Financial Reporting

Financial reporting encompasses all aspects of operations affecting DLA’s ability to produce 

reliable financial statements and disclosures. This process starts with establishing an effective 

governance structure to identify and assess risk and continues with developing a control 

environment that is effective and efficient to manage identified risks. In accordance with FMFIA, 

management is responsible for establishing and maintaining internal controls to achieve reliable 

financial reporting. However, deficiencies exist in DLA’s processes related to the accumulation 

and presentation of financial position and results of operations. 

A. Lack of or Inadequate Documentation of Financial Reporting and Budgetary Processes. 

DLA has not completely documented the end-to-end processes related to funds management. 

For example, the documentation does not sufficiently include a description of the process to 

record budget authority, the transfer process or the Treasury warrant process. 

B. Lack of Controls Over Compliance with the TFM United States Standard General 

Ledger (USSGL). DLA does not have controls to configure the posting logic in the general 

ledger to be compliant with the USSGL and apply TFM updates timely, nor does it have 

controls to link business events to the correct posting logic. As a result, transactions are not 

recorded appropriately. For example, DLA inappropriately uses a general ledger account 

(negative payables) to track payments made without goods received and inappropriately 

combines entries to record the movement of budgetary funds through the apportionment and 

allotment process, which should be recorded separately. As a result, DLA did not implement 

the FY 2021 TFM update to add USSGL accounts 310710 – Unexpended Appropriations –

Used – Disbursed and 570010 – Expended Appropriations – Disbursed during FY 2021.

C. Lack of or Inadequate Controls Over Financial Reporting Processes. DLA lacks or has 

inadequate controls, including the design of controls, over the following:

• Beginning Balances for Budgetary Accounts. DLA does not have controls to verify the 

accuracy of the beginning balances for budgetary accounts, such as Total Actual Resources 

Collected. As a result, DLA is unable to substantiate beginning balances recorded on the 

financial statements. 

• Trading Partner Transactions. DLA does not have controls in place to validate and 

reconcile trading partner eliminations. Adjustments made to accounts receivable, accounts 

payable, revenue, expenses and undisbursed funds are not appropriately supported. A 

complete reconciliation is not performed at the agreement level to the trading partner 

adjustments that are being made. As a result, trading partner adjustments are recorded in 
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the Defense Departmental Reporting System (DDRS) as “top-side” adjustments and are 

identified as “unsupported” by DFAS.

• Contingent Liabilities. DLA does not have adequate controls to identify and account for 

contingent legal liabilities that should be recorded or disclosed in the financial statements. 

• Financial Statement Close Process. DLA does not have adequately designed controls 

around the annual close and reconciliation processes, such as the following: the monthly 

or quarterly reconciliation between the unadjusted trial balance (UTB) and the adjusted 

trial balance (ATB), including sub allottee balances, is not performed sufficiently and 

timely; the information used in the reconciliation of UTB to ATB is not complete and 

accurate; and the review of the procedures performed during the financial statement close 

process is not adequate. In addition, DLA has not designed processes or controls to 

implement new accounting standards. As a result, DLA has not implemented accounting 

standards such as SFFAS No. 47 Reporting Entity and SFFAS No. 49 Public-Private

Partnerships: Disclosure Requirements.

• Budgetary to Proprietary Tie Points. DLA does not have adequately designed controls 

around the tie-point process. There are reconciliation issues between the budgetary and 

proprietary tie points. As a result, DFAS records unsupported monthly and quarterly JV in 

the general ledger and DDRS to reconcile DLA’s budgetary accounts to the proprietary 

accounts.

• Monthly or Quarterly JV Adjustments. DLA does not have controls to review and 

approve JV adjustments recorded in the general ledger and DDRS by DLA and DFAS for 

completeness, accuracy and validity. As a result, a comprehensive listing of adjustments 

made is not maintained to allow DLA to determine the appropriateness of each JV 

adjustment, including those recorded by their service provider. 

• Financial Statement Review Process. The level of review of the financial statements and 

footnote disclosures was insufficient to detect and correct misstatements in the financial 

statements and related disclosures. As a result, inaccurate balances and disclosures were 

reported in the financial statements and notes. For example, line items are not appropriately 

classified between federal and with the public; supporting documentation did not support 

the balances recorded in the notes; and the financial statements are not prepared in 

conformity with U.S. GAAP as described in Note 1, Significant Accounting Policies, 

which did not sufficiently describe changes or noncompliance in U.S. GAAP reporting. 

• Transactions Recorded Using Elevated Privileges. DLA does not have adequately 

designed controls to review and approve transactions recorded with elevated access 

privileges. There were more than 74,000 transactions recorded, totaling approximately 

$575 million using user roles with elevated access privileges. 

• Receipt of Budgetary Funding. DLA does not have adequate controls to identify 

variances in the reconciliation of budgetary funding, including the reconciliation to the 

public law. 
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D. Lack of or Inadequate Documentation to Substantiate Budgetary Execution. DLA is 

unable to provide detailed listings for budgetary accounts at the purchase order (PO) or sales 

order (SO) level that reconcile to the general ledger, such as delivered and undelivered orders 

and unfilled customer orders. As such, the budgetary accounts are not appropriately supported.

Recommendations

Consider the following corrective actions related to the conditions described above:

A. Lack of or Inadequate Documentation of Financial Reporting and Budgetary Processes. 

Document the funds management process and controls to accurately reflect all aspects of the 

end-to-end budget to execute process, including processes and controls performed by DLA and 

service providers.

B. Lack of Controls Over Compliance with the TFM USSGL. Design and implement controls 

to configure posting logic to be compliant with the USSGL; apply TFM updates in a timely 

manner; link business events to the correct posting logic; and post transactions as intended. 

C. Lack of or Inadequate Controls Over Financial Reporting Processes.

• Beginning Balances for Budgetary Accounts. Design and implement control activities to 

accurately state the beginning balance for carryforward budgetary accounts.

• Trading Partner Transactions. Design and implement controls to perform a 

reconciliation at the agreement level to validate trading partner eliminations, which 

includes identifying, researching and resolving variances between DLA general ledger data 

and trading partners. 

• Contingent Liabilities. Design and implement controls related to claims and litigation to 

identify, estimate, record and disclose contingent liabilities in the financial statements.

• Financial Statement Close Process. Develop and implement controls around the annual 

close and reconciliation process, which includes a complete, accurate and timely 

reconciliation of the UTB to the ATB, including sub allottee balances, and processes and 

controls to analyze the impact of and implement new accounting standards, as appropriate.

• Budgetary to Proprietary Tie Points. Design and implement controls to reconcile 

budgetary to proprietary tie points and investigate variances.

• Monthly or Quarterly JV Adjustments. Design and implement controls to review and 

approve JV adjustments recorded in the general ledger and DDRS by DLA and DFAS for 

completeness, accuracy and validity prior to posting.

• Financial Statement Review Process. Design and implement controls to sufficiently 

review the quarterly and annual financial statements and disclosures; to detect and correct 

misstatements; and to review that the financial statements and disclosures are complete and 

prepared in accordance with U.S. GAAP. 
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• Transactions Recorded Using Elevated Privileges. Design and implement controls to 

review and approve transactions recorded with elevated access privileges to assess for 

completeness, accuracy and validity. The review and approval should be performed by 

authorized individuals, such as financial management.

• Receipt of Budgetary Funding. Design and implement controls to perform an adequate 

reconciliation of the amounts recorded in the general ledger to the Consolidated 

Appropriations Act and the final report on budget execution and budgetary resources.

D. Lack of or Inadequate Documentation to Substantiate Budgetary Execution. Develop and 

implement procedures to generate complete and accurate listings of budgetary accounts at the 

purchase order and sales order level that reconcile to the general ledger. 

VI.Oversight and Monitoring

Oversight and monitoring relate to DLA’s lack of establishment and implementation of a sufficient 

enterprise-wide control environment as required by OMB Circular A-123, Management’s 

Responsibility for Enterprise Risk Management Internal Control.

A. Lack of or Inadequate Documentation Around the OMB A-123 Program. DLA has not 

documented the end-to-end process to oversee and monitor the enterprise-level risks and 

controls, including the OMB A-123 program. Specifically, DLA has not performed and 

documented a sufficient risk assessment at the enterprise and business process level to assess 

and document reporting matters, such as the complexity of programs, accounting estimates, 

related-party transactions and the extent of manual processes; a complete and accurate 

population of its assessable units, business processes and relevant controls that are responsive 

to and mitigate risks, including fraud risks; and an assessment and plan for timely remediation 

of audit findings.

B. Lack of or Inadequate Controls Around System-Generated Reports. DLA lacks or has 

inadequate controls to verify the accuracy and completeness of system-generated reports 

required in the execution of controls. 

C. Insufficient Oversight and Monitoring of Third-Party Service Providers. Service 

organizations undergo examinations of internal controls over systems and processes supporting 

their customers. The results of these examinations are documented in SOC 1 reports and 

include the independent service auditor’s report, the service organization’s management 

assertions and identified Complementary User Entity Controls (CUECs) that users of the 

service organization (e.g., DLA and its sub allottees) should have in place to supplement the 

service organization’s internal controls. DLA does not perform sufficient oversight and 

monitoring of SOC 1 reports and does not sufficiently design, implement or monitor CUECs 

over its service providers.
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D. Insufficient Oversight and Monitoring of Funding and Transactions Executed by Others. 

Review controls are not designed effectively to monitor funding and report transactions 

executed by suballotees. Specifically, DLA does not perform a sufficient review of transactions 

that are recorded on their financial statements to prevent or detect misstatements. For example, 

the execution of funding awarded to grantees for the Procurement Technical Assistance Center 

(PTAC) program is not adequately monitored and inventory procured by Defense 

Microelectronic Activity (DMEA) with funding sub allotted from DLA is not properly 

reported. 

Recommendations

Consider the following corrective actions related to the conditions described above:

A. Lack of or Inadequate Documentation Around the OMB A-123 Program. Document the 

end-to-end process to oversee and monitor the enterprise-level risks and controls, including the 

OMB A-123 program. Perform and document a sufficient risk assessment at the enterprise and 

business process level to assess and document reporting matters. Document a complete and 

accurate population of its assessable units and business processes. Identify and assess the risks 

in each business process and design and implement relevant controls that are responsive to and 

mitigate these risks, including fraud risks. Perform an assessment of audit findings and 

establish and execute the plan to remediate the audit findings timely.

B. Lack of or Inadequate Controls Around System-Generated Reports. Design and 

implement controls to verify the accuracy and completeness around system-generated reports 

used in the execution of controls. For example, the procedures should include footing system 

generated reports; performing a tie-out of system generated reports to the general ledger 

system; verifying that the parameters used to generate the reports or data are appropriate; 

selecting a sample of transactions or balances in the report; and validating that the transactions 

are accurate.

C. Insufficient Oversight and Monitoring of Third-Party Service Providers. Design and 

implement controls around the SOC 1 review process and validate that CUECs are properly 

identified, designed and operating effectively.

D. Insufficient Oversight and Monitoring of Funding and Transactions Executed by Others. 

Design and implement internal controls to review transactions executed by others, but recorded 

in DLA’s financial statements, are complete and accurate, and are supported by appropriate 

documentation. 
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VII.Information Systems

Information systems controls are a critical component of the federal government’s operations to 

manage the integrity, confidentiality and reliability of its programs and activities and assist with 

reducing the risk of errors, fraud or other illegal acts. Information management security, access 

controls, segregation of duties, and configuration management controls are fundamental to the 

integrity of financial data and can help manage risks such as unauthorized access, changes to 

critical data, and prevent compromised data. The nature, size, and complexity of DLA’s operations 

require DLA to administer its programs under a decentralized business model by using numerous 

geographically dispersed operating locations and complex, extensive information systems.

We have noted progress in DLA’s ability to define the IT risks relevant to the financial statement 

audit, configuration changes to the entity level tool for managing approvals required for initial 

access to DLA financially significant systems, and monitoring of an IT service provider. However, 

several repeat control deficiencies in the design and operation of financially significant 

information systems controls continue to remain unresolved.

The deficiencies relate to the following areas:

• Access Controls

• Configuration Management

• Segregation of Duties Controls

• Security Management / Governance Over Implementation of Security Controls

Access Controls

Access controls include those related to protecting system boundaries, user identification and 

authentication, authorization, protecting sensitive system resources, audit and monitoring, and 

physical security. When properly implemented, access controls can help ensure that critical 

systems assets are physically safeguarded and that logical access to sensitive computer programs 

and data is granted to users only when authorized and appropriate. Weaknesses in such controls 

can compromise the integrity of sensitive data and increase the risk that such data may be 

inappropriately used and disclosed.

The identified access control weaknesses in aggregate represent a significant risk to the DLA 

financial statements, Information Technology (IT) environment, and financial applications. Absent 

or ineffective preventative controls and compensating detective controls expose financial systems 

and financial data to inappropriate access, unauthorized inputs, and inaccurate entries, resulting in 

significant risk to the financial statements.
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The identified access control weaknesses that represent a significant risk to the DLA financial 

management information systems environment include the following:

• For a selection of users of financially significant applications, access is not restricted to 

authorized users with a business need, is not reviewed and documented prior to provisioning, 

and is not assigned in accordance with the principle of least privilege.

• For a selection of account management controls for financially significant applications, user 

access and activity are not monitored and tracked for routine access recertification, revalidation 

of privileged access, and terminated or inactive users.

• For a selection of audit logging controls for financially significant applications, audit logs, 

security violations, and sensitive user activity are not tracked, monitored, resolved, or 

configured appropriately within systems. 

Configuration Management

Configuration management involves the identification and management of security features for all 

hardware and software components of an information system at a given point and systematically 

controls changes to that configuration during the system’s life cycle. By implementing 

configuration management controls, DLA can ensure that only authorized applications and 

software programs are placed into production through establishing and maintaining baseline 

configurations and monitoring changes to these configurations. Weaknesses in such controls can 

compromise the integrity of sensitive data and increase the risk that such data may be 

inappropriately used and disclosed.

The identified configuration management and change control weaknesses in aggregate represent a 

significant risk to the DLA financial statements, IT environment, and financial applications. 

Absent or ineffective controls expose financial systems and financial data to unexpected impact 

from changes, inappropriate or unauthorized changes, and application errors in production.

The identified change control weaknesses that represent a significant risk to the DLA financial 

management information systems environment include the following:

• For a selection of changes to one financially significant application, both routine and 

emergency changes are not reviewed, approved, and tested in a non-production environment 

prior to release. The impact and functionality of configuration changes are not assessed prior 

to implementation.

• For one financially significant application, system configurations, baseline code, and 

production environments are not monitored and inspected for unauthorized changes. 

• For one financially significant application, users have access privileges enabling them to 

bypass the configuration management process and make changes directly to production.
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Segregation of Duties Controls

An effective control environment guards against a particular user having incompatible functions 

within a system. Segregation of duties controls provide policies, procedures, and an organizational 

structure to prevent one or more individuals from controlling key aspects of computer-related 

operations and, thereby, conducting unauthorized actions or gaining unauthorized access to 

financial management information systems.

The identified segregation of duties and conflicting role weaknesses in aggregate represent a 

significant risk to the DLA financial statements, IT environment, and financial applications. 

Absent or ineffective controls around segregation of duties allow users to circumvent processes 

and automated controls in place, obtain unnecessary or elevated access, and impact the integrity 

of financial data.

The identified weaknesses that represent a significant risk to the DLA financial management 

information systems environment include the following:

• Segregation of duties within the user provisioning process is not completed consistently across 

the financially significant applications. Management does not identify segregation of duties 

conflicts that consider both IT and business process roles and activities. Conflicting roles are 

not inspected and rationalized prior to provisioning.

• Application program management has not completely identified sensitive (financial 

transactions) roles in order to identify and implement appropriate segregation of duties. 

Security Management/Governance Over Implementation of Security Controls

An entity-wide information security management and internal control program is the foundation 

of a security control structure to address security risks. The security management program should 

establish a framework and continuous cycle of activity for assessing risk, developing and 

implementing effective security procedures, and monitoring the effectiveness of these procedures. 

Without a well-designed program, security controls may be inadequate; responsibilities may be 

unclear, misunderstood, or improperly implemented; and controls may be inconsistently applied. 

Such conditions may lead to insufficient protection of sensitive or critical resources and 

disproportionately high expenditures for controls over low-risk resources.

The identified security management and governance weaknesses in aggregate represent a 

significant risk to the DLA financial statements, IT environment, and financial applications. 

Absent or ineffective controls around internal controls and governance compound data integrity 

risk by not monitoring third parties and not remediating known gaps timely.
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The identified security management control weakness represents a significant risk to the DLA 

financial management information systems environment:

• SOC 1 reports are not monitored and reviewed by DLA to assess CUECs, including validation 

of whether DLA management’s internal controls, relevant to the CUECs, are designed, 

implemented, and operating effectively.

Recommendations

Implement controls to address deficiencies in access controls, configuration management, 

segregation of duties and security management procedures to include:

Access and Segregation of Duties Controls

• Restrict access to authorized users in accordance with the least privilege principle. Review and 

approve all access, including justification of business needs.

• Routinely monitor and revalidate access needs for business users, privileged users, and inactive 

users. 

• Monitor user activity, identify and audit security violations, and assess privileged and sensitive 

users and transactions.

• Identify and document conflicting roles, enforce established segregation of duties processes, 

and assess conflicts during account provisioning and management. Segregate conflicting roles 

where possible, and if unavoidable, document business rationale and monitor user activity.

Configuration Management

• Review, approve, and test changes prior to implementation, to include user testing and 

functionality assessments. Monitor source code, configurations, and production environments 

for unauthorized changes. 

• Segregate conflicting roles between development and production environments.

Security Management/Governance over Implementation of Security Controls

• Establish a process to evaluate and incorporate service provider reports, findings, and controls 

into management’s security documentation, governance process, and application control 

environment.
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Appendix B – Significant Deficiency

I. Environmental Liabilities

ELs are comprised of cleanup costs associated with the restoration of sites that DLA manages. In 

accordance with FMFIA, management is responsible for establishing and maintaining internal 

controls to achieve reliable financial reporting. However, we identified the following deficiency 

in internal controls, which, when aggregated, we consider to be a significant deficiency. 

A. Inadequate Controls Over Estimation Processes. DLA does not have adequately designed 

controls around their analysis to retrospectively review the estimate, which includes comparing 

actual costs to estimates to validate the estimation methodology.

Recommendations

Consider the following corrective actions related to the deficiencies identified above:

A. Inadequate Controls Over Estimation Processes. Design and implement adequate controls 

to compare actual costs to estimates to see if any changes to the estimation methodology are 

necessary.

II. Accounting for Long-Term Production Contracts

Long-term production contracts consist of agreements between DLA and outside vendors to 

procure goods or services. In accordance with FMFIA, management is responsible for establishing 

and maintaining internal controls that provide reasonable assurance that significant classes of 

transactions, such as long-term production contracts, are properly recorded and accounted for to 

permit the preparation of reliable financial statements. However, we identified the following 

deficiency in internal controls, which we consider to be a significant deficiency.

A. Inadequate Controls Over Long-Term Production Contract. DLA does not have adequate 

controls to review payments made under long-term production contracts and assess the 

underlying business event to determine the proper accounting. As a result, transactions are not

recorded in accordance with GAAP.

Recommendations

Consider the following corrective actions related to the deficiencies identified above:

A. Inadequate Controls Over Long-Term Production Contracts. Design and implement 

controls to review the payments made under long-term production contracts and assess the 

underlying business event to determine that the accounting for these transactions is in 

accordance with GAAP.
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Report of Independent Auditors on Compliance and Other Matters

Based on an Engagement to Audit the Financial Statements Performed

in Accordance with Government Auditing Standards

The Director of the Defense Logistics Agency and the

Inspector General of the Department of Defense

We were engaged to audit, in accordance with auditing standards generally accepted in the United 

States of America, the standards applicable to financial audits contained in Government Auditing 

Standards, issued by the Comptroller General of the United States and the Office of Management 

and Budget (OMB) Bulletin No. 21-04, Audit Requirements for Federal Financial Statements, the 

financial statements of the General Fund of the Defense Logistics Agency (DLA), which comprise 

the balance sheet as of September 30, 2021, and the related statement of net cost, statement of 

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

and the related notes to the financial statements, and have issued our report thereon dated 

November 8, 2021. Our report disclaims an opinion on such financial statements because DLA 

was not able to provide sufficient appropriate audit evidence due to matters discussed further in 

the Basis for Disclaimer of Opinion paragraph.

Compliance and Other Matters

In connection with our engagement to audit the financial statements of DLA, we performed tests 

of its 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, as 

well as the requirements referred to in the Federal Financial Management Improvement Act of 

1996 (FFMIA) (P.L. 104-208). 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.

The results of our tests disclosed instances of noncompliance and other matters that are required 

to be reported under Government Auditing Standards and OMB Bulletin No. 21-04, as described 

below. Additionally, if the scope of our work had been sufficient to enable us to express an opinion 

on the financial statements, other instances of noncompliance or other matters may have been 

identified and reported herein.

Our Report on Internal Control Over Financial Reporting dated November 8, 2021, includes 

additional information related to the financial management systems and internal controls that were 

found not to comply with the requirements, relevant facts pertaining to the noncompliance, and 

our recommendations to the specific issues presented.
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As referenced in the Fiscal Year (FY) 2021 DLA Statement of Assurance, DLA provides no 

assurance that the internal controls over operations, financial systems, reporting and compliance 

are operating effectively in compliance with the Federal Managers’ Financial Integrity Act 

(FMFIA), Section 4; FFMIA of 1996, Section 803; and OMB Circular No. A-123.

FFMIA

Under FFMIA, we are required to report whether DLA’s financial management systems 

substantially comply with federal financial management system requirements, applicable federal 

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

level. To meet this requirement, we performed tests of compliance with FFMIA Section 803(a) 

requirements. The results of the tests disclosed instances in which DLA’s financial management 

systems did not substantially comply with federal financial management system requirements, 

applicable federal accounting standards or the USSGL.

(a) Federal financial management system requirements

EY identified as part of the Financial Information Systems material weakness, contained in the 

Report on Internal Control Over Financial Reporting, noncompliance with federal financial 

management system requirements for multiple systems. Weaknesses identified include those 

associated with user access, configuration management/change controls, segregation of duties and

security management. These financial system deficiencies prevent DLA from being compliant 

with federal financial management system requirements and inhibit DLA’s ability to prepare 

complete and accurate financial reporting.

(b) Noncompliance with applicable federal accounting standards

As referenced in Note 1 to the financial statements, DLA self-identified that the design of their 

financial and nonfinancial systems does not allow DLA to comply with applicable federal 

accounting standards, including not being able to collect and record financial information as 

required by U.S. generally accepted accounting principles. EY also identified noncompliance with 

federal accounting standards during our testing, which was included in our Report on Internal 

Control Over Financial Reporting.

(c) Noncompliance with USSGL posting logic at the transaction level

EY also identified noncompliance with USSGL posting logic during our testing, which was

included in our Report on Internal Control Over Financial Reporting.

FMFIA

Federal Managers’ Financial Integrity Act (FMFIA) of 1982 requires federal entities to establish 

internal controls, perform ongoing evaluations of the adequacy of the entity’s system of internal 

control, and prepare related reports. The Government Accountability Office’s (GAO’s) Standards 
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for Internal Control in the Federal Government (commonly referred to as the “GAO Green Book”) 

issued under the authority of FMFIA, establishes five components of internal control: Control 

Environment, Risk Assessment, Control Activities, Information and Communication and 

Monitoring. To determine if an entity’s internal control system is effective, the Green Book 

requires management to assess the design, implementation and operating effectiveness of the five 

components of the entity’s internal control system.

DLA has not yet implemented a formal internal control program that would allow it to substantially 

comply with FMFIA and the related GAO Green Book requirements, leading to inadequate control 

environment, risk assessment and monitoring processes.

DLA was not able to provide evidence that they are in compliance with significant aspects of OMB 

Circular A-123, which implemented FMFIA. DLA provided a FY 2021 Statement of Assurance, 

however there was not sufficient evidence that DLA fully completed an organizational risk 

assessment, identified relevant risks related to the financial statement assertions, documented the 

internal control standards as it relates to those assertions, performed internal control testing, and 

reported and tracked control deficiencies at the control level for each process identified. DLA 

provided evidence demonstrating that DLA has started to implement a testing strategy, however,

DLA is unable to provide evidence that the extent of testing and review performed is sufficient to 

meet the requirements of FMFIA.

Management’s Response to Findings

DLA’s response to the findings identified in our engagement and relevant comments from DLA’s 

management responsible for addressing the noncompliance are provided in the accompanying

letter dated November 8, 2021. Management’s response was not subjected to the auditing 

procedures applied in the engagement to audit the financial statements and, accordingly, we 

express no opinion on it.

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of compliance and the 

results of that testing, and not to provide an opinion on the entity’s compliance. This report is an 

integral part of an engagement to perform an audit performed in accordance with Government 

Auditing Standards in considering the entity’s compliance. Accordingly, this communication is 

not suitable for any other purpose.

November 8, 2021


Section 2 | Financial Section (Unaudited)

81 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

Management’s Response to Audit Reports
Financial Section (Unaudited) | Section 2

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 82

Card Scan

An Army soldier assigned to the 

44th Infantry Brigade Combat Team, 

New Jersey Army National Guard, 

scans an individual’s COVID-19 

vaccination card at the newly 

opened COVID-19 vaccination 

mega-site at the New Jersey 

Convention and Exposition Center, 

Edison, N.J., Jan 15, 2021. Photo 

Credit: Mark C. Olsen, New Jersey 

National Guard

Introduction to the Principal Financial Statements

The principal financial statements and the accompanying notes 

(financial statements) included in this report are prepared 

pursuant to the requirements of the CFO Act of 1990 (Pub. L. 

101-576) and expanded by GMRA (Pub. L. 103-356) and other 

applicable legislation. Other reporting requirements include the 

OMB Circular A-136, as amended. The responsibility for the 

integrity of the financial information included in these financial 

statements rests with the management of DLA GF. The IPA was 

engaged to perform the audit of DLA GF’s financial statements 

and disclaimed an opinion on these financial statements. The 

Audit Reports, and Management’s Response to the Audit 

Reports, accompany the unaudited financial statements.

The DLA GF financial statements consist of the following:

The Balance Sheets present those resources owned 

or managed by DLA GF that represent future economic 

benefits (assets), amounts owed by DLA GF that will 

require payments from those resources or future resources 

(liabilities), and residual amounts retained by DLA GF 

comprising the difference (net position) as of September 

30, 2021 and 2020. 

The Statements of Net Cost present the net cost of DLA 

GF operations for the years ended September 30, 2021 

and 2020. DLA GF’s net cost of operations is the gross 

cost incurred by DLA GF activities, less any exchange 

revenue earned and inter-entity eliminations from DLA GF 

activities. 

The Statements of Changes in Net Position present the 

change in DLA GF’s net position resulting from the net cost 

of DLA GF’s operations, budgetary financing sources, and 

other financing sources for the years ended September 30, 

2021 and 2020. 

The Combined Statements of Budgetary Resources 

present how and in what amounts budgetary resources 

were made available to DLA GF, the status of these 

resources, and the net outlays of budgetary resources for 

the years ended September 30, 2021 and 2020.

The Notes to the Principal Financial Statements provide 

detail and clarification for amounts in the principal financial 

statements.
Section 2 | Financial Section (Unaudited)

83 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

Defense Logistics Agency - General Fund

BALANCE SHEETS

As of September 30, 2021 and 2020

(dollars in thousands)

Unaudited

FY 2021

Unaudited 

FY 2020 

As Restated

ASSETS 

Intragovernmental

Fund Balance with Treasury (Note 2) $ 1,927,978 $ 1,600,757 

Accounts Receivable 13,554 23,821 

Total Intragovernmental Assets 1,941,532 1,624,578 

Other than Intragovernmental

Accounts Receivable 20 15 

Inventory and Related Property, Net 17,434 - 

General Property, Plant and Equipment (Note 3) 604,790 611,132 

Other Assets 88 88 

Total Other than Intragovernmental Assets 622,332 611,235 

TOTAL ASSETS $ 2,563,864 $ 2,235,813 

LIABILITIES (Note 4)

Intragovernmental

Accounts Payable $ 37,754 $ 21,158 

Other Liabilities (Note 5) 2,214 3,067 

Total Intragovernmental Liabilities 39,968 24,225 

Other than Intragovernmental

Accounts Payable 15,384 34,180 

Environmental and Disposal Liabilities (Note 6) 90,547 77,707 

Federal Employee Benefits Payable (Note 5) 9,017 9,103 

Advances from Others and Deferred Revenue 877 1,115 

Other Liabilities (Note 7) 3,733 2,624 

Total Other than Intragovernmental Liabilities 119,558 124,729 

TOTAL LIABILITIES 159,526 148,954 

Commitments and Contingencies

NET POSITION

Unexpended Appropriations - Funds from Other than Dedicated Collections 1,888,345 1,563,503 

Cumulative Results of Operations - Funds from Other than Dedicated Collections 515,993 523,356 

TOTAL NET POSITION 2,404,338 2,086,859 

TOTAL LIABILITIES AND NET POSITION $ 2,563,864 $ 2,235,813 

The accompanying notes are an integral part of these statements. 
Financial Section (Unaudited) | Section 2

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 84

Defense Logistics Agency - General Fund

STATEMENTS OF NET COST

For the Years Ended September 30, 2021 and 2020 

(dollars in thousands)

Unaudited

FY 2021

Unaudited 

FY 2020 

As Restated

Operation and Maintenance

Gross Cost $ 475,734 $ 368,612 

Less: Earned Revenue (23,453) (32,341)

Net Cost 452,281 336,271 

Procurement

Gross Cost 2,263 5,765 

Less: Earned Revenue - - 

Net Cost 2,263 5,765 

Research, Development, Test & Evaluation

Gross Cost 373,452 367,428 

Less: Earned Revenue (51,441) (47,215)

Net Cost 322,011 320,213 

Family Housing and Military Construction

Gross Cost 10,273 13,182 

Less: Earned Revenue - - 

Net Cost 10,273 13,182 

Gross Cost 861,722 754,987 

Less: Earned Revenue (74,894) (79,556)

NET COST OF OPERATIONS $ 786,828 $ 675,431 

The accompanying notes are an integral part of these statements. 
Section 2 | Financial Section (Unaudited)

85 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

Defense Logistics Agency - General Fund

STATEMENTS OF CHANGES IN NET POSITION

For the Years Ended September 30, 2021 and 2020

(dollars in thousands)

The accompanying notes are an integral part of these statements. 

Unaudited

FY 2021

Unaudited 

FY 2020 

As Restated

Unexpended Appropriations

Beginning Balances $ 1,563,503 $ 1,361,054 

Appropriations Received 1,334,937 1,089,846 

Appropriations Transferred-in/out 8,561 7,435 

Other Adjustments (45,433) (32,867)

Appropriations Used (973,223) (861,965)

Change in Unexpended Appropriations 324,842 202,449 

Total Unexpended Appropriations: Ending Balance 1,888,345 1,563,503 

Cumulative Results of Operations

Beginning Balances 523,356 633,408 

Correction of Errors - 177,246 

Beginning Balances, as Adjusted 523,356 810,654 

Other Adjustments (544) (1,024)

Appropriations Used 973,223 861,965 

Transfers-in/out Without Reimbursement (195,928) (494,424)

Imputed Financing 2,714 2,323 

Other - 19,293 

Net Cost of Operations 786,828 675,431 

Net Change in Cumulative Results of Operations (7,363) (287,298)

Cumulative Results of Operations: Ending Balance 515,993 523,356 

TOTAL NET POSITION $ 2,404,338 $ 2,086,859 
Financial Section (Unaudited) | Section 2

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 86

Defense Logistics Agency - General Fund

COMBINED STATEMENTS OF BUDGETARY RESOURCES

For the Years Ended September 30, 2021 and 2020 

(dollars in thousands)

The accompanying notes are an integral part of these statements. 

Unaudited

FY 2021

Unaudited 

FY 2020

BUDGETARY RESOURCES

Unobligated Balance From Prior Year Budget Authority, Net $ 618,105 $ 432,305 

Appropriations 1,343,188 1,096,081 

Spending Authority From Offsetting Collections 105,115 77,247 

TOTAL BUDGETARY RESOURCES $ 2,066,408 $ 1,605,633 

STATUS OF BUDGETARY RESOURCES

Total New Obligations and Upward Adjustments $ 1,450,417 $ 989,892 

Unobligated Balance, End of Year:

Apportioned, Unexpired Accounts 548,000 503,770 

Unexpired Unobligated Balance, End of Year 548,000 503,770 

Expired Unobligated Balance, End of Year 67,991 111,971 

Total Unobligated Balance, End of Year 615,991 615,741 

TOTAL BUDGETARY RESOURCES $ 2,066,408 $ 1,605,633 

OUTLAYS, NET

Outlays, Net $ 970,299 $ 884,010 

AGENCY OUTLAYS, NET $ 970,299 $ 884,010 
Section 2 | Financial Section (Unaudited)

87 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

Notes to the Principal Financial Statements

(Unaudited)

Note 1: Summary of Significant Accounting Policies (Unaudited)

A. Reporting Entity

Created in 1961, DLA is a component of the U.S. DoD and 

reports to the Office of the Under Secretary of Defense for 

Acquisition and Sustainment through the Assistant Secretary of 

Defense for Sustainment. DLA provides materials and services 

to components of DoD (including the U.S. Army, Navy, and 

Air Force), other Federal Agencies, and public entities. DLA 

accomplishes its mission and goals through the operations of 

the DLA WCF, DLA GF, and DLA TF. These financial statements 

and accompanying notes herein only refer to the activities of 

DLA GF.

Congress annually appropriates DLA GF amounts to DLA, 

which also grants authority to the OUSD and its Components 

to obligate those funds to support mission requirements. In 

FY 2021 and FY 2020, DLA GF received four appropriations, 

which include O&M; RDT&E; PDW; and MILCON.

B. Basis of Presentation and Accounting

Basis of Presentation and Accounting: The 

DLA GF fiscal year ends September 30. The accompanying 

financial statements account for all resources for which DLA GF 

is responsible. These financial statements present the financial 

position, results of operations, changes in net position, and the 

combined budgetary resources of DLA GF, as required by the 

CFO Act of 1990, expanded by the GMRA of 1994, and other 

applicable legislation. The financial statements are prepared 

from the books and records of DLA GF activities in accordance 

with U.S. GAAP promulgated by the FASAB6 and presented in 

the format prescribed by the OMB Circular A-136, except as 

identified in Note 1.C., Departures from U.S. GAAP, and in the 

following paragraphs.

The DLA GF financial statements reflect both accrual and 

budgetary accounting transactions, except as identified in 

Note 1.C., Departures from U.S. GAAP. Under the accrual 

method of accounting, revenues are recognized when earned 

and expenses are recognized when incurred, without regard 

to the receipt or payment of cash. Budgetary accounting 

is based on concepts set forth by OMB Circular A-11, 

Preparation, Submission, and Execution of the Budget, as 

amended which provides instructions on budget execution. 

Budgetary accounting is designed to recognize the budgetary 

resources and the related status of those budgetary resources, 

including the obligation and outlay of funds according to 

legal requirements, which in many cases is made prior to 

the occurrence of an accrual- based transaction. Budgetary 

accounting is essential for compliance with legal constraints 

and controls over the use of Federal funds.

However, DLA GF is unable to fully prepare financial statements 

in conformity with and implement all elements of U.S. GAAP 

(refer to Note 1.C., Departures from U.S. GAAP), the form and 

content requirements for Federal government entities specified 

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

nonfinancial management processes and systems that support 

the financial statements. In addition, the financial management 

systems used by DLA GF are unable to meet all full accrual and 

budgetary accounting requirements as many of the financial 

and nonfinancial feeder systems and processes were not 

designed to collect and record financial information on the full 

accrual accounting basis as required by U.S. GAAP. These 

systems were designed to support reporting requirements for 

maintaining accountability over assets, reporting the status 

of Federal appropriations, and recording information on a 

budgetary basis, rather than preparing financial statements in 

accordance with U.S. GAAP.

Therefore, DLA GF is continuing the necessary actions required 

to bring its financial and nonfinancial systems and processes 

to generate financial statements and the accompanying notes 

in accordance with U.S. GAAP and in compliance with the 

reporting requirements of OMB Circular A-136. DLA is assessing 

financial feeder systems and processes and their conformance 

6 FASAB is the official body for setting accounting standards of the U.S. 

government
Financial Section (Unaudited) | Section 2

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 88

to existence, completeness, and accuracy requirements as 

required by U.S. GAAP and OMB Circular A-136. As DLA 

GF identifies non-conforming data issues, the Agency will 

continue to implement interim mitigation processes to address 

these limitations. In addition, DLA GF is remediating material 

weaknesses found in all end-to-end business process cycles 

pertaining to reconciliations and adequacy of the supporting 

documentation identified through audits and other compliance 

reporting.

Combined Statements of Budgetary 

Resources: The budgetary accounting concepts are recognized in the Combined Statements of Budgetary Resources. 

The Combined Statements of Budgetary Resources present: 

(1) budgetary resources for the fiscal year; (2) status of those 

budgetary resources (includes obligated7 amounts and unobligated8 amounts for the fiscal year); and (3) Outlays9, Net for 

the fiscal year, which is comprised of Outlays less Offsetting 

Receipts (cash transactions). DLA GF’s budgetary resources10

include unobligated balances of resources from prior years and 

new resources, consisting of appropriations and spending authority from offsetting collections.

Intragovernmental and Other than 

Intragovernmental Transactions:

Statement of Federal Financial Accounting Standards 

(SFFAS) 1, Accounting for Selected Assets and Liabilities, 

distinguishes between Intragovernmental and Other than 

Intragovernmental assets and liabilities. Intragovernmental 

assets and liabilities arise from transactions among Federal 

entities. Intragovernmental assets are claims other Federal 

entities owe to DLA GF. Intragovernmental liabilities are 

claims DLA GF owes to other Federal entities. Whereas 

Other than Intragovernmental assets and liabilities arise 

Same Day Service

Electronics Mechanic Leader Jason Kilmer repairs the transponder on an AH-64D Apache Attack Helicopter at 

Fort Drum, New York. Photo By: Michael Carson

7 Per OMB Circular A-11, Section 20, “ Obligation means a legally binding 

agreement that will result in outlays, immediately or in the future.”

8 Per OMB Circular A-11 , Section 20, “ Unobligated amount means the 

cumulative amount of budget authority that remains available for obligation 

under law in unexpired accounts. The term "expired balances available for 

adjustment ”only refers to unobligated amounts in expired accounts.”

9 Per OMB Circular A-11, Section 20, “ Outlay means a payment to liquidate 

an obligation (other than the repayment to the Treasury of debt principal)... 

Outlays are a measure of Government spending.”

10 Per OMB Circular A-11 , Section 20, " Budgetary resources are amounts 

available to incur obligations in a given year. Budgetary resources consist 

of new budget authority and unobligated balances of budget authority 

provided in previous years."
Section 2 | Financial Section (Unaudited)

89 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

from transactions with public entities. The term public entities 

encompass domestic and foreign persons and organizations 

outside the U.S. Government. Other than Intragovernmental 

assets are claims of DLA GF against public entities. Other than 

Intragovernmental liabilities are amounts that DLA GF owes 

to public entities. Currently, DLA GF is unable to accurately 

map its trading partners to separate Intragovernmental and 

Other than Intragovernmental transactions in accordance with 

Treasury Financial Manual (TFM), Volume I, Part 2,Central 

Accounting and Reporting, Chapter 4700, Federal Entity 

Reporting Requirements for the Financial Report of the United 

States Government.

The DLA GF engages in transactions with other DoD and 

Federal entities that generate inter-DoD and intragovernmental 

balances; however, DLA GF is unable to reconcile and resolve 

differences between balances and transactions with other DoD 

and Federal entities in accordance with OMB Circular A-136 

requirements and TFM 4700 guidance. The reconciliation 

process is not fully implemented.

(Refer to Note 1.C., Departures from U.S. GAAP, related 

to Intragovernmental/Intra-departmental and Other than 

Intragovernmental Transactions.)

Intra-departmental Transactions: DoD reporting 

entities reconcile with their trading partners at the detail transaction level. Detail transactions provide support for reported 

balances requiring elimination with trading partners. DLA 

GF is ultimately responsible for the accuracy of its trading 

partner data and initiating actions to reconcile balances with 

its trading partners; however, DLA GF is unable to resolve the 

reconciling differences in amounts reported for the buyer/seller 

transactions reciprocal category with ODOs. A DoD reporting 

entity unable to provide detail transactions at the appropriate 

time of the financial statement reporting cycle must adjust 

its balance to match the seller’s or buyer’s supportable data 

(refer to Note 1.C., Departures from U.S. GAAP, related 

to Intragovernmental/Intra-departmental and Other than 

Intragovernmental Transactions).

Inter-fund Transactions: Inter-fund transactions 

and balances among DLA GF appropriations are eliminated 

from the Balance Sheets, the Statements of Net Cost, and 

the Statements of Changes in Net Position. The Combined 

Statements of Budgetary Resources is presented on a 

combined basis in accordance with OMB Circular A-136; 

therefore, inter-fund transactions have not been eliminated from 

this statement. DLA GF presents the Statements of Net Cost 

C. Departures from U.S. GAAP

Financial management systems and operations continue to 

be evaluated and modified as DLA GF strives to remediate 

its material weaknesses and record and report its financial 

activity in accordance with U.S. GAAP. Therefore, DLA GF 

is determining the actions required to bring its financial and 

nonfinancial feeder systems and processes into compliance 

with U.S. GAAP. However, due to the financial management 

systems and operational limitations, the known departures 

from U.S. GAAP described below have been identified that 

impact DLA GF financial statements although other departures 

from U.S. GAAP may exist that have not been identified.

Definition of Reporting Entity: The DLA GF 

has not completed analyzing material applicable business 

relationships with other organizations to identify consolidation 

entities, disclosure entities, or related parties in accordance 

with SFFAS 47, Reporting Entity (effective FY 2018). As a 

result, DLA GF is unable to determine if there are consolidation 

entities that are required to be consolidated and disclosed in 

DLA GF financial statements or disclosure entities and related 

parties, where the nature and magnitude of such relationships, 

are required to be disclosed in a Disclosure Entities and 

Related Parties note to the financial statements.

based on appropriations rather than program costs, which is 

not in accordance with OMB Circular A-136 (refer to Note 1.C., 

Departures from U.S. GAAP, related to Intragovernmental/Intradepartmental and Other than Intragovernmental Transactions 

and Statements of Net Cost).

Classified Activities: 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.

Use of Estimates: The DLA GF management has made 

certain estimates and assumptions when reporting assets, 

liabilities, revenue, and expenses and disclosures in the notes. 

Uncertainties associated with these estimates exist and actual 

results may differ from these estimates; however, DLA GF’s 

estimates are based on historical experience, current events 

and other assumptions that are believed to be reasonable 

under the circumstances. Significant estimates reported in 

the financial statements include: (1) EL; (2) accounts payable 

accrual; (3) undelivered orders; and (4) Federal Employees’ 

Compensation Act (FECA) actuarial liability as of the date of 

these financial statements.
Financial Section (Unaudited) | Section 2

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 90

Statements of Net Cost: The DLA GF does not 

have policies and compliant processes in place to present 

its major program costs aligned with DLA GF mission and 

goals by responsibility segments in accordance with SFFAS 

4, Managerial Cost Accounting Concepts and Standards, and 

OMB Circular A-136.

Intragovernmental/Intra-departmental and 

Other than Intragovernmental Transactions 

(Note 1.B.): The DLA GF does not have compliant 

processes in place to properly report and distinguish between 

intragovernmental, intra- departmental, and Other than 

Intragovernmental transactions in accordance with SFFAS 1, 

Accounting for Selected Assets and Liabilities.

Inter-Entity Cost (Note 1.R.): The DLA GF does not 

have compliant processes in place to recognize all significant 

inter-entity costs related to inputs of its goods or services 

provided to entities for a fee or user charge in accordance with 

SFFAS 55, Amending Inter-Entity Cost Provisions (effective 

FY2019). Generally, the fees and user charges should recover 

the full costs of those goods and services. Thus, the cost of 

inter-entity goods or services needs to be recognized by the 

receiving entity in order to determine fees or user charges for 

goods and services sold.

Fund Balance with Treasury (Note 1.F. and 

Note 2): The DLA GF is not able to account for Fund Balance 

with Treasury in accordance with SFFAS 1, Accounting for 

Selected Assets and Liabilities, due to its inability to identify 

and reconcile the reported differences between DLA GF’s 

accounting system and Treasury. Monthly unsupported journal 

vouchers are made to adjust the Fund Balance with Treasury 

balances in DLA GF financial statements to match U.S. 

Treasury records.

Accounts Receivable, Revenue, and Unfilled 

Customer Orders (Notes 1.G. and 1.R., and 

Note 10): The DLA GF does not have policies and compliant 

processes in place to: (1) recognize revenue and record the 

related accounts receivable, net and unfilled customer order 

(UCO) balances from goods sold and services provided in 

the proper period; (2) identify, evaluate, record, and report an 

allowance for doubtful accounts related to intragovernmental 

receivables in accordance with SFFAS 1 and Technical Bulletin 

2020-1, Loss Allowance for Intragovernmental Receivables;

and (3) adjust revenue to the extent that realization of the 

full amount is not probable in accordance with SFFAS 1, 

Accounting for Selected Assets and Liabilities, and/or SFFAS 

7, Accounting for Revenue and Other Financing Sources and 

Concepts for Reconciling Budgetary and Financial Accounting.

Revenue Recognition Restatement: In FY 2021, DLA GF 

made adjustments to correct the error of recognizing revenue 

earned and not recognized in FY 2020 for services performed 

by the sub-allottee Defense Microelectronics Activity’s (DMEA). 

As such, DLA GF restated the FY 2020 balances reported in 

the prior year Balance Sheet, Statement of Net Cost, and 

Statement of Changes in Net Position to properly recognize 

the revenue from services provided in accordance with SFFAS 

7, Accounting for Revenue and Other Financial Sources and 

Concepts for Reconciling Budgetary and Financial Accounting

(refer to Note 10, Restatements of FY 2020 Balance Sheet, 

Statement of Net Cost, and Statement of Changes in Net 

Position).

Inventory and Related Property, Net (Note 

1.H.): The DLA GF does not have policies and compliant

processes in place to properly evaluate, record, and report

Inventory and Related Property, Net in accordance with SFFAS

3, Accounting for Inventory and Related Property. More 

specifically:

• DLA GF does not have proper policies and compliant 

processes to support the valuation of inventory; and

• DLA GF does not have proper policies and compliant 

processes to support when goods/services are received. 

General Property, Plant and Equipment, Net 

(Note 1.I.; Note 3; and Note 10): The DLA GF does 

not have policies and compliant processes in place to account 

for general property, plant and equipment (PP&E) at historical 

cost, in accordance with SFFAS 6, Accounting for Property, 

Plant, and Equipment, and SFFAS 10, Accounting for Internal 

Use Software. Supportable general PP&E beginning balances 

have not been established for Construction-in-Progress 

(CIP) and Internal Use Software (IUS) in Development using 

the alternative valuation methods permitted by SFFAS 50, 

Establishing Opening Balances for General Property, Plant, and 

Equipment (effective FY2017). In addition, DLA GF does not 

have compliant processes in place to account for impairment 

of facilities and equipment in accordance with SFFAS 44, 

Accounting for Impairment of General Property, Plant, and 

Equipment Remaining in Use. More specifically:

(continued on next page)
Section 2 | Financial Section (Unaudited)

91 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

without receipt, thus resulting in a negative payable. This 

occurs when a payment is made prior to the goods receipts 

being posted in DLA GF’s accounting system. This results in an 

understatement of current year expenses and payables, and 

an overstatement of UDOs;

Undelivered Orders: The DLA GF does not have sufficient 

policies and procedures in place to record obligations at the 

time contracts are awarded. In addition, DLA GF is unable to 

support the UDO balance in the accounting system; and

Right of Offsets: The DLA GF does not have policies and 

compliant procedures in place to evaluate whether a right of 

offsets exist within the contract agreements that will allow DLA 

to properly recognize assets and liabilities in accordance with 

Financial Accounting Standards Board Accounting Standards 

Codification 210.20, Balance Sheet-Off Setting, as prescribed 

by SFFAS 34, The Hierarchy of Generally Accepted Accounting 

Principles, Including the Application of Standards Issued by the 

Financial Accounting Standards Board.

Environmental and Disposal Liabilities 

(Note 1.M. and Note 6): The DLA GF does not 

have policies and compliant processes in place to reconcile 

asset listings for costs related to cleanup, asset closure, and 

asbestos associated with general PP&E, in accordance with 

SFFAS 5, Accounting for Liabilities of the Federal Government; 

SFFAS 6, Accounting for Property, Plant, and Equipment; and 

Federal Financial Accounting and Auditing Technical Release 

2, Determining Probable and Reasonably Estimable for 

Environmental Liabilities in the Federal Government.

Commitments and Contingencies (Note 1.K. 

and Note 6): The DLA GF did not complete its assessment 

of commitments and contingencies in accordance with SFFAS 

5, Accounting for Liabilities of The Federal Government, and 

SFFAS 12, Recognition of Contingent Liabilities Arising from 

Litigation: An Amendment of SFFAS 5, Accounting for Liabilities 

of the Federal Government.

Reconciliation of Net Cost to Net Outlays 

(Note 9): The DLA GF does not have an established policy 

for the reconciliation of net cost to net outlays in accordance with 

SFFAS 53, Budget and Accrual Reconciliation. DLA GF is also 

unable to fully prepare reconciliation of net cost to net outlays 

in conformity with U.S. GAAP due to limitations of financial and 

nonfinancial management processes and systems that support 

the underlying financial information. 

Construction-in-Progress Balances: The DLA GF does 

not have the proper policies and compliant processes to identify 

aged CIP balances in accordance with SFFAS 6, Accounting 

for Property, Plant, and Equipment;

Internal-Use Software in Development: The DLA GF 

does not have the proper policies and compliant processes 

to identify IUS in Development balances in accordance with 

SFFAS 10, Accounting for Internal Use Software;

Capitalization Thresholds: The DLA GF does not have 

policies and procedures to implement and consistently 

apply capitalization thresholds in accordance with SFFAS 6, 

Accounting for Property, Plant, and Equipment, and SFFAS 10, 

Accounting for Internal Use Software; and

Capitalization Cost Restatement: In FY 2021, DLA GF 

made adjustments to correct the error of recognizing capitalized 

cost as period costs related to MILCON CIP projects. The 

impact of these errors resulted in DLA GF’s Net Position 

and Transfers Out reported on the financial statements to be 

understated by $1.4 million and $179.2 million, respectively.As 

such, DLA GF restated the FY 2020 balances reported in the 

prior year Balance Sheet, Statement of Net Cost, and Statement 

of Changes in Net Position to properly recognize capitalize 

cost in accordance with SFFAS 6, Accounting for Property, 

Plant, and Equipment (refer to Note 10, Restatements of FY 

2020 Balance Sheet, Statement of Net Cost, and Statement of

Change in Net Position).

Leases (Note 1.J. and Note 3): The DLA GF does 

not have policies and compliant processes in place to identify, 

evaluate, record, and report capital and operating leases in 

accordance with SFFAS 5, Accounting for Liabilities of the 

Federal Government, SFFAS 6, Accounting for Property,

Plant, and Equipment, and SFFAS 10, Accounting for Internal 

Use Software. As such, DLA GF does not have any capital or 

operating leases reported or disclosed as of of September 30, 

2021 and 2020.

Accounts Payable, Expenses, and 

Undelivered Orders (UDO) (Notes 1.L. and 

1.S.; Notes 4; Note 7; and Note 8):

The DLA GF does not have policies and compliant processes in 

place to account for accounts payable, expense accruals, and 

the related UDOs in accordance with SFFAS 1, Accounting for 

Selected Assets and Liabilities, and SFFAS 5, Accounting for 

Liabilities of The Federal Government. More specifically:

Negative payable: The DLA GF processes allow for payment 
Financial Section (Unaudited) | Section 2

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 92

Public-Private Partnerships: The DLA GF has not 

completed analyzing all the applicable business relationships 

to determine if these arrangements or transactions indicate the 

existence of Public-Private Partnerships (P3) relationships, 

risk-sharing arrangements or transactions lasting more 

than five years between public and private sector entities, 

in accordance with SFFAS 49, Public-Private Partnerships: 

Disclosure Requirements (effective FY 2019). As a result, DLA 

GF is unable to determine the nature of such partnerships, if 

applicable, and related Federal funding amounts required to be 

disclosed in a P3 note to the financial statements.

D. Pronouncements Recently Issued but 

Not Yet Effective

FASAB has issued the following pronouncements that may affect 

future financial presentation, as well as financial management 

practices and operations of DLA GF upon implementation. DLA 

GF has not completed the process of evaluating the effects of 

adopting these pronouncements and is unable to determine the 

materiality of changes that adopting will have on its financial 

position, results of operations, changes in net position, and 

combined budgetary activity.

SFFAS 58, Deferral of the Effective Date of SFFAS 54, Leases, 

defers SFFAS 54, Leases: An Amendment of SFFAS 5, Accounting for Liabilities of the Federal Government, and SFFAS 

6, Accounting for Property, Plant, and Equipment, until FY2024; 

earlier implementation is not permitted. SFFAS 54, revised the 

current Federal financial reporting standards for lease accounting and requires that Federal lessees recognize a lease liability 

and a leased asset at the commencement of the lease term, 

unless it meets any of the scope exclusions or the definition/

criteria of short-term leases, or contracts or agreements that 

transfer ownership, or intragovernmental leases. SFFAS 57, 

Omnibus Amendments FY 2019, amends certain references to 

leases affected by SFFAS 54, as well as other minor changes 

in order to improve clarity of existing statements.

FASAB

Statement No SFFAS 54 SFFAS 57 (paragraphs 

3 – 8, 11, and 12)

FASAB 

Standard

Leases: An Amendment 

of SFFAS 5, Accounting 

for Liabilities of the Federal 

Government, and SFFAS 

6, Accounting of Property,

Plant, and Equipment

Omnibus 

Amendments 

FY 2019

Adoption 

Required in FY Deferred to FY2024 Effective FY 2024

E. Appropriations and Funding

The DLA GF receives allotted funding through the annual 

appropriations received by the OUSD(C). DoD’s annual 

appropriations are apportioned by OMB. Apportionment is part 

of the government-wide system for the administrative control of 

funds. Unless expressly exempted or automatically apportioned 

by OMB, all DoD appropriated, collected, and recovered 

resources require OMB approval through the apportionment/

reapportionment process before they are available for 

distribution and legal obligation by OUSD(C). Following the 

approval of apportionment/reapportionment requests by OMB, 

OUSD(C) allocates funds to the Military Services and ODOs. 

Funds distributed by OUSD(C) may be further subdivided 

through sub-allocation and sub-allotment to lower levels within 

the organizations or across organizations for execution. 

The DLA GF receives its budgetary resources through suballotments from OUSD(C). These sub-allotments received 

by the DLA GF annually are reported in the Statements of 

Budgetary Resources and included in the appropriations line 

as part of DLA GF’s budgetary resources. These budgetary 

resources provide the funding necessary to incur obligations, 

pay for goods and services, and are available for obligations 

based on the period of availability as described below. Any 

budgetary resources remaining at the end of the period 

of availability are held in ‘an expired status’ for five years. 

Existing obligated balances can be used to make payments, 

but unobligated balances are not available for new obligations. 

Budgetary resources, including any related obligations and 

payables, are cancelled at the end of the five-year expiration 

period.

O&M appropriation (funds available year(s): 

1 year) funds Administration and Service-Wide Activities 

such as DoD programs, DoD EBS, DLA HQ programs, and 

Environmental Programs. These programs are associated with 

DLA logistics mission as well as programs assigned to DLA 

GF from DoD for budget administration purposes. DLA GF 

functions as either the executive agent responsible for program 

oversight and policy guidance or the budget administrator 

responsible for administrative support for these programs.

Procurement Defense-Wide appropriation 

(funds available year (s): 3 years) funds mission 

essential equipment, including automated data processing, 

telecommunications equipment, and passenger carrying vehicles that afford a high degree of efficiency, effectiveness, and 

productivity in the accomplishment of DLA GF’s logistics mission.
Section 2 | Financial Section (Unaudited)

93 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

RDT&E appropriation (funds available year 

(s): 2 years) funds the development of major upgrades to 

increase the performance of existing systems, the purchase of 

test articles, and the developmental testing and/or initial operational testing and evaluation prior to system acceptance. 

In addition, the RDT&E appropriation develops, manages, and 

implements innovative microelectronic solutions to enhance 

DoD mission capabilities. These capabilities are leveraged to 

develop low-volume, high mix fabrication processes for stateof-the-art technologies that meet DoD’s performance and reliability needs for legacy microelectronics that are unavailable 

from commercial foundries. RDT&E also helps ensure that advanced logistics concepts and business processes are used to 

accomplish the Agency’s mission. The Logistics R&D program 

identifies the best commercial business practices and tailors 

them, as necessary, into the most effective business processes 

for DLA. The ManTech R&D program provides the critical link 

between invention and application. DLA sub-allots RDT&E authority to the DMEA.

Family Housing and Military Construction

Family Housing O&M appropriation (funds 

available year(s): 1 year) funds the routine O&M of 

24 MFH units. Routine operation and maintenance include 

management costs, utility costs and cyclical maintenance 

such as painting and renovations. Allocated funding for 

Family Housing ended in FY 2019, all remaining obligated 

and unobligated balances will be cancelled by FY 2025. 

MILCON appropriation (funds available 

year (s): 5 years) funds the construction of facilities 

that support DLA GF’s mission. These include DoD fuel 

infrastructure projects, and distribution and disposition 

facilities. DLA GF sub-allots MILCON authority to USACE 

and NAVFAC, which are DLA’s primary design and 

construction agents for the MILCON program.

F. Fund Balance with Treasury

The DLA GF does not maintain cash in a commercial bank, 

but rather in the U.S. Treasury. DLA GF’s FBwT includes the 

amount available for DLA GF to pay current liabilities and 

finance authorized purchases, except as restricted by law. The 

disbursing offices of DFAS, USACE, GSA, and the Department 

of State’s financial service centers process DLA GF’s cash 

collections, disbursements, and adjustments.

In recent years, DLA GF implemented U.S. Treasury Direct 

Disbursing (TDD), which provides DLA GF the capability to 

transmit directly from the accounting system to Treasury for 

disbursements. With the implementation of TDD, DLA GF has 

a unique accounting code, which allows DLA GF to properly 

identify the transactions.

On a monthly basis, DLA GF adjusts the FBwT account balance to bring the cash balance to be in agreement with the U.S. 

Treasury cash balance reported on the Central Accounting 

and Reporting System (CARS) using the Cash Management 

Report (CMR). The CMR provides a summary cash position 

for each ODO’s FBwT account by fiscal year and appropriation 

at the limit level. The adjustments represent the undistributed 

disbursements and collections amounts that have been reported to U.S. Treasury, but have not yet been posted to DLA GF’s 

accounting system. Undistributed amounts can be a result of 

timing, invalid line of accounting, invalid TAS information, and 

unsupported and unreconciled differences.

The DLA GF’s accounting service provider, DFAS, uses U.S. 

Treasury suspense accounts to hold transactions temporarily 

prior to identifying the correct appropriation. Suspense 

account items represent the amounts that are reported to 

Treasury at the Treasury Index (TI) Level (TI-17, TI-21, TI-57, 

TI-97), but have not yet been classified to a DLA GF TAS. 

The transactions in suspense accounts include unidentified 

collections, disbursements, and Intragovernmental Payment 

and Collection transactions at month end. DFAS researches 

suspense transactions in each TI to post them against the 

appropriate line of accounting. The current balances for 

DLA GF suspense transactions are derived from the DFAS 

Suspense Account Universe of Transactions (UoT). 

U.S. Treasury also compares DoD’s FBwT reported by DFAS 

with comparable data submitted by financial institutions 

and Treasury Regional Financial Centers and notifies DoD 

of differences in collection and disbursement data on the 

Statement of Differences (SOD) report. DFAS reviews the 

SOD report to research and resolve differences. The current 

balances for DLA GF SOD transactions are derived from 

DFAS management analysis and the SOD OuT.

(Refer to Note 1.C., Departures from U.S. GAAP, related to 

Fund Balance with Treasury, and Note 2, Fund Balance with 

Treasury.)
Financial Section (Unaudited) | Section 2

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 94

G. Accounts Receivable

Accounts receivable represents amounts due to DLA GF by 

other Federal Agencies (intragovernmental) and the public 

(other than intragovernmental). DLA GF’s accounts receivable 

arise from sales of materials and services.

The policy pertaining to allowance for doubtful accounts 

receivables other than intragovernmental is based on a 

systematic methodology of grouped aged receivables. DLA 

GF does not currently have material receivables other than 

intragovernmental and does not recognize a corresponding 

allowance for doubtful accounts. 

(Refer to Note 1.C., Departures from U.S. GAAP, related to 

Accounts Receivable, Net, Revenue, and Unfilled Customer 

Orders; Note 10, Restatements of FY 2020 Balance Sheet, 

Statement of Net Cost, and Statement of Changes in Net 

Position.)

H. Inventory and Related Property, Net

Inventory and Related Property, Net consist of the inventory 

work-in-process and includes the acquisition of equipment to 

support the Military Services program. As of September 30, 

2021 and 2020, the total inventory and related property, net 

were $17.4 million and $0.0 thousand, respectively (refer to 

Note 1.C., Departures from U.S. GAAP, related to Inventory 

and Related Property, Net).

I. General Property, Plant and Equipment, 

Net

The DLA GF PP&E consists of Real Property CIP and IUS 

under development. These PP&E categories are not subject 

to amortization or depreciation.

The DLA GF transfers the amounts in the CIP account to the 

DLA WCF upon project completion. DLA WCF will place assets 

in the appropriate PP&E account and transfer the asset to the 

military services. Due to identified deficiencies in policies and 

procedures related to CIP, DLA GF is not able to reconcile the 

recorded CIP balances.

The DLA GF has not yet finalized the valuation process for 

PP&E. Accordingly, DLA GF has not made an unreserved 

assertion that the opening balances of PP&E for FY 2021 are 

presented fairly in accordance with SFFAS 50, Establishing 

Opening Balances for General Property, Plant, and Equipment.

(Refer to Note 1.C., Departures from U.S. GAAP, related 

to General Property, Plant and Equipment, Net, and Note 

3, General Property, Plant and Equipment ; and Note 10, 

Restatements of FY 2020 Balance Sheet, Statement of Net 

Cost, and Statement of Changes in Net Position.)

J. Leases

As of the date of these financial statements, DLA GF has not 

completed the process of developing policies and procedures 

to identify, calculate, record and report capital and operating 

leases in accordance with SFFAS 5 Accounting for Liabilities 

of The Federal Government, and SFFAS 6, Accounting for 

Property, Plant, and Equipment (refer to Note 1.C., Departures 

from U.S. GAAP, related to Leases).

K. Commitments and Contingencies

In accordance with SFFAS 5, Accounting for Liabilities of the 

Federal Government, as amended by SFFAS 12, Recognition 

of Contingent Liabilities Arising from Litigation: An Amendment 

of SFFAS 5, Accounting for Liabilities of the Federal 

Government, DLA GF recognizes contingent liabilities in DLA 

GF’s Balance Sheets and Statements of Net Cost when the 

loss is determined to be probable and reasonably estimable. 

In the event of an adverse judgment against the Government, 

some of the liabilities may be payable from the U.S. Treasury. 

DLA GF evaluates all contingent liabilities based on three 

criteria: probable, reasonably possible, and remote.

The DLA GF recognizes that the estimated liability may be a 

specific amount or a range of amounts. If some amount within 

the range is a better estimate than any other amount within the 

range, that amount is recorded. If no amount within the range is 

a better estimate than any other amount, the minimum amount 

of the range is recorded and the range and a description of the 

nature of the contingency are disclosed.

The DLA GF records an accrual for contingent liabilities 

if it is probable and reasonably estimable and discloses 

those contingencies that are reasonably possible in Note 

6, Environmental and Disposal Liabilities, of the financial 

statements. DLA GF does not disclose or record contingent 

liabilities when the loss is considered remote.

As of the date of these financial statements, DLA GF had no 

Commitments and Contingencies that were reasonably possible 

(continued on next page)
Section 2 | Financial Section (Unaudited)

95 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

and 3 matters identified as remote. The related probable 

contingent liabilities related to EL have been recognized in the 

financial statements as of September 30, 2021 and 2020.

For matters where DLA Counsel is unable to express an opinion 

regarding the likely outcome of the case and an estimate of 

the potential liability cannot be made, the total amount claimed 

against the government is classified as “Reasonably Possible” 

and disclosed if available.

(Refer to Note 1.C., Departures from U.S. GAAP, related to 

Environmental and Disposal Liabilities and Commitments 

and Contingencies, and Note 6, Environmental and Disposal 

Liabilities.)

L. Liabilities

Liabilities represent probable and measurable future outflows 

of resources as a result of past transactions or events and are 

recognized when incurred, regardless of whether there are 

budgetary resources available to pay the liabilities. However, 

liabilities cannot be liquidated without legislation providing 

resources and legal authority.

Liabilities Covered and Not Covered by 

Budgetary Resources: Liabilities covered by budgetary resources include those liabilities for which Congress appropriated funds and are otherwise available to pay amounts 

due as of the Balance Sheet dates. Liabilities Not Covered by 

Budgetary Resources are liabilities that will require budgetary 

resources and are amounts owed in excess of available, congressionally appropriated funds. Therefore, no budgetary resources are available to pay amounts due as of the Balance 

Sheet dates but will require future funding to liquidate the obligation (refer to Note 4, Liabilities Not Covered by Budgetary 

Resources).

Current and Noncurrent Liabilities: The DLA GF 

discloses its other liabilities between current and noncurrent 

liabilities in accordance with SFFAS 1, Accounting for Selected 

Assets and Liabilities. Current liabilities represent liabilities 

that DLA GF expects to settle within 12 months of the Balance 

Sheet dates. Noncurrent liabilities represent liabilities that 

DLA GF does not expect to be settled within 12 months of the 

Balance Sheet dates (refer to Note 7, Other Liabilities).

Accounts Payable: Accounts Payable includes amounts 

owed but not yet paid to Intragovernmental and Other than 

Intragovernmental entities for goods and services received by 

DLA GF. DLA GF estimates and records accruals when services 

and goods are performed or received (i.e., Mechanization of 

Contract Administration Services (MOCAS) accrual related 

to contract financing and Negative Payable Accrual to adjust 

the timing issues that exist within EBS when an invoice is 

received and posted without a goods receipt). DLA GF also 

accrues liabilities incurred at month-end but not yet recorded 

using data from Third Party Payment Systems, GPC, various 

feeder systems, and estimates of costs incurred when goods 

or services received but not invoiced. For Accounts Payable 

associated with cancelling appropriations, the cancelled 

payable is re-established after funding expired and are no 

longer available to liquidate obligations. The payments for the 

cancelled payable will be disbursed using current available 

funding (refer to Note 4, Liabilities Not Covered by Budgetary 

Resources).

Advances from Others and Deferred 

Revenue: Advances from Others and Deferred Revenue 

are cash received in advance of goods or services that have 

not been fully rendered. 

(Refer to Note 1.C., Departures from U.S. GAAP, related to 

Accounts Payable, Expenses and Undelivered Orders).

M. Environmental and Disposal Liabilities

EL are a probable and reasonably estimable future outflow 

or expenditure of resources that exists as of the financial 

reporting date for environmental cleanup costs resulting from 

past transactions or events.

The DLA GF is responsible for accurate reporting of the EL 

and expense for the real property and/or equipment that 

it records and reports in its financial statements as assets, 

regardless of ownership by any Federal Agency. DLA GF 

identifies and estimates accrued EL through its annual costto-complete (CTC) process. DLA GF accrued EL comprises 

of environmental cleanup costs associated with restoration 

of environmental sites on real property that it does not own 

but has received appropriated funds to execute and manage. 

These environmental sites may include, but are not limited 

to, decontamination, decommissioning, site restoration, site 

monitoring, clean closure of assets, and post-closure costs 

related to the Agency’s operations that result in hazardous 

waste. Due to noted deficiencies, DLA GF is not able to 

reconcile the population of real property assets that encompass 

the environmental sites closure and asbestos liabilities. 
Financial Section (Unaudited) | Section 2

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 96

(Refer to Note 1.C., Departures from U.S. GAAP, related to 

Environmental and Disposal Liabilities and Commitments 

and Contingencies, and Note 6, Environmental and Disposal 

Liabilities.)

N. Payroll and Leave Accruals

Accrued payroll consists of salaries, wages, and other 

compensation earned by employees, but have not yet been 

disbursed as of the Balance Sheets dates. DLA GF accrues 

the cost of unused annual leave, including restored leave, 

compensatory time, and credit hours as earned and reduces 

the accrual when leave is taken. The payroll and annual leave 

accrual liability is accrued based on the latest pay period data 

for reporting purposes (refer to Note 7, Other Liabilities).

O. Federal Employee Benefits Payable

The FECA (Public Law 103-3) provides income and medical 

cost protection to covered Federal civilian employees injured 

on the job, to employees who have incurred work-related 

occupational diseases, and to beneficiaries of employees 

whose deaths are attributable to job-related injuries or 

occupational diseases. The FECA program is administered by 

the Department of Labor (DOL), which pays valid claims and 

subsequently seeks reimbursement from DLA GF for these 

paid claims. The FECA liability consists of two elements.

The first element, accrued FECA liability, is based on actual 

future payments for claims paid by DOL but not yet reimbursed 

by DLA GF. DLA GF reimburses DOL for claims as funds are 

appropriated for this purpose. In general, there is a one to 

two-year period between payment by DOL and reimbursement 

to DOL by DLA GF. As a result, DLA GF recognizes an intragovernmental liability, not covered by budgetary resources, for 

the claims paid by DOL that will be reimbursed by DLA GF (refer to Note 4, Liabilities Not Covered by Budgetary Resources, 

and Note 5, Federal Employee Benefits Payable and Related 

Other Liabilities).

The second element, actuarial FECA liability, is the estimated 

liability for future payments and is recorded as a liability Other 

than Intragovernment, not covered by budgetary resources. 

The actuarial FECA liability includes the expected liability 

for death, disability, medical, and miscellaneous costs 

for approved compensation cases. DOL determines the 

actuarial FECA liability annually, as of September 30, using 

an actuarial method that considers historical benefit payment 

patterns, wage inflation factors, medical inflation factors, and 

other variables. The projected annual benefit payments are 

discounted to present value. The methodology for billable 

projected liabilities includes: (1) an algorithmic model that 

relies on individual case characteristics and benefit payments 

(the FECA Case Reserve Model); and (2) incurred but not 

reported claims were estimated using historical incurred 

benefit liabilities and payments (refer to Note 4, Liabilities 

Not Covered by Budgetary Resources, and Note 5, Federal 

Employee Benefits Payable and Related Other Liabilities). 

P. Pension Benefits

Based on the effective Federal government start date, the 

DLA GF’s civilian employees participate in either the Civil 

Service Retirement System (CSRS), a defined benefit plan, or 

the Federal Employees Retirement System (FERS), a defined 

benefit plan and contribution plan. The employee pension 

benefit is managed at the OUSD level. The measurement of 

the service cost requires the use of an actuarial cost method 

and assumptions. The Office of Personnel Management 

(OPM) administers these benefits and provides the factors 

that DLA GF applies to calculate and recognize imputed 

costs, as reported in its Statements of Net Cost, and a 

corresponding imputed revenue in the Statements of Changes 

in Net Position. DLA GF is not responsible for and does not 

report CSRS or FERS assets, accumulated plan benefits, or 

liabilities applicable to its employees. OPM is responsible for 

and reports these amounts.

Q. Net Position

Net position is the residual difference between assets and 

liabilities and consists of unexpended appropriations and 

cumulative results of operations.

Unexpended Appropriations: Unexpended 

appropriations consist of unobligated and undelivered order 

balances. Unobligated balances are amounts of budgetary 

resources available for obligation, which have not been 

rescinded or withdrawn. Undelivered orders are the amount of 

obligations incurred for goods and/or services ordered, but not 

yet received. DLA GF unexpended appropriations primarily 

consist of direct appropriations.

Cumulative Results of Operations: Cumulative 

results of operations includes the net difference since inception 

between: (1) expenses and losses; (2) revenue, gains; and (3) 

other financing sources. 
Section 2 | Financial Section (Unaudited)

97 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

(Refer to Note 1.C., Departures from U.S. GAAP, related to 

Accounts Receivable, Revenue, and Unfilled Customer Orders 

and Accounts Payable, Expenses, and Undelivered Orders, 

and Note 8, Undelivered Orders; Note 10, Restatements of FY 

2020 Balance Sheet, Statement of Net Cost, and Statement of 

Changes in Net Position.)

R. Revenue and Other Financing Sources

Exchange and Non-exchange Revenue: The 

DLA GF classifies revenue as either exchange revenue or 

non-exchange revenue. Exchange revenue arises when DLA 

GF provides goods or services to intragovernmental or Other 

than Intragovernmental entities in exchange for inflows of 

resources. Exchange revenue is presented in the Statements 

of Net Cost and serves to offset the costs of these goods 

and services. Exchange revenue from services in the O&M 

appropriation include support for Continuity of Operations; Law 

Enforcement Support Office; Morale, Welfare and Recreation; 

and Defense Travel System Support. Exchange revenue from 

services in the RDT&E appropriation include support for the 

Next Generation Resource Management System; Mapping 

EBS; and Defense Information System Security. 

Non-exchange revenue is derived from the government’s 

sovereign right to demand payment, such as specifically 

identifiable, legally enforceable claims. Non-exchange revenue 

is considered to impact the cost of DLA GF’s operations and 

is reported in the Statements of Changes in Net Position as a 

financing source. 

Other Financing Sources: Other financing 

sources, other than exchange and non-exchange revenue, 

include additional inflows of resources that increase results 

of operations during the reporting period. DLA GF’s other 

financing sources come from unexpended appropriation 

transfers and non-expenditure transfer-in initiated by OUSD, 

and recognized as financing sources when used. Other 

financing sources also include: (1) transfers-in/out without 

reimbursement, and (2) imputed financing with respect to 

costs subsidized by another Federal entity.

Transfers-in/out without Reimbursement: Transfersin/out without reimbursement include intragovernmental 

transfers of capitalized assets. The amount of the transfer is 

the book value of the transferring entity and if the book value 

is not known, the amount should be the estimated fair value at 

the date of transfer.

Imputed Financing and Imputed Cost: In certain cases, 

DLA GF receives goods and services from other Federal 

entities at no cost or at a cost less than the full cost to the 

providing entity. Consistent with accounting standards, certain 

costs of the providing entity that are not fully reimbursed by 

DLA GF are recognized as imputed cost in the Statements 

of Net Cost and are offset by imputed financing in the 

Statements of Changes in Net Position. DLA GF recognizes 

the following imputed cost and related imputed financing: (1) 

employee benefits administered by the OPM (i.e., retirement, 

health, life insurance benefits); and (2) claims settled by the 

Treasury Judgment Fund. In accordance with SFFAS 55, 

Amending Inter-Entity Costs Provisions, unreimbursed costs 

of goods and services other than those identified above are 

not included in DLA GF financial statements.

(Refer to Note 1.C., Departures from U.S. GAAP, related 

to Accounts Receivable, Revenue, and Unfilled Customer 

Orders;Note 10, Restatements of FY 2020 Balance Sheet, 

Statement of Net Cost, and Statement of Changes in Net 

Position).

S. Expenses

Expenses are recognized when there are outflows, usage of 

assets, or incurrences of liabilities (or a combination) from 

carrying out activities related to DLA GF appropriations and 

missions, for which benefits do not extend beyond the present 

operating period. For financial reporting purposes, operating 

expenses are recognized in the period incurred (refer to Note 

1.C., Departures from U.S. GAAP, related to Accounts Payable, 

Expenses, and Undelivered Orders; Note 10, Restatements of 

FY 2020 Balance Sheet, Statement of Net Cost, and Statement 

of Changes in Net Position).

T. Reclassifications

The FY 2020 Balance Sheet was reclassified to conform to 

the FY 2021 financial statement presentation requirements in 

accordance with OMB Circular No. A-136, as amended, and 

include changes in the presentation to Note 4, Liabilities not 

Covered by Budgetary Resources, Note 5, Federal Employee 

Benefits Payable and Related Other Liabilities, Note 7, Other 

Liabilities, and Note 9, Reconciliation of Net Cost to Net 

Outlays. The reclassifications had no effect on total assets, 

liabilities, or net position.
Financial Section (Unaudited) | Section 2

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 98

Status of Fund Balance with Treasury presents the budgetary and proprietary balances that constitute 

DLA GF FBwT. It primarily consists of unobligated and obligated balances. The balances reflect the budgetary authority 

remaining for disbursement against current or future obligations. Unobligated and obligated balances differ from the related amounts reported in the Combined Statements of Budgetary Resources because budgetary balances are supported 

by amounts other than FBwT (e.g., budgetary receivables).

Unobligated Balance – Available includes the cumulative amount of budgetary authority that has not been set 

aside to cover outstanding obligations and can be used for 

future obligations.

Unobligated Balance – Unavailable includes the 

cumulative amount of budget authority and funds not available 

for obligation from offsetting collections.

Obligated Balance Not Yet Disbursed includes 

funds that have been obligated for goods and services not 

received, and those received but not paid.

Non-budgetary FBwT consists of FBwT in unavailable 

receipt accounts and clearing accounts that do not have budget authority and non-budgetary FBwT such as non-fiduciary 

deposit funds. As of September 30, 2021 and 2020, DLA GF 

does not have a balance for non-budgetary FBwT.

Other Information includes the following tables summarizing the undistributed collections and disbursements between U.S. Treasury and DLA GF as of September 30, 2021 

and 2020, respectively.

Note 2: Fund Balance with Treasury (Unaudited)

FY 2021 FY 2020

Status of Fund Balance Treasury

Unobligated Balance:

Available $ 548,000 $ 503,770 

Unavailable 67,991 111,971 

Obligated Balance not yet Disbursed 1,311,987 985,016 

Total Fund Balance with Treasury $ 1,927,978 $ 1,600,757 

Fund Balance with Treasury as of September 30, 2021 and 2020, respectively, consist of the following (dollars in thousands):

FY 2020 Adjustments of Undistributed Collections and Disbursements (dollars in thousands)

Transaction Type Treasury 

Balance based on CMR DLA GF Trial Balance

Balances Not Yet Recorded in 

DLA Accounting System - 

Undistributed

Collections $ 225,673 $ 236,400 $ (10,727)

Disbursements $ 3,119,816 $ 3,111,332 $ 8,484

(Refer to Note 1.C., Departures from U.S. GAAP, related to Fund Balance with Treasury.)

FY 2021 Adjustments of Undistributed Collections and Disbursements (dollars in thousands)

Transaction Type Treasury 

Balance based on CMR DLA GF Trial Balance

Balances Not Yet Recorded in 

DLA Accounting System - 

Undistributed

Collections $ 313,589 $ 318,521 $ (4,932)

Disbursements $ 3,545,384 $ 3,535,425 $ 9,959
Section 2 | Financial Section (Unaudited)

99 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

IMAGE PLACEHOLDER

Breaking Thngs Up

Mark C. Olsen, New Jersey National Guard. Photo By: DLA Disposition Services - Camp Arifjan staff
Financial Section (Unaudited) | Section 2

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 100

Note 3: General Property, Plant and Equipment (Unaudited)

General Property, Plant and Equipment as of September 30, 2021 and 2020, respectively, consist of the following (dollars in 

thousands):

FY 2021

Acquisition Value

Accumulated 

Depreciation/ 

Amortization

Net Book Value

Major Asset Classes

Construction-in-Progress $ 528,858 $ - $ 528,858 

Internal-Use Software in Development 75,932 - 75,932 

Total General Property, Plant and Equipment, Net $ 604,790 $ - $ 604,790 

FY 2020 As Restated

Acquisition Value

Accumulated 

Depreciation/

Amortization

Net Book Value

Major Asset Classes

Construction-in-Progress $ 510,080 $ - $ 510,080 

Internal-Use Software in Development 101,052 - 101,052 

Total General Property, Plant and Equipment, Net $ 611,132 $ - $ 611,132 

The DLA GF maintains CIP and Internal-Use Software in 

Development. The CIP mainly consists of projects from 

USACE and NAVFAC. The accumulated CIP balances will 

be transferred to other entity or funds upon completion of 

the project and removed from DLA GF accounting records. 

As of September 30, 2021, DLA GF continues to review the 

CIP balance reported by the construction agents to DFAS and 

adjustments are made as applicable by DLA GF and DFAS.

The Internal-Use Software in Development mainly consists of 

projects related to DAI systems.

The table below discloses activity for General Property, 

Plant and Equipment as of September 30, 2021 and 2020, 

respectively (dollars in thousands):

(Refer to Note 1.C., Departures from U.S. GAAP, related to General Property, Plant and Equipment, Net, and Leases; and Note 

10, Restatements of FY 2020 Balance Sheet, Statement of Net Cost, and Statement of Changes in Net Position.)

FY 2021 FY 2020 

As Restated

General Property, Plant and Equiptment - Beginning Balances $ 611,132 $ 905,918

Capitalized Acquisitions 189,594 234,318

Disposals - (34,681)

Transfers in/out without reimbursements (195,936) (494,423)

General Property, Plant and Equiptment - Ending Balances $ 604,790 $ 611,132
Section 2 | Financial Section (Unaudited)

101 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

Note 4: Liabilities Not Covered by Budgetary Resources (Unaudited)

Liabilities not Covered by Budgetary Resources as of September 30, 2021 and 2020, respectively, consist of the following 

(dollars in thousands):

FY 2021 FY 2020 

As Restated

Intragovernmental Liabilities

Accounts Payable $ 4,214 $ - 

Other Liabilities 1,444 2,422 

Total Intragovernmental Liabilities 5,658 2,422 

Other than Intragovernmental Liabilities

Accounts Payable 7,559 6,791 

Environmental and Disposal Liabilities 79,504 69,111 

Federal Employee Benefits Payable 8,215 8,737 

Total Other than Intragovernmental Liabilities 95,278 84,639 

Total Liabilities Not Covered by Budgetary Resources 100,936 87,061 

Total Liabilities Covered by Budgetary Resources 58,590 61,893 

Total Liabilities $ 159,526 $ 148,954 

Other Liabilities (Intragovernmental) primarily 

consist of intragovernmental liabilities for unemployment 

compensation and the accrued FECA liability based on DOL 

records and other than intragovernmental liabilities which 

include amounts owed but not yet paid to public entities for 

goods and services received by DLA GF.

Accounts Payable include amounts owed but not yet 

paid to the public for goods and services received by DLA GF. It 

is classified as Liabilities Not Covered by Budgetary Resources because the revenues or other sources of funds necessary 

to pay the liabilities have not been made available through congressional appropriations or current earnings of DLA. 

Environmental and Disposal Liabilities 

(Other than Intragovernmental) consist of probable and reasonably estimable future outflow or expenditure of 

resources that exist as of the financial reporting date for environmental cleanup costs resulting from past transactions or 

events. As of September 30, 2021 and 2020, the total liabilities 

covered by budgetary resources for the EL consists of $11.0 

million and $8.6 million, respectively.

Federal Employee Benefits Payable (Other 

than Intragovernmental) are mostly comprised of the 

current year: (1) FECA actuarial liability based on DOL records 

and (2) unfunded annual leave earned by civilian employees 

but not yet paid. Unfunded annual leave includes restored 

leave, compensatory time, and credit hours as earned.

(Refer to Note 1.C., Departures from U.S. GAAP, related to 

Accounts Payable, Expenses, and Undelivered Orders; Note 

5, Federal Employee Benefits Payable and Related Other 

Liabilities; and Note 6, Environmental and Disposal Liabilities.)
Financial Section (Unaudited) | Section 2

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 102

Unfunded FECA Liability (Intragovernmental)

include the accrued FECA liability paid by DOL but not yet 

reimbursed by DLA GF.

Note 5: Federal Employee Benefits Payable and Related Other 

Liabilities (Unaudited)

Federal Employment Benefits Payable and Related Other Liabilities as of September 30, 2021 and 2020, respectively, consist 

of the following (dollars in thousands):

Employer Contributions and Payroll Taxes 

Payable (Intragovernmental) are the employer 

portion of payroll taxes and benefit contributions for health 

benefits, retirement, life insurance and voluntary separation 

incentive payments.

FY 2021

Liabilities

(Less: 

Assets 

Available 

to Pay 

Benefits)

Unfunded 

Liabilities

Intragovernmental Other Liabilities

Employer Contribution and Payroll Taxes Payable $ 770 $ (770) $ - 

Unfunded FECA Liability 313 - 313 

Other Unfunded Employment Related Liability 1,131 - 1,131 

Total Intragovernmental Other Liabilities $ 2,214 $ (770) $ 1,444 

Other than Intragovernmental Federal Employee Benefits Payable

Actuarial FECA Liability $ 2,520 $ - $ 2,520 

Accrued Unfunded Annual Leave 5,695 - 5,695 

Employer Contributions and Payroll Taxes Payable 802 (802) - 

Total Other than Intragovernmental Federal Employee Benefits Payable $ 9,017 $ (802) $ 8,215 

FY 2020

Liabilities

(Less: 

Assets 

Available 

to Pay 

Benefits)

Unfunded 

Liabilities

Intragovernmental Other Liabilities

Employer Contribution and Payroll Taxes Payable $ 645 $ (645) $ - 

Unfunded FECA Liability 389 - 389 

Other Unfunded Employment Related Liability 2,033 - 2,033 

Total Intragovernmental Other Liabilities $ 3,067 $ (645) $ 2,422 

Other than Intragovernmental Federal Employee Benefits Payable

Actuarial FECA Liability $ 2,864 $ - $ 2,864 

Accrued Unfunded Annual Leave 5,873 - 5,873 

Employer Contributions and Payroll Taxes Payable 366 (366) -

Total Other than Intragovernmental Federal Employee Benefits Payable $ 9,103 $ (366) $ 8,737 
Section 2 | Financial Section (Unaudited)

103 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

Other Unfunded Employment Related 

Liability (Intragovernmental) consist of 

intragovernmental liabilities for unemployment compensation.

Actuarial FECA Liability (Other than 

intragovernmental) are workers’ compensation benefits 

developed by the DOL’s Office of Worker’s Compensation 

Programs (OWCP) and provided to DLA GF at the end of 

each FY. The liability includes the expected liability for death, 

disability, medical and miscellaneous costs for approved 

compensation cases. The liability is determined using a method 

that utilizes historical benefit payment patterns to predict the 

ultimate payments. The projected annual benefit payments are 

then discounted to the present value using the OMB economic 

assumptions for 10-year U.S. Treasury notes and bonds. Cost 

of living adjustments (COLAs) and medical inflation factors are 

also applied to the calculation of projected future benefits.

Accrued Unfunded Annual Leave (Other 

than intragovernmental) includes restored leave, 

compensatory time, and credit hours earned.

(Refer to Note Note 4, Liabilities Not Covered by Budgetary 

Resources.)

Authorized Surplus

Historical items maintained by the Army Museum Enterprise's 46 distinct Army museums will be inventoried 

during the next five years. DLA Disposition Services will process and make available those items deemed 

duplicate or surplus that are authorized for reuse, transfer and donation. Photo By: Army Museum Enterprise
Financial Section (Unaudited) | Section 2

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 104

Note 6: Environmental and Disposal Liabilities (Unaudited)

Environmental and Disposal Liabilities as of September 30, 2021 and 2020, respectively, consist of the following (dollars in 

thousands):

FY 2021 FY 2020

Environmental and Disposal Liabilities

Accrued Environmental Restoration Liabilities:

Active Installations - Installation Restoration Program 

and Building Demolition and Debris Removal $ 90,547 $ 77,707 

Total Environmental and Disposal Liabilities $ 90,547 $ 77,707 

The DLA GF EL are comprised of two primary elements: (1) 

existing obligations supporting the Defense Environmental 

Restoration Account (DERA) and BRAC funded environmental 

restoration programs, and (2) the CTC which includes 

anticipated future cost necessary to complete environmental 

restoration sites. While DLA GF is responsible for recording 

BRAC Installations – Installation Restoration Program (IRP) 

EL, it is reported on the DoD Component Level Statements 

under Consolidated ODO GF.

In FY 2021 and FY 2020, DLA GF utilized the Remedial Action 

Cost Engineering & Requirements (RACER) software to 

generate the CTC estimates of anticipated future costs. 

In FY 2021, cost estimates were generated for 79 Accrued 

Environmental Restoration Liabilities Active Installations – 

Installation Restoration Program (IRP) EL sites and one BRAC 

Installations – IRP site. In FY 2021 and FY 2020, there were no 

PP&E transfers impacting the E&DL balance for GF.

Types of Environmental and Disposal 

Liabilities: The DLA GF is responsible for cleanup requirements of DERP eligible sites managed under Active IRP and 

BRAC IRP. Costs under the Accrued Environmental Restoration Liabilities and BRAC Installations line items represent 

the cost to correct past environmental problems that are funded from the Environmental Restoration and BRAC Accounts 

in accordance with the DoD Manual (DoDM) 4715.20 – DERP 

Management (March 2012) and the DoD 7000.14-R Financial 

Management Regulation (FMR) Volume 4, Chapter 13 – Environmental and Disposal Liabilities (April 2018). All clean-up 

is conducted in coordination with regulatory Agencies, other 

responsible parties, and current property owners.

The DLA GF reportable EL is under Accrued Environmental 

Restoration Liabilities and BRAC Installations and includes the 

following line items:

Accrued Environmental Restoration Liabilities:

Includes Active Installations – IRP EL associated with remedial 

actions eligible for funding under the DERP. These remedial 

actions may address hazardous substances, pollutants, and 

contaminants as defined in the Comprehensive Environmental 

Response, Compensation, and Liability Act (CERCLA); 

hazardous waste or hazardous constituents addressed 

under the Resource Conservation and Recovery Act (RCRA) 

corrective action process or other Federal or state statutes 

and regulations; and military munitions or Waste Military 

Munitions (WMM), chemical residues from military munitions, 

and munitions scrap at locations other than operational ranges 

associated with an active installation, when the environmental 

restoration activity is incidental to the IRP environmental 

restoration activity.

BRAC Installations: Includes IRP EL associated with the 

costs to address environmental cleanup at bases that are 

realigning or closing resulting from past activities which are 

part of DERP. While DLA GF is responsible for recording BRAC 

Installations – IRP EL, it is reported in the DoD Component 

Level Statements under Consolidated ODO GFs.

The DLA assessed its PP&E inventory and does not currently 

have reportable GF EL for Environmental Closure, Asbestos, 

or General Equipment (GE). There are no other reportable 

EL categories as listed on the DoD FMR Volume 6B, Chapter 

10 – Note to the Financial Statements, Paragraph 1017, Figure 

10-31. Environmental and Disposal Liabilities (March 2020). 

Applicable Laws and Regulations for 

Cleanup Requirements: The DLA GF is required 

to clean up contamination resulting from past waste disposal 

practices, leaks, spills, and other prior activities, which may 

have created a public health or environmental risk. DLA GF 
Section 2 | Financial Section (Unaudited)

105 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

is required to comply with the following laws and regulations 

where applicable: CERCLA; the Superfund Amendments and 

Reauthorization Act (SARA); RCRA; and other applicable Federal, State, and local laws and regulations. Required cleanup 

may at times extend beyond Installation boundaries onto privately owned property or onto sites where DLA GF is named 

as a potentially responsible party by a regulatory Agency. DLA 

GF reports EL in accordance with SFFAS 5, Accounting for 

Liabilities of the Federal Government, and Federal Financial 

Accounting Technical Release 2, Determining Probable and 

Reasonably Estimable for Environmental Liabilities in the Federal Government. 

Methods for Assigning Estimated Total 

Cleanup Cost to Current Operating Periods:

To estimate future environmental costs, the DLA GF utilizes 

a combination of historical or pre-negotiated contract costs, 

proposal costs, engineering estimates, and in the absence 

of other detailed information, parametric estimates created 

using the RACER software. Any historical costs used in the 

creation of the estimates for DLA EL are adjusted for inflation 

and reported in current year dollars. The RACER Steering 

Committee ensures that the RACER software is Validated, 

Verified, and Accredited (VV&A) in accordance with DoD 

Instruction 5000.61. The DoD is working with the RACER 

Steering Committee and stakeholders to identify improvements 

to RACER functionality, auditability, and documentation. 

Detailed information on estimating methodologies is provided 

in the DLA Environmental Liabilities Management (ELM) SOPs.

Nature of Estimates and the Disclosure of 

Information Regarding Possible Changes 

Due to Inflation, Deflation, Technology, or 

Applicable Laws and Regulations: The DLA EL 

Site Identification (ID) process tracks environmental events such 

as spills and releases in an Environmental Event Repository 

and evaluates each event annually for Active Installations and 

BRAC Installations EL potentiality to determine the annual 

CTC inventory. The DLA GF EL estimates are created annually 

for all projected requirements and are finalized and approved 

by July, in accordance with the DoD 7000.14-R FMR Volume 

4, Chapter 13 – Environmental and Disposal Liabilities (April 

2018). The estimates are then reevaluated through a Roll 

Forward review to identify any material changes to previously 

approved estimates to ensure accuracy as of the financial 

reporting date of September 30. Processes are conducted 

in accordance with DLA ELM SOPs; DoDM 4715.20 – DERP 

Management (March 2012); the DoD 7000.14-R FMR Volume 

4, Chapter 13 – Environmental and Disposal Liabilities (April 

2018); and the Office of the Under Secretary of Defense 

(OUSD) memorandum for Strategy for Environmental & 

Disposal Liabilities Audit Readiness (September 30, 2015).

CTC estimates revised through Roll Forward, as applicable, 

and prior year obligations are reported in the balance as of 

September 30. As of the reporting date, no material changes in 

total estimated cleanup costs were identified through the Roll 

Forward review due to changes in laws, technology, or plans. In 

addition, DLA GF is not aware of any changes to estimates that 

would result from inflation, deflation, technology, plans, and/

or pending changes to applicable laws and regulations. The 

cost estimate changes from prior periods are primarily driven 

by remediation activities and operations, as evidenced by 

UDOs; there are minor adjustments for inflation or other similar 

administrative costs throughout the fiscal year. EL estimates 

will be reevaluated each year and may change in the future due 

to changes in laws and regulations, changes in agreements 

with regulatory Agencies, and advances in technology.

Uncertainty Regarding the Accounting 

Estimates Used to Calculate the Reported 

Environmental and Disposal Liabilities: The 

stated total DLA GF EL includes prior year obligations and the 

estimate of future costs necessary to complete requirements. 

DLA GF has instituted extensive controls to ensure that these 

estimates are accurate and reproducible. The cost estimates 

produced through the EL process are considered accounting 

estimates, which require certain judgments and assumptions 

that are reasonable based upon information available at the 

time the estimates are calculated. Actual cost may materially 

vary from the accounting estimates if agreements with 

regulatory agencies require remediation to a different degree 

than anticipated when calculating the estimates. DLA GF EL 

can be further affected if investigation of the environmental 

sites reveals contamination levels that differ from the estimated 

parameters.

The DLA utilizes a formalized Site ID process to identify, track, 

and evaluate environmental events where the potential for an 

out-year EL exists but the EL is not probable and measurable. 

These environmental events will be re-evaluated in the following 

fiscal year to determine if any changes have taken place and 

sufficient information or data is available to create an estimate 

of future costs that would be included in the EL balance.
Financial Section (Unaudited) | Section 2

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 106

FY 2021

Accrued 

Liabilities

Estimated Range of Loss

 Lower End Upper End

Environmental Contingencies

Probable $ 90,547 $ - $ -

Reasonably Possible $ - $ -

FY 2020

Accrued 

Liabilities

Estimated Range of Loss

 Lower End Upper End

Environmental Contingencies

Probable $ 77,707 $ - $ -

Reasonably Possible $ - $ -

(Refer to Note 1.C., Departures from U.S. GAAP, related to Environmental and Disposal Liabilities and Commitments and 

Contingencies.)

DOD Computers For Learning Program

DLA Disposition Services Guam Area Manager Eric Mills attends a donation event at Merizo Martyrs Memorial 

School on the southern tip of Guam Aug. 14. Agency personnel helped Army National Guard elements donate 50 

unused laptops to rural elementary students through its DOD Computers For Learning authority. 

Photo By: Captain Mark Scott
Section 2 | Financial Section (Unaudited)

107 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

Note 7: Other Liabilities (Unaudited)

Other Liabilities as of September 30, 2021 and 2020, respectively, consist of the following (dollars in thousands):

FY 2021

Current Non-Current Total

Other than Intragovernmental Other Liabilities

Accrued Funded Payroll and Benefits $ 2,563 $ - $ 2,563 

Contract Holdbacks 1,170 - 1,170 

Total Other than Intragovernmental Other Liabilities $ 3,733 $ - $ 3,733 

Accrued Funded Payroll and Benefits 

(Other than Intragovernmental) include salaries, 

wages, and other compensation earned by employees but not 

yet disbursed.

FY 2020

Current Non-Current Total

Other than Intragovernmental Other Liabilities

Accrued Funded Payroll and Benefits $ 1,352 $ - $ 1,352 

Contract Holdbacks 1,236 36 1,272 

Total Other than Intragovernmental Other Liabilities $ 2,588 $ 36 $ 2,624 

Contract Holdbacks (Other than 

Intragovernmental) are amounts earned by contractors 

or suppliers during the production period but not yet paid to the 

contractor/supplier to ensure future performance.

(Refer to Note 1.C., Departures from U.S. GAAP, related to 

Accounts Payable, Expenses, and Undelivered Orders.)

Simulated Assault

Soldiers conduct a simulated air assault from an Army CH-47 Chinook during training at Monte Romano Training 

Area, Italy, on Jan. 27, 2021. Photo By: Elena Baladelli/Army
Financial Section (Unaudited) | Section 2

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 108

FY 2021 FY 2020

Intragovernmental Undelivered Orders

Unpaid $ 1,369,254 $ 531,601 

Total Intragovernmental Undelivered Orders 1,369,254 531,601 

Other than Intragovernmental Undelivered Orders

Unpaid (35,338) 461,417 

Total Other than Intragovernmental Undelivered Orders (35,338) 461,417 

Total Undelivered Orders $ 1,333,916 $ 993,018 

UDOs represent the amount of goods and/or services ordered 

to perform DLA GF’s mission objectives that have not been 

received. Unpaid UDOs represent obligations for goods and 

services that have not been received or paid. Whereas, paid 

UDOs represent obligations for goods and services that have 

been paid for in advance of receipt. For the years ended 

September 30, 2021 and 2020, respectively, DLA GF does not 

have intragovernmental paid UDO balances. 

Due to system limitations, DLA GF is unable to determine the 

Intragovernmental and Other than Intragovernmental allocation 

of UDOs. DLA GF estimates the allocation of Intragovernmental 

and Other than Intragovernmental unpaid UDOs based on 

funded liabilities, excluding payroll and employee benefit 

liabilities, and paid UDOs based on advances and prepayments 

reported on the Balance Sheets. The abnormal balance of 

Other than Intragovernemental unpaid UDOs was due to 

trading partner eliminations.

(Refer to Note 1.C., Departures from U.S. GAAP, related 

to Intragovernmental/Intra-departmental and Other than 

Intragovernmental Transactions, and Accounts Payable, 

Expenses, and Undelivered Orders.)

Note 8: Undelivered Orders (Unaudited)

Undelivered Orders (UDOs) for the years ended September 30, 2021 and 2020, respectively, consist of the following (dollars in 

thousands):

Celebration Formation

Sailors participate in a pinning ceremony for new chief petty officers on the flight deck of the USS Theodore 

Roosevelt in the Pacific Ocean, Jan. 29, 2021. Photo By: Navy Seaman Eduardo A. Torres
Section 2 | Financial Section (Unaudited)

109 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

Note 9: Reconciliation of Net Cost to Net Outlays (Unaudited)

Reconciliation of Net Cost to Net Outlays for the years ended September 30, 2021 and 2020, respectively, consist of the 

following (dollars in thousands):

FY 2021

Intragovernmental Other than 

Intragovernmental Total

NET COST $ 161,997 $ 624,831 $ 786,828 

Components of Net Cost That 

are Not Part of Net Outlays

General PP&E Disposals - - - 

Net Gains/(Losses) - - - 

Increase/(Decrease) in Assets

Accounts Receivable (10,267) 5 (10,262)

Advances and Prepayments - - - 

Other Assets - - -

(Increase)/Decrease in Liabilities

Accounts Payable (16,596) 18,796 2,200 

Environmental and Disposal Liabilities - (12,840) (12,840)

Federal Employee Benefits Payable - 86 86 

Advances from Others and Deferred Revenue - 238 238 

Other Liabilities 853 (1,109) (256)

Other Financing Sources

Imputed Financing (2,714) - (2,714)

Total Components of Net Cost That are Not Part 

of Net Outlays (28,724) 5,176 (23,548) 

Components of Net Outlays That are Not Part of 

Net Cost

Acquisition of PP&E - 189,594 189,594 

Acquisition of Inventory and Related Property - 17,434 17,434

Other (9) - (9)

Total Components of Net Outlays That are Not 

Part of Net Cost (9) 207,028 207,019

NET OUTLAYS $ 133,264 $ 837,035 $ 970,299 

Outlays, Net, Statements of Budgetary Resources 970,299 

Reconciling Difference $ - 
Financial Section (Unaudited) | Section 2

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 110

FY 2020 As Restated

Intragovernmental Other than 

Intragovernmental Total

NET COST $ 131,680 $ 543,752 $ 675,431 

Components of Net Cost That 

are Not Part of Net Outlays

General PP&E Disposals - (34,681) (34,681)

Net Gains/(Losses) - (1) (1)

Increase/(Decrease) in Assets

Accounts Receivable 12,039 13 12,052 

Advances and Prepayments - (1) (1)

Other Assets - 1 1 

(Increase)/Decrease in Liabilities

Accounts Payable 19,325 (3,588) 15,737 

Environmental and Disposal Liabilities - 3,462 3,462 

Federal Employee Benefits Payable - (146) (146)

Advances from Others and Deferred Revenue - 565 565 

Other Liabilities (1,118) 6 (1,112)

Other Financing Sources

Imputed Financing (2,323) - (2,323)

Total Components of Net Cost That are Not Part 

of Net Outlays 27,923 (34,370) (6,447)

Components of Net Outlays That are Not Part of 

Net Cost

Acquisition of PP&E - 234,319 234,319

Acquisition of Inventory and Related Property - - -

Other - (19,293) (19,293)

Total Components of Net Outlays That are Not 

Part of Net Cost - 215,026 215,026 

NET OUTLAYS $ 159,603 $ 724,407 $ 884,010 

Outlays, Net, Statements of Budgetary Resources 884,010

Reconciling Difference $ -

The Net Cost to Net Outlays Reconciliation schedule reconciles 

the Net Cost (reported in the Statements of Net Cost) to the Net 

Outlays (reported in the Statements of Budgetary Resources). 

The reconciliation clarifies the relationship between budgetary 

and proprietary accounting information. Examples of the 

reconciling items identified are: (1) Transactions which did 

not result in an outlay but did result in a cost; and (2) Unpaid 

expenses included in the net cost in this reporting period but 

not yet included in outlays. Components of net cost that are 

not part of net outlays are most commonly (1) the result of 

allocating assets to expenses over more than one reporting 

period (e.g., depreciation) and the write-down of assets (due 

to revaluations); (2) the temporary timing differences between 

outlays/receipts and the operating expense/revenue during the 

period; and (3) costs financed by other entities (imputed interentity cost).

More specifically for FY 2021, the key reconciling differences 

between the net cost and net outlays for DLA GF include: (1) 

Accounts Receivable decreased due to increased collections 
Section 2 | Financial Section (Unaudited)

111 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

Note 10: Restatements of the FY 2020 Balance Sheet, Statement of Net 

Cost, and Statement of Changes in Net Position (Unaudited)

In FY 2021, DLA GF restated its FY 2020 financial statements 

to correct errors in the Balance Sheet, Statement of Net Cost, 

and Statement of Changes in Net Position. The impact of 

these errors resulted in DLA GF’s Net Position reported on the 

financial statements to be understated by $13.3 million. DLA GF 

made adjustments to properly recognize: (1) revenue earned 

by the sub-allottee DMEA; (2) capitalized CIP costs that had 

been previously expensed; and (3) transferred out completed 

property, due to correction of errors. More specifically:

Revenue earned by the sub-allottee DMEA: 

The FY 2020 revenue earned from services provided by DMEA 

was corrected to report the Earned Revenue and related 

impact on Accounts Receivable and Advances from Others and 

Deferred Revenue. The correction required adjustments to the 

FY 2020 Balance Sheet, Statement of Net Cost, and Statement 

of Changes in Net Position by increasing Accounts Receivable 

by $11.9 million, decreasing Advances from Others and 

Deferred Revenue by $0.1 thousand, and increasing Earned 

Revenue by $12.0 million, resulting in an overall increase to 

Net Position of $12.0 million.

Capitalize construction-in-progress cost:

In FY 2015 and FY 2016, DLA GF funded seven MILCON 

CIP projects, which were expensed rather than capitalized 

as costs were incurred. The prior years and FY 2020 Gross 

Cost were corrected to properly report CIP as capitalized cost 

for cost that should have been capitalized in the prior period. 

The correction required adjustments to the FY 2020 Balance 

Sheet, Statement of Net Cost, and Statement of Changes in 

Net Position by recognizing a prior period adjustment of $177.2 

million, decreasing Gross Cost by $3.3 million, increasing 

Transfers-out by $179.2 million, and increasing CIP by $1.4 

million, resulting in net increases in both General Property 

and Equipment, Net, and Net Position by $1.4 million and $1.4 

million, respectively. 

(Refer to Note 1.C., Departures from U.S. GAAP, related to 

Accounts Receivable, Revenue, and Unfilled Customer Orders 

and General Property, Plant and Equipment, Net.)

in the reimbursement program; (2) Environmental Liabilities 

increased due to a surge in program cost related to the 

development of a new EL cost estimating software; and (3) the 

acquisition of capital assets, which are capitalized expenditures 

paid for, that have no impact on net cost. 

For FY 2020, the key reconciling differences between the 

net cost and net outlays for DLA GF include; (1) the offset 

to capitalize assets, which are reclassified expenses for 

capitalized purchases that have no impact on net outlays; 

and (2) the acquisition of capital assets, which are capitalized 

expenditures paid for, that have no impact on net cost. 

Any reconciling difference would be attributable to limitations 

of financial and nonfinancial management processes and 

systems that support the financial statements, as disclosed 

in Note 1.B., Basis of Presentation and Accounting. In addition, DLA GF does not have an established policy to identify and reconcile net cost to net outlays and/or identify components of net cost or net outlays that have not been properly 

accounted for. As such, DLA GF will continue to investigate and 

resolve the causes of any reconciling differences. 

The prior year presentation was modified to the current year 

presentation to facilitate the: (1) comparability between years 

for related activity; and (2) conform to the FY 2021 financial 

statement presentation requirements in accordance with OMB 

A-136 and revised TFM crosswalk mappings. The modification 

in the presentation had no net effect on the reconciliation as 

previously reported. 

(Refer to Note 1.C., Departures from U.S. GAAP, related to the 

Reconciliation of Net Cost to Net Outlays.) 
Financial Section (Unaudited) | Section 2

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 112

Balance Sheet

(dollars in thousands)

As of September 30, 2020

Unaudited

FY 2020 

As Previously 

Reported

Unaudited

FY 2020 

Adjustments

Unaudited

FY 2020 

As Restated

ASSETS 

Intragovernmental

Fund Balance with Treasury (Note 2) $ 1,600,757 $ - $ 1,600,757 

Accounts Receivable 11,948 11,873 23,821 

Total Intragovernmental Assets 1,612,705 11,873 1,624,578 

Other than Intragovernmental

Accounts Receivable 15 - 15 

Inventory and Related Property, Net - - -

General Property, Plant and Equipment, Net (Note 3) 609,780 1,352 611,132 

Other Assets 88 - 88 

Total Other than Intragovernmental Assets 609,883 1,352 611,235 

TOTAL ASSETS $ 2,222,588 $ 13,225 $ 2,235,813 

LIABILITIES (Note 4)

Intragovernmental

Accounts Payable $ 21,158 $ - $ 21,158 

Other Liabilities (Note 5) 3,067 - 3,067 

Total Intragovernmental Liabilities 24,225 - 24,225 

Other than Intragovernmental

Accounts Payable 34,180 - 34,180 

Environmental and Disposal Liabilities (Note 6) 77,707 - 77,707 

Federal Employee Benefits Payable (Note 5) 9,103 - 9,103 

Advances from Others and Deferred Revenue 1,220 (105) 1,115 

Other Liabilities (Note 7) 2,624 - 2,624 

Total Other than Intragovernmental 124,834 (105) 124,729 

TOTAL LIABILITIES 149,059 (105) 148,954 

Commitments and Contingencies

NET POSITION

Unexpended Appropriations-Funds from Other than 

Dedicated Collections 1,563,503 - 1,563,503 

Cumulative Results of Operations-Funds from Other 

than Dedicated Collections 510,026 13,330 523,356

TOTAL NET POSITION 2,073,529 13,330 2,086,859

TOTAL LIABILITIES AND NET POSITION $ 2,222,588 $ 13,225 $ 2,235,813 

1 Certain balances were reclassified on the FY 2020 Balance Sheet to conform to the FY 2021 financial statement presentation requirements in 

accordance with OMB Circular A-136, as amended.
Section 2 | Financial Section (Unaudited)

113 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

Statement of Net Cost

For the Year Ended September 30, 2020 

(dollars in thousands)

Unaudited

FY 2020 

As Previously 

Reported

Unaudited

FY 2020 

Adjustments

Unaudited

FY 2020 

As Restated

Operation and Maintenance

Gross Cost $ 368,612 $ - $ 368,612 

Less: Earned Revenue (32,341) - (32,341)

Net Cost 336,271 - 336,271 

Procurement

Gross Cost 5,765 - 5,765 

Less: Earned Revenue - - -

Net Cost 5,765 - 5,765 

Research, Development, Test & Evaluation

Gross Cost 367,428 - 367,428 

Less: Earned Revenue (35,237) (11,978) (47,215)

Net Cost 332,191 (11,978) 320,213 

Family Housing and Military Construction

Gross Cost 16,476 (3,294) 13,182 

Less: Earned Revenue - - - 

Net Cost 16,476 (3,294) 13,182 

Gross Cost 758,281 (3,294) 754,987 

Less: Earned Revenue (67,578) (11,978) (79,556)

NET COST OF OPERATIONS $ 690,703 $ (15,272) $ 675,431
Financial Section (Unaudited) | Section 2

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 114

Statement of Changes in Net Position 

For the Year Ended September 30, 2020 

(dollars in thousands)

Unaudited

FY 2020 

As Previously 

Reported

Unaudited

FY 2020 

Adjustments

Unaudited

FY 2020 

As Restated

Unexpended Appropriations

Beginning Balances $ 1,361,054 $ - $ 1,361,054 

Appropriations Received 1,089,846 - 1,089,846 

Appropriations Transferred-in/out 7,435 - 7,435 

Other Adjustments (32,867) - (32,867)

Appropriations Used (861,965) - (861,965)

Change in Unexpended Appropriations 202,449 - 202,449 

Total Unexpended Appropriations: Ending Balance 1,563,503 - 1,563,503 

Cumulative Results of Operations

Beginning Balances 633,408 - 633,408 

Correction of Errors - 177,246 177,246 

Beginning Balances, as Adjusted 633,408 177,246 810,654 

Other Adjustments (1,024) - (1,024)

Appropriations Used 861,965 - 861,965 

Transfers-in/out Without Reimbursement (315,236) (179,188) (494,424)

Imputed Financing 2,323 - 2,323 

Other 19,293 - 19,293 

Net Cost of Operations 690,703 (15,272) 675,431 

Net Change in Cumulative Results of Operations (123,382) (163,916) (287,298)

Cumulative Results of Operations: Ending Balance 510,026 13,330 523,356 

TOTAL NET POSITION $ 2,073,529 $ 13,330 $ 2,086,859
Section 2 | Financial Section (Unaudited)

115 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

Combining Statements of Budgetary Resources

The Combining Statements of Budgetary Resources combines 

the availability, status, and outlays of DLA GF budgetary resources. The below tables provide the Combining Statements 

of the Budgetary Resources disaggregated by DLA GF programs for the years ended September 30, 2021 and 2020, 

respectively. As the Combining Statements of the Budgetary 

Resources are prepared at appropriation level, DLA GF presented the programs by appropriation. However, for reporting 

purposes, due to the material and size of Family Housing, DLA 

GF combined the Family Housing Program with MILCON in its 

Statements of Net Cost for presentation purposes.

Defense Logistics Agency - General Fund

COMBINING STATEMENT OF BUDGETARY RESOURCES 

For the Year Ended September 30, 2021

(dollars in thousands)

Operation

and 

Maintenance

Procurement

Research, 

Development, 

Test 

& Evaluation

Family 

Housing

Military 

Construction

FY 2021 

Total

BUDGETARY RESOURCES 

Unobligated Balance From 

Prior Year Budget Authority, 

Net $ 66,210 $ 1,398 $ 59,331 $ 549 $ 490,617 $ 618,105 

Appropriations 395,017 390,459 252,947 - 304,765 1,343,188 

Spending Authority From 

Offsetting Collections 24,015 - 81,100 - - 105,115 

TOTAL BUDGETARY 

RESOURCES $ 485,242 $ 391,857 $ 393,378 $ 549 $ 795,382 $ 2,066,408 

STATUS OF BUDGETARY 

RESOURCES 

New Obligations and Upward 

Adjustments $ 445,879 $ 384,170 $ 323,207 $ - $ 297,161 $ 1,450,417 

Unobligated Balance, 

End of Year:

Apportioned, Unexpired 

Accounts 1,360 7,357 60,818 - 478,465 548,000 

Unexpired Unobligated 

Balance, End of Year 1,360 7,357 60,818 - 478,465 548,000 

Expired Unobligated Balance, 

End of Year 38,003 330 9,353 549 19,756 67,991 

Total Unobligated Balance, 

End of Year 39,363 7,687 70,171 549 498,221 615,991 

TOTAL BUDGETARY 

RESOURCES $ 485,242 $ 391,857 $ 393,378 $ 549 $ 795,382 $ 2,066,408 

OUTLAYS, NET

Outlays, Net $ 424,537 $ 19,918 $ 293,100 $ 692 $ 232,052 $ 970,299 

AGENCY OUTLAYS, NET $ 424,537 $ 19,918 $ 293,100 $ 692 $ 232,052 $ 970,299 

Required Supplementary Information (Unaudited)
Financial Section (Unaudited) | Section 2

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 116

Defense Logistics Agency - General Fund

COMBINING STATEMENT OF BUDGETARY RESOURCES 

For the Year Ended September 30, 2020

(dollars in thousands)

Operation

and 

Maintenance

Procurement

Research, 

Development, 

Test 

& Evaluation

Family 

Housing

Military 

Construction

FY 2020 

Total

BUDGETARY RESOURCES 

Unobligated Balance From 

Prior Year Budget Authority, 

Net $ 94,815 $ 5,845 $ 61,409 $ 615 $ 269,621 $ 432,305 

Appropriations 415,991 8,471 317,970 - 353,649 1,096,081 

Spending Authority From 

Offsetting Collections 27,229 - 50,018 - - 77,247 

TOTAL BUDGETARY 

RESOURCES $ 538,035 $ 14,316 $ 429,397 $ 615 $ 623,270 $ 1,605,633 

STATUS OF BUDGETARY 

RESOURCES 

New Obligations and Upward 

Adjustments $ 455,071 $ 12,889 $ 373,038 $ - $ 148,894 $ 989,892 

Unobligated Balance, End of 

Year:

Apportioned, Unexpired 

Accounts 1,081 754 48,706 - 453,229 503,770 

Unexpired Unobligated 

Balance, End of Year 1,081 754 48,706 - 453,229 503,770 

Expired Unobligated Balance. 

End of Year 81,883 673 7,653 615 21,147 111,971 

Total Unobligated Balance, 

End of Year 82,964 1,427 56,359 615 474,376 615,741 

TOTAL BUDGETARY 

RESOURCES $ 538,035 $ 14,316 $ 429,397 $ 615 $ 623,270 $ 1,605,633 

OUTLAYS, NET

Outlays, Net $ 374,140 $ 3,643 $ 282,174 $ 615 $ 223,438 $ 884,010 

AGENCY OUTLAYS, NET $ 374,140 $ 3,643 $ 282,174 $ 615 $ 223,438 $ 884,010 
Section 3 | Other Information (Unaudited)

117 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

SECTION 3

Other Information (Unaudited)

117

Mediterranean Watch ►

Navy Seaman Cedric Volle stands watch aboard the aircraft 

carrier USS Dwight D. Eisenhower in the Mediterranean Sea, 

April 1, 2021.

 Photo Credit: Navy Seaman Jacob Hilgendorf

Section 3 | Other Information (Unaudited)

119 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

In this section

120 Management Challenges 

124 Summary of Financial Statement Audit 

 and Management Assurances

128 Payment Integrity 

128 Grants Program

SECTION 3

Same Day Service

Electronics Mechanic Leader Jason Kilmer repairs the transponder on an AH-64D Apache Attack 

Helicopter at Fort Drum, New York.

 Photo Credit: Michael Carson
Other Information (Unaudited) | Section 3

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 120

Management Challenges

DEFENSE LOGISTICS AGENCY

HEADQUARTERS

8725 JOHN J. KINGMAN ROAD

FORT BELVOIR, VIRGINIA 22060-6221

July 27, 2021

MEMORANDUM FOR VICE ADMIRAL MICHELLE C. SKUBIC, DIRECTOR, DLA

SUBJECT: Major Management and Performance Challenges Facing the Defense Logistics 

 Agency

Although significant progress has been made in the management of DLA and the 

reduction of risks facing the organization, especially due to the actions of the Enterprise Risk 

Management Office, the Office of the Inspector General (OIG) sees 15 areas where major 

challenges remain. The 15 challenge areas are:

a. Sales of DoD Property. Insufficient policy and oversight of DLA sales of property 

requires action to establish clear policy guidelines and oversight authority. This 

concern was formally recognized in a finding in FY18 during an Agency 

Management Review and has not been corrected to date. Multiple components of 

DLA are involved in sales of DoD property. DLA Headquarters has limited expertise 

within the staff. Sales procedures and process are impacted by law and rules from 

several governmental agencies. An unclear policy proponent and corresponding lack 

of oversight of execution within DLA is an area of risk that requires mitigation and 

remediation.

b. Contracting Officers Representatives. Although this area was identified last year, this 

challenge remains on the list because of the significant concerns about the quality of 

Contracting Officers Representatives work. Contracting Officers Representative files 

almost always contained inadequate evidence supporting monitoring of contractors. 

These results are important to DLA because the preponderance of our supplies and 

services are acquired through contract. Given the significant number of DLA 

contracts, to improve audit readiness, it is essential to improve Contracting Officer 

Representative performance and quality of work.

c. Financial Liability Investigations. Based on numerous OIG investigations, financial 

liability investigation of property losses were inadequate and failed to hold 

responsible officials accountable for failure to maintain accountability of property 

under their control. The OIG audit division has begun research on this topic and 

anticipates issuing an audit report in FY 2022.

d. Critical Warfighter Items and Whole of Government. Despite the pandemic and the 

shortage of supplies, DLA has maintained outstanding support to the Warfighters. 

However, as continuing emphasis is placed on the Whole of Government effort, DLA 

must remain vigilant that the Whole of Government effort doesn’t overshadow 
Section 3 | Other Information (Unaudited)

121 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

Warfighter support since both efforts will be competing for many of the same product 

lines – e.g., pharmaceuticals, clothing and textiles, food and water, and fuel. 

e. Supply Chain Security and Risk Management. DLA needs to continually evaluate 

our supply chains for single-point failures to prevent disruptions to DLA’s Warfighter 

and Whole of Government customers. The supply risk management process is 

critical to identify risks to our supply chains while developing mitigation strategies, to 

reduce the risk to acceptable levels when feasible or develop mitigating strategies 

when mitigation isn’t feasible. This challenge highlights the lack of domestically 

based integrated supply chains, just-in-time inventory management, as well as other 

risks in DLA’s reliance on the Defense industrial base – that individually and 

collectively increase risk to the process.

f. Nonconforming Inventory. The induction of repair parts from commercial suppliers 

must be continuously monitored and reviewed to prevent nonconforming and 

counterfeit parts from entering the DLA supply chains and causing major risks to our 

Warfighters and Whole of Government customers.

g. Activity Pricing and Cost Recovery Rate. Until DLA develops an accounting system 

that is sufficiently designed to assign and record accurate costs (and achieves an

unqualified audit opinion), then assigning costs to appropriate cost centers will be 

difficult and making decisions will be based on unauditable and potentially incorrect 

information.

h. DLA Cybersecurity and Resiliency. Cybersecurity is an inherent risk and the most 

persistent threat to DLA operations. The resiliency of DLA to identify and counter 

cyber intrusions is paramount to DLA success. With the majority of the DLA 

workforce now teleworking via potentially less secure home networks, DLA’s 

cybersecurity risk profile is increased. DLA must continually stress that employees

have a personal responsibility for network security. While the DLA J6 achieved 

impressive sustainment of DLA networks during the pandemic, it is imperative that 

continued and innovative resources be employed to retain this resiliency. These 

efforts are essential to ensure that employees remain as productive as possible and 

that new software, as well as major updates, are conducted in as seamless a manner as 

possible with minimal disruption. 

i. Evidential Matter. Both financial and operating audit work continues to show that 

DLA’s ability to locate appropriate evidential matter for audit readiness is just as 

important as appropriately processing the transaction.

j. Knowledge Management. DLA needs to move from the reactionary data 

management mentality to a more proactive ability to appropriately summarize our 

vast data into useful and actionable knowledge that management can act upon.

k. Business Process Documentation. DLA needs to sustain a robust organizational 

approach to address business process documentation in a manner that covers 
Other Information (Unaudited) | Section 3

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 122

inception to conclusion. Over the past several years, there has been improvement in 

creating process maps that document processes from beginning to end (to include 

inputs from other organizations as well as handoffs to others). However, much 

remains to be done in: the identification of risks associated with a process, 

management evaluation and either acceptance or addressing the risk, and 

implementation of internal controls associated with all phases of the process. 

l. Special Emphasis Programs. DLA has at least three special emphasis programs –

PTAP (Procurement Technical Assistance Program), NWRM (Nuclear Weapons

Related Material), and Strategic Materials – that, while currently in good shape,

requires continual management emphasis. While the PTAP program may transition

to DoD, we will continue to include it on this list until the transition is complete.

m. Trade Security Controls. DoD delegates Export Control requirements for Trade

Security Controls (TSC) policy, controls, and enforcement for the DoD to DLA. The

required functions include policy, issuance of End Use Certificates (EUC) to qualified

entities, and enforcement through Post Sales Investigations. As noted in paragraph a.

above, DLA has inadequate sales oversight structure and execution policy. This

shortfall in guidance results in conflict between TSC and sales contracts at

Disposition Services that requires both policy and contracting changes to realign.

Disposition Services implemented a new business model that sells export-controlled

DoD personal property to the contractor. The contractor becomes the first non-DoD

owner and is issued a single EUC that is renewed on a periodic basis. This permits

the contractor to sell controlled property to anyone, nullifying the EUC process for

export-controlled DoD personal property. DLA must resolve the guidance and

execution for export controls.

n. Post-Pandemic Reduction of Telework. DLA executed a superlative pivot to full time

telework by the eligible office workforce while maintaining operational readiness and

providing a safe secure workplace for employees in industrial operations. The

reduction of telework and return to onsite offices represents a significant challenge.

Numerous studies and reports indicate a fundamental change in attitudes by the

workforce across the nation. Employees are seeking greater control over schedules,

flexibility, and how work is conducted. Other structural supports such as childcare,

school schedules and methods, and availability of public transport affect the

willingness and mobility of the workforce. Balancing telework and return to

centralized offices could present a significant challenge through employee turnover

leading to a loss of knowledge and experience in critical skill areas, while extenuating

the efforts to acculturate new employees. DLA is addressing this challenge in the

strategic plan and by encouraging senior leaders to be as flexible as possible.

Although this challenge is being addressed through the Future of Work Line of Effort

it nonetheless presents a situation that requires much thought, understanding,

flexibility, and adaptability to retain the well-qualified and resilient workforce DLA

requires.
Section 3 | Other Information (Unaudited)

123 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

o. Climate Change Management. DLA J3 has begun addressing this topic. However,

because it is a reasonably new topic, additional senior leader focus is required as the

expectation is that DLA will be required to assist DoD by leading the way in

procuring carbon-pollution free electricity, developing alternative fuel costing policy,

and incorporating the social cost of greenhouse gases into product costs. DLA must

have a deliberate plan in place before the requirements outpaces the current capability

of both DLA Energy and the DLA Environmental Office.

It is important that DLA leadership recognize these challenges facing the organization for 

DLA to provide the best value to the taxpayer and the best support to the warfighter. Addressing 

each of these challenges will improve the internal control structure of DLA and thereby help the 

organization in achieving an unmodified financial statement opinion. 
Other Information (Unaudited) | Section 3

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 124

Summary of Financial Statement Audit 

and Management Assurances

The audit reports on the FY 2021 and FY 2020 DLA GF 

financial statements identified seven material weaknesses or 

DLA GF. Table 1 below provides a summary of the financial 

statement audit results for FY 2021 and FY 2020, as restated. 

Although the material weaknesses overall are not resolved, 

DLA is continuing to develop CAPs to resolve specific findings 

associated with the material weaknesses.

The DLA SOA package only includes self-identified material 

weaknesses and significant deficiencies for internal DoD 

reporting; however, DLA continues to monitor the financial 

statement audit material weakness areas separately. DLA’s 

FY 2021 Material Weaknesses and Significant Deficiencies 

template included a total of three self-identified material 

weaknesses in the area of ICOR-O. In FY 2021, the six ICOR 

material weaknesses and four ICOFS non-conformances were 

based on financial statement audit NFRs. However, DLA has 

determined these audit identified ICOR material weaknesses 

and ICOFS nonconformances are still present and have 

not been remediated in FY 2021.The DLA Audit Task Force 

continues to separately track financial statement audit findings 

and CAPs and report these to the ODCFO.

Table 1: FY 2021 Summary of the Financial Statement Audit

Audit Opinion Disclaimer

Restatement Yes

Material Weaknesses Beginning 

Balance New Resolved Consolidated Ending Balance

Property, Plant & Equipment 1 - - - 1

Fund Balance with Treasury 1 - - - 1

Accounts Receivable and Revenue 1 - - - 1

Accounts Payable and Expenses 1 - - - 1

Financial Reporting 1 - - - 1

Oversight and Monitoring 1 - - - 1

Information Systems 1 - - - 1

Total Material Weaknesses 7 - - - 7

Dusty Direction

Marines move for cover during 

urban assault training at Marine 

Corps Air-Ground Combat Center in 

Twentynine Palms, California., Jan. 

21, 2021. Photo Credit: Marine Corps 

Lance Cpl. Brian Bolin Jr.
Section 3 | Other Information (Unaudited)

125 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

Table 2: Summary of Management Assurances

Effectiveness of Internal Control over Financial Reporting (FMFIA § 2)

Statement of 

Assurance No Assurance

Material 

Weaknesses

Beginning 

Balance New Resolved Consolidated Reassessed Ending Balance

Acquire-to-Retire: 

Property, Plant and 

Equipment

1 - - - - 1

Oversight and 

Monitoring 1 - - - - 1

Financial Reporting 1 - - - - 1

Fund Balance with 

Treasury 1 - - - - 1

Order-to-Cash:

Accounts Receivable 

and Revenue

1 - - - - 1

Procure-to-Pay: 

Accounts Payable 

and Expenses

1 - - - - 1

Total Material

 Weaknesses 6 - - - - 6

Table 2 summarizes DLA’s FY 2021 material weaknesses associated with GF.

Food Donations

Army Pvt. Antonio Ocampo, a 

wheeled vehicle mechanic with 

the 1348th Maintenance Company, 

Arizona Army National Guard, 

prepares boxes of groceries to be 

delivered to area residents at a 

food bank in Phoenix, Ariz., May 21, 

2021. The Arizona National Guard is 

continuing to support food banks as 

well as COVID-19 vaccination sites 

statewide. Photo Credit: Air Force 

Tech. Sgt. Michael Matkin, Arizona 

Air National Guard
Other Information (Unaudited) | Section 3

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 126

Table 2: Summary of Management Assurances

Effectiveness of Internal Control over Operations (FMFIA § 2)

Statement of 

Assurance No Assurance

Material 

Weaknesses

Beginning 

Balance New Resolved Consolidated Reassessed Ending Balance

Supply Operations: 

Lack of policy and 

procedures in place 

over the management and oversite of 

First Article Test

 Exhibits

1 - - - - 1

Contract Administration: Nonverification 

of supplier invoices

1 - - - - 1

Business Process 

Controls: Lack of 

procedures over the 

scrap management 

program

 1 - - - - 1

Total Material

 Weaknesses 3 - - - - 3

Table 2: Summary of Management Assurances

Conformance with Federal Financial Management System Requirements (FMFIA § 4)

Statement of 

Assurance Federal Systems do not conform to financial management system requirements

NonConformancesBeginning 

Balance New Resolved Consolidated Reassessed Ending Balance

Security 

Management 1 - - - - 1

Access Controls 1 - - - - 1

Segregation of 

Duties 1 - - - - 1

Configuration 

Management 1 - - - - 1

Total NonConformances 4 - - - - 4
Section 3 | Other Information (Unaudited)

127 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

Based on DLA management’s analysis of relevant FFMIA compliance indicators available at the time of this report, DLA identified 

a lack of compliance associated with all three FFMIA Section 803(a) requirements across all funds summarized in the table below. 

Table 2: Summary of Management Assurances

Compliance with Section 803(a) of the FFMIA

Agency Auditor

1. Federal Financial Management 

System Requirements Lack of compliance noted Lack of compliance noted

2. Applicable Federal Accounting 

Standards Lack of compliance noted Lack of compliance noted

3. USSGL at the Transaction Level Lack of compliance noted Lack of compliance noted

At Sea

Sailors aboard the Arleigh Burke-class guided-missile destroyer USS Roosevelt (DDG 80) receive pallets of 

food stores during a replenishment-at-sea with the dry cargo ship USNS William McClean (T-AKE 12), April 

1, 2021. Roosevelt, forward-deployed to Rota, Spain, is on its second patrol in the U.S. Sixth Fleet area of 

operations in support of regional allies and partners and U.S. national security interests in Europe and Africa. 

Photo Credit: Mass Communication Specialist 2nd Class Andrea Rumple/Released
Other Information (Unaudited) | Section 3

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 128

The Payment Integrity Information Act of 2019 (IPIA) (Pub. L. 

116-117), requires Agencies to review and assess all programs 

and activities they administer and identify those determined to 

be susceptible to significant improper payments (IPs), estimate 

the annual amount of IPs, and submit those estimates to 

Congress. In accordance with DoD 7000.14-R FMR, Volume 4, 

Chapter 14, Improper Payments, DoD components that entitle 

(i.e. process or compute) payments conduct risk assessments 

of their payment processes and random post- payment reviews 

to estimate IPs.

The OUSD(C) Accounting & Finance Policy Directorate 

(A&FP) compiles the Department-wide results annually as 

part of DoD’s AFR. As DLA’s Service Provider, DFAS entitles 

payments and provides the results of post-payment reviews 

to OUSD(C) A&FP on behalf of its customers. OMB Circular 

A-123, Appendix C defines an IP as any payment that should 

not have been made or that was made in an incorrect amount 

Payment Integrity

(including overpayments and underpayments) under statutory, 

contractual, administrative, or other legally applicable 

requirements. It includes duplicate payments, any payment 

made to an ineligible recipient, any payment for an ineligible 

good or service, any payment for a good or service not 

received (except for such payments where authorized by law), 

and any payment that does not account for credit for applicable 

discounts.

In accordance with the PIIA, and Appendix B of the OMB 

Bulletin No. 21-04, Audit Requirements for Federal Financial 

Statements, dated June 11, 2021, DoD reports payment 

integrity information (i.e., IPs) at the Agency-wide level in 

the consolidated DoD AFR. In addition, DoD provides data 

for display on https://paymentaccuracy.gov. For detailed 

reporting on DoD payment integrity, refer to the OI section of 

the consolidated DoD AFR at: https://comptroller.defense.gov/

ODCFO/afr/.

Grants Program

The DLA GF provides cooperative agreements through the 

PTAP and strives to perform timely close out of awards for 

which the period of performance has expired. DLA GF is 

currently collaborating with the DoD Agencies administering 

awards to facilitate the timely closeout of one remaining award.

 

Table 5 below summarizes the total number of Federal grant 

and cooperative agreement awards (amounts in quantity) and 

the balances (amounts in dollars) for which closeout has not 

yet occurred but the period of performance has elapsed by 

more than two years or more prior to September 30, 2021. 

Table 5: Cooperative Agreements

Risk Category 2-3 Years 3-5 Years More than 5 Years

Number of Grants/Cooperative Agreements with 

Zero Dollar Balances 0 1 0

Number of Grants/Cooperative Agreements with 

Undisbursed Balances 0 0 0

Total Amount of Undisbursed Balances 0 0 0

The DLA GF is unable to validate the completeness and accuracy of the cooperative agreements disclosed above due to limitations 

of financial and nonfinancial management processes and systems that support the financial statements, as disclosed in Note 1.B., 

Basis of Presentation and Accounting.
Sunlit Sail ►

Sailors assigned to Maritime Expeditionary Security Squadron 

11 participate in evaluation exercises aboard a patrol boat in San 

Diego, Feb. 24, 2021. 

 Photo Credit: Navy Chief Petty Officer Nelson Doromal Jr.

A / B / C

129

APPENDIX

Appendix A | Summary of FMFIA Definitions and Reporting

131 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

Appendix A: Summary of FMFIA Definitions 

and Reporting

Category Definition Reporting

Control Deficiency

A. Exists when the design, implementation, or 

operation of a control does not allow management 

or personnel, in the normal course of performing 

their assigned functions, to achieve control 

objectives and address related risks.

B. Deficiency in Design: A deficiency in design exists 

when:

(1) a control necessary to meet a control objective 

is missing

(2) an existing control is not properly designed so 

that even if the control operates as designed, 

the control objective would not be met.

C. Deficiency in Implementation: A deficiency in 

implemen- tation exists when a properly designed 

control is not implemented correctly in the internal 

control system.

D. Deficiency in Operation: A deficiency in 

operation exists when a properly designed control 

does not operate as designed, or when the person 

performing the control does not possess the 

necessary authority or competence to perform the 

control effectively. Internal to the organization and 

not reported externally. Progress against CAPs 

must be periodically assessed and reported to 

Agency management.

Internal to the 

organization and not 

reported externally. 

Progress against CAPs 

must be periodically 

assessed and reported 

to Agency management.

Significant Deficiency

A significant deficiency is a deficiency, or 

combination of deficiencies, in internal control 

that is less severe than a material weakness yet 

is important enough to merit attention by those 

charged with governance.

Self-identified 

significant deficiencies 

are reported to OUSD. 

Progress against CAPs 

must be periodically 

assessed and reported 

to Agency management.
 Summary of FMFIA Definitions and Reporting | Appendix A

Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 132

Category Definition Reporting

Material Weakness

A. A material weakness is a significant deficiency 

that the Agency Head or Director determines to 

be significant enough to report outside of the 

Agency as a material weakness. In the context of 

the Green Book (https://www.gao.gov/greenbook), 

non-achievement of a relevant principle and 

related component results in a material weakness.

B. Internal Control Over Operations: A material 

weakness in internal control over operations might 

include, but is not limited to conditions that:

● Impact the operating effectiveness of entrylevel controls;

● Impair fulfillment of essential operations or 

missions;

● Deprive the public of needed services; or

● Significantly weaken established safeguards 

against fraud, waste, loss, unauthorized use, 

or misappropriation of funds, property, assets, 

or conflicts of interest.

C. Internal Control Over Reporting: A material 

weakness in internal control over external 

financial reporting is a deficiency, or a 

combination of deficiencies, in internal control, in 

that there is a reasonable possibility a material 

misstatement of the entity’s financial statements 

will not be prevented or detected and corrected 

before issuance.

D. Internal Control Over Compliance: A material 

weakness in internal control over compliance is a 

condition where management lacks a process that 

reasonably ensures preventing a violation of law 

or regulation that has direct and material effect 

on financial reporting or significant effect on other 

reporting or achieving Agency objectives.

Material weaknesses 

and a summary of 

corrective actions 

must be reported to 

OMB and Congress 

through the AFR or 

other management 

reports. Self-identified 

material weaknesses 

are reported to OUSD. 

Progress against CAPs 

must be periodically

assessed and reported 

to Agency management.

Appendix A: Summary of FMFIA Definitions and Reporting (continued)
133 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

The following are DLA Enterprise-wide J/D Codes and DLA HQ 

Program Support Structures:

DLA HUMAN RESOURCES (J1) provides the 

full range of human resource services to include Operational, Human Performance, Talent Management, Performance 

Management, Labor Relations and Human Resources Policy 

for the DLA workforce. DLA Human Resources recruits, hires, 

trains, and sustains a mission-ready workforce for DLA and 

Human Resources customers, using world-class policies, 

processes, programs, and tools. 

DLA LOGISTICS OPERATIONS (J3) is responsible for the end-to-end supply chain management of DLA’s supply chains, providing logistics and material process-management policy, guidance, and oversight. J3 integrates strategic, 

operational, and tactical perspectives, as well as commands 

and controls functions for contingency operations and logistics 

supply chain planning. J3 maximizes the readiness and logistics combat power by leveraging enterprise solutions to support 

DLA’s global customer base.

DLA INFORMATION OPERATIONS (J6) as 

DLA’s knowledge broker, provides comprehensive, best practice IT support to the DoD/DLA Logistics Business Community, 

resulting in customer support; efficient and economical computing; data management; electronic business; telecommunication services; key management; and secure voice systems 

for DoD, DLA, and geographically separated operating locations. The Director of Information Operations serves as DLA’s 

CIO. DLA Information Operations also manages DLA’s R&D IT 

program. 

DLA ACQUISITION (J7) is responsible for planning, 

organizing, directing, and managing the procurement and contract administration functions for DLA acquisition in support of 

both internal operations and other supported activities. The Director of DLA Acquisition also serves as the Agency’s Component Acquisition Executive. DLA Acquisition provides oversight 

of DLA Contracting Services Office. 

DLA FINANCE (J8) is responsible for obtaining and allocating resources; analyzing execution; and providing fiscal 

guidance and advice to support the Agency, its business areas, 

and its MSCs in accomplishing DLA’s mission. DLA Finance 

prepares the AFRs and guides DLA in its Audit Remediation 

efforts. The Director of Finance also serves as DLA’s CFO. 

DLA JOINT RESERVE FORCE (J9) provides DLA 

with trained, ready, and available reservists from the Army, 

Air Force, Navy, and Marine Corps for worldwide contingency 

operations and support of ongoing operations, surge requirements, and logistics planning.

DLA OFFICE OF SMALL BUSINESS 

PROGRAMS (DB) provides small business advocacy 

and promotes small business utilization to strengthen the competency, capability, and commitment of the industrial base that 

fulfills DLA’s mission as the Nation’s Combat Logistics Support 

Agency. DLA Office of Small Business Programs is responsible 

for implementation of the Procurement Technical Assistance 

Program to expand the number of businesses capable of participating in contracts with DoD, other Federal Agencies, state 

and local governments, and government prime contractors. 

DLA GENERAL COUNSEL (DG) delivers professional, candid, and independent legal advice and services to 

DLA. 

DLA COMMAND CHAPLAIN (DH) serves as the 

program manager for religious support logistics. This office 

provides the DLA Director and the staff a clear picture of workforce morale as affected by religion, ensuring the free exercise 

of religion to support the Warfighter and the employees in the 

workplace at DLA. 

DLA INSTALLATION MANAGEMENT (DM) provides enterprise-wide Agency policy, program, and worldwide 

operational support in environmental management; safety and 

occupational health; installation management; public safety; 

forms and policy management; and morale, welfare, and recreation for DLA. 

Appendix B: J/D Codes, DLA HQ 

Program Support Structure, Roles and 

Responsibilities

Appendix B | J/D Codes, DLA HQ Program Support Structure, Roles and Responsibilities 
Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 134

DLA EQUAL EMPLOYMENT OPPORTUNITY 

AND DIVERSITY OFFICE (DO) provides DLA senior 

leadership, staff, and subordinate commands enterprise-wide 

respondent and subject matter expertise on all Equal Employment Opportunity Compliance oversight, Affirmative Employment and Diversity and Inclusion. 

DLA PUBLIC AFFAIRS (DP) provides public affairs 

support, communication strategy development, and engagement guidance to DLA senior leadership, staff, and subordinate 

commands. The DLA Public Affairs office develops and administers internal news and information; manages DLA social media and public engagement policies; and develops programs 

that communicate DLA’s role as a Combat Support Agency 

that adds value to the Defense Department, military services, 

CCMDs and the American people. 

DLA TRANSFORMATION (DT) directorate synchronizes strategy, policy, and process to support the Warfighter, strengthen alliances and drive innovation. DT manages 

DLA’s strategic plan, executive governance forums, and the 

Agency-wide deployment of Enterprise Process Management, 

Continuous Process Improvement, Enterprise Organizational 

Alignment, and Enterprise Policy Management programs. 

DLA OFFICE OF THE INSPECTOR GENERAL 

(OIG) coordinates and synchronizes GAO and Department 

of Defense Office of Inspector General (DoDIG) audits with 

all DLA components; tracking, monitoring, and assessing the 

implementation of audit corrective actions and communicating 

completion results. They sustain strategic engagement with the 

Defense Counsel on Integrity and Efficiency and their subcommittees, as well as relationships with DoDIG Criminal Investigative Services, Military Criminal Investigation Services, and 

other Law Enforcement Agencies. DLA OIG also conducts administrative investigations and crime vulnerability assessments 

that align with Agency risks and strategic goals. The DLA OIG 

internal audit plan is derived from DLA’s ERM efforts, and also 

encompasses external audit projects derived from GAO’s highrisk list.

J/D Codes, DLA HQ Program Support Structure, Roles and Responsibilities | Appendix B
135 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

Appendix C | Abbreviations & Acronyms

Appendix C: Abbreviations & Acronyms

A&FP Accounting & Finance Policy Directorate

A/BO Approving/Billing Officials

ACT Active

ADA Anti-Deficiency Act

AFR Agency Financial Report

A/OPC Agency/Organization Program Coordinators

APR Annual Performance Report 

AWARS Automated Workflow and Reporting System

BRAC Base Realignment and Closure

C&T Clothing and Textiles

CAC Common Access Card

CAPs Corrective Action Plans

CARES Coronavirus Aid, Relief, and Economic Security (CARES) Act 

CCMD Combatant Command

CCs Critical Capabilities

CFO Chief Financial Officers

Charge Card Act Charge Card Abuse Prevention Act

CIO Chief Information Officer

CIP Construction-in-Progress

CMR Cash Management Report

COLA Cost-of-Living Adjustments

COTS Commercial Off-the-Shelf

COVID-19 Coronavirus-19

CPM Component Program Manager 

CRO Chief Risk Officer

CRR Cost Recovery Rate

CSRS Civil Service Retirement System

CTC Cost To Complete 

DATA Act Digital Accountability and Transparency Act of 2014

DCAS Defense Contract Administration Services

DCIA Debt Collection Improvement Act

DFAS Defense Financial and Accounting Services

DAI Defense Agencies Initiative

DISA Defense Information System Agency 

DLA Defense Logistics Agency

DM-I Installation Management – Installation & Equipment

DoD Department of Defense

DOL Department of Labor

ODCFO Deputy Chief Financial Officer

DQP Data Quality Plan

DSA Defense Supply Agency

DSS Distribution Standard System

EBS Enterprise Business System

ECC Resource Planning Central Component

EL Environmental and Disposal Liabilities 

ERM Enterprise Risk Management

ERP Enterprise Resource Planning

FASAB Federal Accounting Standards Advisory

FBwT Fund Balance with Treasury

FECA Federal Employees’ Compensation Act

FEMA Federal Emergency Management Agency

FERS Federal Employees Retirement System

FFMIA Federal Financial Management Improvement Act 

FFMSR Federal Financial Management System Requirements

FMFIA Federal Managers’ Financial Integrity Act

FMR Financial Management Regulations

FMS Foreign Military Sales

FPAs Federal Program Agencies

FRDAA Fraud Reduction and Data Analytics Act

FY Fiscal Year

GAAP Generally Accepted Accounting Principles

GAO Government Accountability Office

GF General Fund

GMRA Government Management Reform Act
Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report 136

 Abbreviations & Acronyms | Appendix C

GPC Government Purchase Card 

GPRA Government Performance and Results Act

GSA General Services Administration

HHS Health and Human Services

HQ Headquarter 

ICOFS Internal Controls Over Financial Systems

ICOR Internal Control over Reporting

ICOR-O Internal Control over Operations

ID Identification

IH Industrial Hardware

IOD Insight on Demand

IPA Independent Public Accounting

IPERIA Improper Payments Elimination and Recovery Improvement Act

IPIA Improper Payments Information Act of 2002

IPs Improper Payments

IT Information Technology

IUS Internal Use Software

LOEs Lines of Effort

MOCAS Mechanization of Contract Administration Service 

MSC Major Subordinate Command

NDAA The National Defense Authorization Act

NDS National Defense Strategy

NFR Notice of Findings and Recommendations

NSA National Security Agency

OCONUS Outside the Continental United States

ODCFO Office of the Deputy Chief Financial Officer

ODOs Other Defense Organizations

OI Other Information

OIG Office of the Inspector General

OMB Office of Management and Budget

OPM Office of Personnel Management 

OSHA Occupational Safety and Health Administration

OUSD Office of the Under Secretary of Defense

OUSD(C) Office of the Under Secretary of Defense (Comptroller)

OWCP Office of Workers’ Compensation Programs 

P3 Public-Private Partnerships

PMO Program Management Office

PP&E General Property, Plant and Equipment

PPA Prompt Payment Act

PPE Personal Protective Equipment 

R&D Research & Development

RACER Remedial Action Cost Engineering and Requirements

RCRA Resource Conservation and Recovery Act

RSI Required Supplementary Information

RMIC Risk Management and Internal Control

SAO Senior Accountable Official

SAP Systems Applications and Product

SFFAS Statement of Federal Financial Accounting Standards 

SFIS Standard Financial Information Structure 

SLOA Standard Line of Accounting 

SOA Statement of Assurance

SMC Senior Management Council

TAS Treasury Account Symbol 

TDD Treasury Direct Disbursing

TF Transaction Fund

TI Treasury Index

TNC Treasury Nominal Coupon

U.S. United States 

UCO Unfilled Customer Orders

UDO Undelivered Orders 

USMC United States Marine Corps

USSGL U.S. Standard General Ledger

VV&A Validated, Verified, and Accredited

WCF Working Capital Fund

WMS Warehouse Management System
Appendix A | Summary of FMFIA Definitions and Reporting

137 Defense Logistics Agency | FY 2021 General Fund | Agency Financial Report

 Acknowledgments | Appendix C

This AFR was prepared with the energies and talents of many 

employees across DLA and contract partners. A special note 

of appreciation is extended to the many diligent employees in 

the Financial Reporting Division within the Office of the CFO, 

for your time and efforts in preparing the AFR.

The DLA also would like to thank the Audit Task Force for 

coordinating the external audit of the Agency’s financial 

statements. 

The DLA offers our sincerest thanks and acknowledgment 

to the DLA Director, Senior Executive Leaders and their 

respective staff for their commitment to improve financial 

accountability and transparency, while executing the primary 

mission of Sustaining the Warfighter.

Acknowledgments