♦♦♦

 Andrew T. McNamara Building | 8725 John J. Kingman Road Fort Belvoir, VA 22060-6221 | Visit us at www.dla.mil

The Defense Logistics Agency (DLA) headquarters, also known as the Andrew T. McNamara Headquarters Complex, 

at Fort Belvoir, Virginia. The headquarters contains numerous offices responsible for supporting the overall agency. 

DLA provides supplies to the military services and supports their acquisition of weapons, fuel, repair parts, and other 

materials. The agency also disposes of excess or unusable equipment through various programs.

The Defense Logistics Agency (DLA) Headquarters

DEFENSE LOGISTICS AGENCY

FY 2022 | Working Capital Fund

AGENCY FINANCIAL REPORT
Agency Financial Report | FY 2022 WORKING CAPITAL FUND | Defense Logistics Agency i

ABOUT THE AGENCY FINANCIAL REPORT

All information within this report pertains to DLA WCF unless 

specifically noted otherwise. DLA WCF’s financial results are 

unaudited because there are limitations due to underlying processes and internal controls that support the principal financial statements. DLA WCF 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 WCF, including DLA’s history, mission, and organizational structure; 

DLA WCF’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) Working Capital Fund 

(WCF) 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 WCF financial statements 

and other reports. The principal financial statements1 have 

been prepared to report the financial position and results of 

DLA WCF’s operations. The principal financial statements and 

accompanying notes have been prepared from the books and 

records of DLA WCF using guidance from the following applicable laws and regulations for which DLA WCF 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 WCF’s compliance with, and commitment to, specific regulations. It includes Summary of Financial 

Statement Audit and Management Assurances, foregone revenue reporting, management and performance challenges, and 

payment integrity 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;

● Payment Integrity Information Act of 

(PIIA) 2019

● 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.

TABLE OF CONTENTS

IV

Message from the Director

2 SECTION 1

Management’s Discussion 

and Analysis (Unaudited)

4 Mission and Organizational Structure

12 Performance Goals, Objectives, and 

Results

28 Analysis of Financial Statements and 

Stewardship Information

36 Analysis of Systems, Controls, and 

Legal Compliance

46 Forward-Looking Information

50 SECTION 2

Financial Section (Unaudited)

52 Message from the Chief Financial 

Officer

53 Audit Reports 

95 Management’s Response to Audit 

Reports 

96 Introduction to the Principal Financial 

Statements

97 Principal Financial Statements 

(Unaudited) 

101 Notes to the Principal Financial 

Statements (Unaudited)

142 Required Supplementary Information

The AFR is available on the DLA website at: 

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

148 SECTION 3

Other Information (Unaudited)

150 Summary of Financial Statement Audit 

and Management Assurances 

154 Foregone Revenue

155 Management Challenges

158 Payment Integrity

160 APPENDIX

161 Appendix A: Summary of FMFIA 

Definitions and Reporting

163 Appendix B: J/D Codes, DLA HQ 

Program Support Structure, Roles and

Responsibilities 

166 Appendix C: Abbreviations &Acronyms 

168 Acknowledgments

Army Sgt. Courtney Hawthorne hands a box of diapers 

to Sgt. George Alexander at Fort McCoy, Wisconsin, 

Dec. 28, 2021. The diapers and other supplies were 

donated to Afghan guests at the installation. 

Photo by: Army Sgt. Yesenia Barajas

◄ Donation Duo
iv Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report 

Message from the Director 

MESSAGE FROM THE DIRECTOR

FY 2022 | Working Capital Fund

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

Fiscal Year (FY) 2022 Agency Financial Report. Over the last year, DLA 

celebrated its accomplishments spanning the past six decades. We are laserfocused on serving the Warfighter, and remaining 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. 

Notwithstanding the dramatic increases in fuel costs driven by the Ukraine conflict and 

continued impacts of the pandemic on global supply chains, we effectively and efficiently 

supported our customers. Additionally, the Agency continued to support efforts to combat 

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

military service members and families and to other Department of Defense customers. As always, our support to relief efforts for 

natural disasters, including hurricanes, flooding in Tennessee, and wildfires in California demonstrate our critical role in supporting 

the Nation.

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

Capital Fund (WCF) Financial Statements. Information obtained through this report will be valuable in our ongoing efforts to 

improve all aspects of DLA WCF 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 continues to 

track and remediate material weaknesses in these 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’s efforts have increased accountability, communication, and 

support across all levels of the organization to better focus our attention and align resources to areas with the most critical need 

and potential impact. DLA fully supports the overall Department of Defense priorities to deliver transparent financial reporting with 

integrity and agility in support of the National Defense Strategy. DLA will review audit results, identify root causes, prioritize 

resources, and develop corrective action plans. This effort will rely on continued identification of risks and establishing firm internal 

controls to address the risks throughout every process. 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.
Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report v

Message from the Director

♦♦♦

As we close out DLA’s Diamond Anniversary year, I am proud of our legacy and our 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.” 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.

An airman guides a rough terrain container handler during 

a demonstration in Southwest Asia, Jan. 29, 2022.

Management’s Discussion 

and Analysis

SECTION 1

DEFENSE LOGISTICS AGENCY

◄ CONTAINER HANDLER - SOUTHWEST ASIA

2

Page no. 

PHOTO BY: AIR FORCE SGT. CHRISTOPHER PARR

UNAUDITED

FY 2022 | Working Capital Fund
IN THIS SECTION:

4 Mission and Organizational Structure

12 Performance Goals, Objectives, and Results

28 Analysis of Financial Statements and Stewardship Information

36 Analysis of Systems, Controls, and Legal Compliance

46 Forward-Looking Information

SECTION 1 UNAUDITED

Management’s Discussion 

and Analysis

FY 2022 | Working Capital Fund

Training Duo

Soldiers discuss mission plans before moving to a simulated objective during training at Pohakuloa Training 

Area, Hawaii, Oct. 18, 2021. Photo Credit: Army Spc. Rachel Christensen
Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report 4

Management’s Discussion and Analysis (Unaudited) | SECTION 1

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

military buildup required the rapid procurement of vast amounts 

of 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.

Forged by History, Focused on the Future: 

A Short History of the Defense Logistics Agency

Rows of Jeeps Stretch to the Horizon

The vehicles would be sold to veterans and auctioned off to the public during large war surplus sales conducted 

after World War II. Photo by: Department of Defense

MISSION AND ORGANIZATIONAL STRUCTURE

♦♦♦
5 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

SECTION 1 | Management’s Discussion and Analysis (Unaudited)

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 in 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, DoD recognized this expanded mission 

by renaming DSA the DLA. 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 most manufactured 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 (DCMC).

A robust contract management capability proved indispensable after Iraq invaded Kuwait in 1990. While DCMC revitalized an industrial base weakened by the end of the Cold War, 

the rest of the Agency housed, fed, equipped, and fueled a 

500,000-person force in an austere land. In all, DLA processed 

1.7 million requisitions, shipped $32 billion in spare parts, and 

contracted for $4.6 billion more: exemplary support that earned 

it its first joint unit meritorious award. 

The Agency continued reorganizing after troops returned 

home. In April 1990, DoD gave DLA the mission of overseeing 

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 

1961

The DSA 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. 
Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report 6

Management’s Discussion and Analysis (Unaudited) | SECTION 1

of Base Realignment and Closure (BRAC) 88, DLA HQ moved 

from Cameron Station, VA, to Fort Belvoir, VA. In the mid1990s, 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 Support Center collocated 

with Defense Industrial Supply Center in northern Philadelphia 

to form Defense Supply Center Philadelphia. Finally, Defense 

Automated Publishing Service (formerly 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 $6.9 billion, provided 180.5 million field meals, supplied 

nearly 2.0 million humanitarian daily rations, and sourced more 

than 3.0 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.

DLA continues to provide logistics, acquisition, and technical 

services to DoD and other customers and 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.

2020-22

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.
7 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

SECTION 1 | Management’s Discussion and Analysis (Unaudited)

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 multinational forces engaged 

in large-scale combat operations, weapons and spares provisions, peacekeeping efforts, and emergency support to humanitarian assistance.

The DLA WCF employs approximately 23,792 civilian 

personnel, 532 active-duty military personnel, and 754 reserve 

personnel, who operate a global enterprise in 20 countries and 

46 states. Civilian personnel are paid from DLA WCF while 

active-duty military personnel and reserve personnel are paid 

from their respective Military Departments.

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.

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

which are represented through its efforts and impact around the world.
Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report 8

Management’s Discussion and Analysis (Unaudited) | SECTION 1

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

Federal law specifying annual budget and expenditures of the 

DoD. As part of fulfilling the government’s duty to be publicly 

accountable for budgetary resources, DLA WCF maintains 

accountability primarily through contract authority for its 

operating and capital programs, as it relates to its two major 

activity groups: Energy and Supply Chain Management (SCM). 

DLA WCF rigorously plans, executes and monitors budgetary 

resources, sales patterns, and rates of obligation in excess of 

$53.2 billion annually, while ensuring its mission of supplying 

American Warfighters with critical support. These resources 

are utilized in accordance with prevailing laws and regulations.

The DLA WCF has three major activity groups: Energy, SCM, 

and Document Services. Energy and SCM collaborate with 

Distribution and Disposition Services to form the six Major 

Subordinate Commands (MSCs) (as depicted in Figures 1 and 

3). The Energy activity group manages the Energy MSC, and 

the SCM activity group manages the other five MSCs. The 

term MSC was devised by DLA’s Director to reflect the flow of 

acquiring supplies, distributing supply materials, and disposing 

of excess supplies. In its support role, Distribution provides 

worldwide storage and distribution services to the eight supply 

chains described on the next page, while Disposition Services 

partners with DLA WCF’s supply chains, DoD components 

(including the U.S. Army, Navy, and Air Force), other Federal 

Agencies, and public entities to reutilize, transfer, sell, and 

donate surplus property and dispose of hazardous waste.

The third DLA WCF activity, Document Services, operates 

primarily through spending authority from offsetting collections and outside of the MSCs. Its role is to provide preferred 

DoD document and printing services, as well as provide those 

services to other Federal Agencies.

The DLA WCF manages eight supply chains through the 

Energy and SCM activity groups and supports more than approximately 2,400 weapon systems. The eight supply chains 

are: Aviation Systems, Land Systems, Maritime Systems, Fuel/ 

Energy, Subsistence, Medical, Clothing and Textiles (C&T), 

and Construction and Equipment (C&E). In FY 2020, Industrial Hardware (IH) was absorbed and transferred between 

Aviation Systems, Land Systems, and Maritime Systems. In 

FY 2022, the IH national stock numbered items and workload 

were divided between Land Systems, Maritime Systems, and 

Aviation Systems. The Energy activity group manages the 

Energy supply chain, and the SCM activity group manages the 

other seven supply chains. Agency leaders are committed to 

the continuous assessment and transformation of the organizational culture, size, structure, and alignment through enterprise integration and partnering with the private sector. Organizing as a single, integrated business enterprise enables DLA 

WCF to focus on supporting DoD components, other Federal 

Agencies, and public entities, enhancing the Armed Forces’ 

readiness, and providing for the Warfighter during contingency 

operations.

Figure 1: DLA MSC Chart

WARFIGHTER ALWAYS

SIX MAJOR SUBORDINATE COMMANDS/BUSINESS UNITS

BUY STORE /DISTRIBUTE DISPOSE

End-to-End Global 

Supply Chain Management

• $39.5B in Revenue

• $13B in Small Business

• $6.4B in support to Whole Government

• $433M in AbilityOne

• ~100% Military Services’ Consumables

• Over 10K Suppliers

• 10K Awards per day (94% automated)

• Manage over 5M line items

• $205B Active Contracts Managed

• 26K Workforce, 2K Forward Positioned 

• Executive Agent for Bulk Fuel, Medical 

Materiel, Subsistence, Construction & 

Barrier Materiel

TROOP SUPPORT

PHILADELPHIA, PA

Global Supply Chains:

Subsistence, Clothing 

& Textiles, Construction 

& Equipment, and 

Medical

• $21.5B Revenue

• 51K+ Customers

• 3 Locations

LAND AND 

MARITIME

COLUMBUS, OH

Repair parts and 

Industrial Hardware 

(IH) for ground-based 

and maritime 

systems

• $3.9B Revenue 

• 13K+ Customers

• 2K weapon systems 

• 8 Locations

AVIATION

RICHMOND, VA

Repair parts and IH 

for aviation systems, 

nuclear systems, 

maps and Industrial 

Plant Equipment

• $4.9B Revenue

• 13K+ Customers

• 2K weapon systems

• 19 Locations

ENERGY

FORT BELVOIR, VA

Global fuel and 

comprehensive 

energy solutions

• $9.5B Revenue

• 4K+ Customers

• 602 Fuel Locations

DISTRIBUTION

NEW CUMBERLAND, PA

Global storage and 

distribution solutions

• $980M in Revenue

• 243K+ Customers

• $105B in Inventory

• 43 Locations

DISPOSITION 

SERVICES

BATTLE CREEK, MI

Global solutions for 

disposal of 

excess property

• $418M Revenue

• 31K+ Customers

• Reutilization: $2.5B

• 89 Locations

PLAN / SURGE *Year End FY 18
9 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

SECTION 1 | Management’s Discussion and Analysis (Unaudited)

How DLA WCF Accomplishes its Mission

The DLA WCF has three major activity groups: Energy, SCM, and Document Services.

The three major activity groups are described below:

Energy

The DLA Energy activity group provides the DoD components 

(including the U.S. Army, Navy, and Air Force), other 

Federal Agencies, and public entities with comprehensive 

energy solutions worldwide. To do so, DLA Energy manages 

the Energy supply chain for energy-related products and 

services from jet fuel and natural gas to quality assurance 

and utility services, and many more. DLA Energy manages 

the following major product areas: Aerospace Energy, Bulk 

Petroleum Products, Direct Delivery Fuels, and Installation 

Energy. Additionally, DLA Energy provides services such as 

Government Fuel Cards, quality-related services, international 

fuel agreements, utility services contracts, and research and 

development (R&D) of alternative fuels to customers.

Supply Chain Management

The DLA SCM activity group is responsible for managing 

seven supply chains and associated weapons systems. DLA 

SCM also provides logistics and material process management 

policy, guidance, and oversight while conducting continuous 

assessments of supply chain performance. DLA SCM 

integrates strategic, operational, and tactical perspectives, 

command and control functions for contingency operations, 

and adaptive planning in order to influence the logistics supply 

chain. Additionally, DLA SCM operates a global network of 

distribution centers and Disposition Services for reutilization, 

transfers, and donations. DLA WCF’s warehousing strategy 

is driven by the commitment to better serve Warfighters, 

collocating with the Armed Forces while placing supplies 

where they are most needed.

Document Services

Operating independently and apart from the two activity 

groups discussed above, DLA Document Services is the 

preferred provider for document automation services to 

the DoD and is also designated as the single manager for 

printing and high-speed, high-volume duplicating in the 

DoD. Document Services provides printing, duplicating, and 

document automation services within the DoD to include 

document workflow conversion, electronic storage and 

output, multifunction devices, office printers, and distribution 

of hard copy and digital information. Through Document 

Services, DLA WCF helps customers reduce storage costs, 

increase efficiency of information sharing, and provide more 

functionality at a significantly lower cost.

Sea Ops

Marines conduct combat rubber raiding craft operations from the well deck of the USS Green Bay in the Philippine Sea, 

Feb. 6, 2022. Photo By: Navy Petty Officer 2nd Class Jonathan D. Berlier
Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report 10

Management’s Discussion and Analysis (Unaudited) | SECTION 1

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 2: DLA Organizational Chart
11 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

SECTION 1 | Management’s Discussion and Analysis (Unaudited)

DLA Organizational Structure

Figure 3: DLA Organizational Structure

DLA CENTCOM & SOCOM

MacDill Air Force Base, FL

DLA EUCOM & AFRICOM

Stuttgart, Germany

DLA INDOPACOM

Joint Base Pearl Harbor-Hickam, HI

Defense Logistics Agency

Fort Belvoir, VA

DLA Aviation

Richmond, VA

Provides parts for aviation 

weapons systems, flight 

safety equipment, maps, 

environmental products, 

industrial hardware and 

industrial plant equipment.

DLA Land and Maritime

Columbus, OH

Provides repair parts for 

ground-based and Maritime 

weapons systems, small 

arms parts, fluid handling, 

consumable hardware, and 

electronic components.

DLA Troop Support

Philadelphia, PA

Provides food, textiles, 

construction material, 

medical supplies and 

equipment, to include 

pharmaceuticals.

DLA Energy

Fort Belvoir, VA

Provides bulk fuel, 

alternative fuel/renewable 

energy. aerospace energy, 

fuel quality/ technical 

support, fuel card programs 

and installation energy 

services.

DLA Distribution

New Cumberland, PA

Provides storage and 

distribution solutions/

management, transportation 

planning/management 

and logistics planning and 

contingency operations; 

operates a global network 

of distribution centers.

DLA Disposition Services

Battle Creek, MI

Disposes of excess property by reutilization, transfer 

and demilitarization; 

conducts environmental 

disposal and reuse.

Office of the Secretary of Defense

Under Secretary of Defense

(Acquisition and Sustainment)

Assistant Secretary of Defense

(Sustainment)
Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report 12

Management’s Discussion and Analysis (Unaudited) | SECTION 1

PERFORMANCE GOALS, OBJECTIVES, AND RESULTS

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 WCF, and will include its FY 2022 

APR with its FY 2024 Congressional Budget Justification. The 

APR is located at: https://dam.defense.gov/Publications/Annual-Performance-Plan-and-Performance-Report/

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 the Director’s specific emphasis 

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

and CCs below.

Cleanup in Cuba

Navy Petty Officer 2nd Class Shana 

Martin cleans the transmission of 

an MH-60S Seahawk helicopter 

aboard the USS Milwaukee at 

Naval Station Guantanamo Bay, 

Cuba, Jan. 2, 2022. Photo By: Navy 

Petty Officer 2nd Class Danielle 

Baker

Figure 4: Lines of Effort and Critical Capabilities

CC-A: People & Culture >

 Supporting our people

CC-B: Fiscal Stewardship >

 Investing in outcomes

CC-C: Digital-Business Transformation >

 Embracing the Future 

Critical Capabilities (CC):

Success across all Lines of Effort

Lines of Effort (LOE): Core strategic outcomes of DLA's Targeted Transformation

LOE 1 LOE 2 LOE 3 LOE 4 LOE 5 

Tailors solutions to 

drive readiness

Deliberate approach, 

without tradeoff to 

the Warfighter

Transparency and 

accountability to 

our customers

Leading in logistics 

to deliver best value 

and manage risk

Adapting to new 

ways of working

Warfighter

Always

Support

to the

Nation

Trusted

Mission

Partner

Modernized

Acquisition and

Supply Chain

Management

Future

of Work
13 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

SECTION 1 | Management’s Discussion and Analysis (Unaudited)

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 Service-specific 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, enterprise-wide 

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.

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.

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 WCF and have been identified accordingly below.

LOE 3: Trusted Mission Partner

Objective 3.1: Implement customer-centric 

performance metrics and predictive problem-solving 

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 problem-solving 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 Supply 

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

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.
Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report 14

Management’s Discussion and Analysis (Unaudited) | SECTION 1

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.

Preparing Samples

Air Force Tech. Sgt. 

Max-Eddie Ibarrientos 

prepares a sample to test 

for COVID-19 at Joint Base 

Elmendorf-Richardson, 

Alaska, March 16, 2022.. 

Photo By: Air Force Senior 

Airman Samuel Colvin
15 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

SECTION 1 | Management’s Discussion and Analysis (Unaudited)

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.

Critical Capability B: Fiscal Stewardship

Objective B1: Auditability

Objective B2: Cost visibility and cash management

Objective B3: Investment to drive efficiency and 

effectiveness

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

Pre-Flight Check

Marines conduct pre-flight checks on an F-35B Lightning II on the Royal Navy aircraft carrier HMS Queen Elizabeth 

in the Mediterranean Sea, Nov. 24, 2021. Photo Credit: Marine Corps 1st Lt. Zachary Bodner
Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report 16

Management’s Discussion and Analysis (Unaudited) | SECTION 1

Performance Measures (Unaudited)

DLA Supply Chain Management (Non-Energy)

Performance Measure 1: Material Availability to Warfighters

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; and Objective 4.4: Enhance our acquisition capabilities to improve 

readiness for contingencies

The DLA SCM strives to predict supply needs to equip the 

Warfighter efficiently and effectively. The following analysis 

applies to Non-Mission Critical Supplies; the results display 

acquisition and supply activities for regular procurement items.

DLA continues its efforts in meeting high material availability 

expectations by employing smart budgetary resource use techniques and leveraging rapid acquisition opportunities to meet 

expectations. WCF Supply Chain Management will continue 

to evaluate purchase, storage, and distribution processes, 

planning to implement modifications which are cost-justified 

and will increase efficiency and product availability in future 

periods.

For FY 2022, the actual average Material Availability was 

87.5%, 2.5% lower than the 90% target. This variance from 

target was driven by significant global supply chain challenges 

caused by the COVID pandemic. In addition, a Supply Chain 

Realignment Initiative caused organizational disruptions; the 

transfer of Industrial Hardware’s supply chain to DLA Aviation 

and DLA Land and Maritime is expected to eventually create 

efficiencies and support increased material volume, however, 

in the short term the FY 2021 & FY 2022 transition has resulted 

in temporary disruptions and inefficiencies. 

Figure 5: Supply Availability to Warfighters by Military Command
17 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

SECTION 1 | Management’s Discussion and Analysis (Unaudited)

DLA Supply Chain Management (Non-Energy)

Performance Measure 2: “Wait Time” to Fill Supply Orders for Supply Chains

The DLA WCF tracks the average amount of wait time that 

occurs to fill backorders for its SCM. DLA WCF aims to minimize 

the amount of time required to fill backorders to increase the 

readiness of the Warfighter. Over the past two years, the 

average SCM wait time results have trended upwards, with 

the most significant increase in C&T. DLA WCF’s emphasis 

on filling high priority non-mission capable supply backorders 

and weapon system readiness-based orders has allowed lower 

priority orders to age more than in the past. When those lower 

priority orders are not filled, they drive up the average wait 

time. Additionally, FY 2021 and FY 2022 supply chain disruptions were driven by the COVID-19 Pandemic, also having an 

unfavorable impact on wait time.

The DLA SCM wait time to fill backorders for the Military Departments over the past four fiscal years is illustrated below 

for the following SCM supply chains: Aviation, Land, Maritime, 

C&E, Medical, C&T, and Food (Subsistence). The Industrial Hardware supply chain, which had existed in prior years, 

was realigned in FY 2022, with its activity transferred to DLA 

Aviation and DLA Land and Maritime. This realignment is 

expected to create future efficiencies and support increased 

material volume. 

DLA WCF SCM applies variable strategic acquisition techniques to minimize supply wait times to supply the Warfighters efficiently and effectively. WCF Supply Chain Management 

will continue to evaluate purchase, storage, and distribution 

processes, planning to implement modifications which are 

cost-justified and will increase efficiency and product availability in future periods.

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; and Objective 4.4: Enhance our acquisition capabilities to improve readiness for 

contingencies

Figure 6: Wait Time to Fill Supply Orders for Supply Chain Management (in days)
Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report 18

Management’s Discussion and Analysis (Unaudited) | SECTION 1

DLA Supply Chain Management (Non-Energy)

Performance Measure 3: “COVID-19 Support”

This performance measure relates to the objective described above:

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

The DLA provides agency-wide pandemic support to aid the 

whole-of-government COVID-19 response, which became 

apparent in February 2020. For instance, DLA Disposition 

Services provides reutilized medical supplies, while DLA Land 

and Maritime provides repair parts for hospital ships and DLA 

Energy provides the fuel.

The DLA WCF, in partnership with HHS, FEMA and other 

Federal Agencies, works to support the president in responding to COVID-19 challenges in procuring personal protective equipment (PPE) and replenishing the nearly depleted 

Strategic National Stockpile (SNS). DLA Troop Support is 

primary in this effort, coordinating procurement and delivery 

activities for COVID-19 supplies and SNS replenishment. 

The supplies procured as of September 30, 2022, as illustrated below, include test components, gloves, hand sanitizers, 

masks, N95 respirators, gowns, BinaxNOW Point-of-Cares 

(POCs), COVID-19 Over-the-Counter (OTC) self/home tests 

and COVID-19 test kits.

For FY 2022, DLA Troop Support’s procurement goal based 

on customer orders was to supply 2.5 million test components, 202.0 million gloves, 0.3 million hand sanitizers, 17.7 

million masks, 2.0 million N95 respirators, 2.9 million gowns, 

2.9 million BinaxNOW POCs, 14.0 million COVID-19 OTC self/

home tests, and 0.6 million COVID-19 test kits. Differences 

between customer orders and materials received were due to 

backorders of remaining supplies. DLA operations have been 

refining the data accumulation and reporting for this measurement, and the FY 2021 amounts currently being reported 

reflect improved data accumulation and categorization.

*Test Components included Specimen Collection Swabs, Transport Medium, and Viral Transport Swab Kits.

Figure 7a: FY 2022 Procurement of Critical Medical Supplies & PPE versus Goal
19 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

SECTION 1 | Management’s Discussion and Analysis (Unaudited)

*Test Components included Specimen Collection Swabs, Transport Medium, and Viral Transport Swab Kits.

Figure 7b: FY 2022 Procurement of Critical Medical Supplies & PPE versus FY2021

Home Test Kits

Naval Health Clinic Hawaii distributed at-home COVID-19 test kits at Branch Health Clinic to eligible TRICARE 

beneficiaries March 9 and March 11, 2022, in Kaneohe Bay, Hawaii. HC Kaneohe Bay is one of four sites in the Hawaii 

Market distributing free test kits to beneficiaries. Photo By: Macy Hinds, Navy
Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report 20

Management’s Discussion and Analysis (Unaudited) | SECTION 1

DLA Supply Chain Management (Non-Energy) 

Performance Measure 4: “COVID-19 Vaccine Distribution”

This performance measure relates to the objective described above:

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

The DLA provided support to DoD health initiatives by partnering with DHA to create a COVID-19 vaccine distribution plan 

in October 2020. Since Fall 2020, DLA representatives have 

been embedded in the DoD COVID-19 Vaccine Operational 

Planning Team, working extensively to leverage interagency partnerships in planning, executing, and tracking vaccine 

shipments to 104 military treatment facilities and fleet sites 

overseas. DLA plans COVID-19 vaccine shipments according 

to orders placed by the Military Services, who receive requirements from combatant commands.

The following performance summary uses key indicators to 

gauge trends in performance. Vaccine allocations are quantities which are requisitioned for the use of each Military 

service and vaccine deliveries are quantities supplied to the 

military treatment facilities. As of September 30, 2022, DLA 

has delivered over 1,360,000 Moderna, Janssen, and Pfizer 

vaccine doses to DoD vaccination sites in 35 countries. Overall, 

approximately 100% of doses allocated have been delivered. 

About 9.3% of those doses were delivered through intermediate distribution facilities in Europe, Asia, and the Middle East. 

From there, shipments are scheduled for onward movement to 

treatment facilities and clinics using local transportation and 

military airlift.

WCF Supply Chain Management will continue to evaluate 

purchase, storage, and distribution processes for COVID-19 

supplies, planning to implement modifications which are 

cost-justified and will increase efficiency and product availability in future periods.

Figure 8: 2022 Performance Measures: COVID-19 Vaccine Distribution
21 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

SECTION 1 | Management’s Discussion and Analysis (Unaudited)

DLA Energy

Performance Measure 1: Fuel Sales in Barrels by DoD Component

The DLA WCF supports other DoD Agencies through fuel 

sales. This allows for increased interagency support through 

self-sustainment of fuel. For FY 2022, DLA Energy budgeted to 

sell 76.6 million barrels to DoD Agencies, and actual fuel sales 

to DoD components were 73.2 million barrels. Demand affects 

actual fuel sales year-over-year, and DoD's mission dictates 

the amount of fuel DoD purchases. For example, if training or 

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; and Objective 2.1: Implement a 

deliberate, enterprise-wide approach to Whole of Government support.

flying hours decreased for DoD components, less fuel would 

be purchased during the year. Due to the reduction of operations overseas, the actual sales did not meet the budgeted 

sales for the year. WCF Energy will continue to evaluate 

fuel purchase, storage, and distribution processes, planning 

to implement modifications which are cost-justified and will 

increase efficiency and fuel availability in future periods.

Figure 9: Fuel Sales in Barrels by DoD Component

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

Air Force Army Navy Marines and Other

DoD

FY 2019 46.4 9.2 28.0 1.8

FY 2020 45.3 9.0 28.1 1.1

FY 2021 41.2 7.8 27.9 0.7

FY 2022 42.9 7.2 27.0 1.0

Barrels in millions

Fuel Sales in Barrels by DoD Component
Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report 22

Management’s Discussion and Analysis (Unaudited) | SECTION 1

DLA Energy

Performance Measure 2: Fuel Sales in Dollars by DoD Component

Figure 10: Fuel Sales in Dollars by DoD Component

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; and Objective 2.1: Implement a 

deliberate, enterprise-wide approach to Whole of Government support 

For FY 2022, DLA Energy budgeted to sell $9.9 billion of fuel 

to DoD Agencies, and actual fuel sales to DoD components 

Air Force $4,273.3 

Army $768.3 

Marines and Other DoD $98.2 

Navy $2,718.8 

FY 2021 Fuel Sales in Dollars by DoD Component

($ in Millions)

Air Force Army Marines and Other DoD Navy

were $10.3 billion. DLA Energy reports revenues on a net basis 

(gross revenues less direct cost).
23 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

SECTION 1 | Management’s Discussion and Analysis (Unaudited)

DLA Energy

Performance Measure 3: Fuel Sales in Barrels by Non-Federal Customer

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; and Objective 2.1: Implement a 

deliberate, enterprise-wide approach to Whole of Government 

The DLA is authorized to provide its services to the public 

by selling fuel to various non-Federal parties. By doing so, 

DLA is building partnerships with non-Federal customers 

(including commercial entities/Agencies), as well as international partners. For FY 2022, DLA Energy budgeted to sell 

7.0 million barrels to non-Federal customers, and actual fuel 

sales to non-Federal customers was 5.5 million barrels. Due 

to the reduction of operations overseas, the actual sales did 

not meet the budgeted sales for the year. WCF Energy will 

continue to evaluate fuel purchase, storage, and distribution 

processes, planning to implement modifications which are 

cost-justified and will increase efficiency and fuel availability 

in future periods.

Figure 11: Fuel Sales in Barrels by Non-Federal Customers
Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report 24

Management’s Discussion and Analysis (Unaudited) | SECTION 1

DLA Energy

Performance Measure 4: Fuel Sales in Barrels by Federal Civilian Agency

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; and Objective 2.1: Implement a 

deliberate, enterprise-wide approach to Whole of Government

In addition to providing fuel to DoD components and non-Federal entities, DLA WCF also sells fuel to Federal Civilian 

Agencies. DLA WCF supports other Federal Agencies as they 

embark on their daily activities and accomplish their missions. 

DLA wholly supports the government and the entire Nation 

through its supply of fuel. For FY 2022, DLA Energy budgeted 

to sell 4.2 million barrels to Federal Civilian Agencies. 

DLA Energy did not achieve its goal with actual fuel sales of 

3.8 million barrels to Federal Civilian Agencies. WCF Energy 

will continue to evaluate fuel purchase, storage, and distribution processes, planning to implement modifications which are 

cost-justified and will increase efficiency and fuel availability in 

future periods.

Figure 12: Fuel Sales in Barrels by Civilian Agency
25 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

SECTION 1 | Management’s Discussion and Analysis (Unaudited)

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

2020 results 2021 results

70.2% 73.0%

Has DLA responded to employee Pandemic-driven needs by 

providing increased opportunities for Telework? 

(% who responded "yes")

Performance Measure 1: Future of Work 

This performance measure relates to the objectives described above:

Objective 5.1: Redefine virtual work models to enable our next generation workforce; 

Objective 5.2: Assess DLA Contiguous United States (CONUS) facilities footprint to maximize 

space utilization; and Objective 5.3: Build skillsets of the future.

The DLA Human Resources is tasked with advancing a cooperative and supportive workplace culture. That culture was 

instrumental in allowing the Department to quickly adapt to 

extensive telework for many employees in the early days of the 

pandemic, while also allowing the Department to meet mission 

requirements under the unprecedented conditions.

The U.S. Office of Personnel Management (OPM) conducted 

an employee survey for DLA for FY 2021; the survey indicated 

that department-wide teleworking three or more days a week 

increased approximately 250% from 2019 (pre-pandemic) to 

2021. In 2021, 73.0% of DLA employees note that DLA has 

increased opportunities to telework versus 2019. Overall 

employee satisfaction with the DLA organization also increased 

by approximately 7.5% from 2019 to 2021. As the employee 

survey is conducted annually during October/November, the 

FY 2021 data is the latest available for the FY 2022 AFR.

Figure 14: Has DLA provided increased opportunities for Telework?

*2019 survey data is N/A

Figure 13: How often do you telework?

0.0%

20.0%

40.0%

60.0%

80.0%

2019 results

(Pre Pandemic)

2020 results 2021 results

19.3%

71.5% 67.7%

How often do you Telework 

(3 or more days/week)
Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report 26

Management’s Discussion and Analysis (Unaudited) | SECTION 1

Based on this data, it is expected that continuing the increased 

virtual work environment after COVID will support attracting 

and sustaining a competitive workforce, increased productivity, 

and heightened employee satisfaction.

While the Federal government has encouraged its workforce 

to work remotely as possible during the pandemic, specific 

guidance has been tailored to each organization’s work 

requirements. The target for percentage telework for the 

Federal workforce or total DLA has not yet been determined. 

DLA Human Resources is taking action to foster the culture 

of workplace creativity and caring to allow DLA to apply a 

collaborative and innovative spirit, enabling the workforce of 

the future by additional virtual work options, and by maximizing 

space utilization and building newly required skill sets.

Our greatest challenge will be finding the right balance of 

onsite and virtual work. The optimum balance will result in 

meeting employee health, wellness needs, and recruitment 

and retention goals. In addition, maintaining a strong workplace 

culture and continuing to build on interpersonal relationships 

will allow us to exceed expectations when faced with a global 

crisis.

The DLA is taking a thoughtful, holistic approach to shaping 

DLA’s future workplace policies, guided, and informed by efforts 

underway throughout the Federal government, with input from 

our employees, and in cooperation with our labor partners. For 

example, DLA is awaiting guidance from the White House on 

expanded telework opportunities for the Federal workforce so 

DLA can ensure DLA is in compliance with all guidelines and 

directives.

Figure 15: How satisfied are you with your organization?

Tube Test

Airmen inspect the inside 

of an exhaust tube for 

damage after an engine 

run at Shaw Air Force 

Base, S.C., Oct. 13, 2021. 

Photo By: Air Force Senior 

Airman Dallin Wrye

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

2019 results

(Pre Pandemic)

2020 results 2021 results

65.2%

72.7% 72.7%

How satisfied are you with your organization?
27 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

SECTION 1 | Management’s Discussion and Analysis (Unaudited)

Currently, DLA WCF receives a disclaimer of opinion on its 

financial statements. DLA WCF is striving to obtain an unmodified audit opinion from its IPA in the future. Since receiving a 

disclaimer of opinion each year from FY 2017 through FY 2022, 

DLA WCF 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 virtue of addressing Notice of 

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

Performance Measure 2: DLA Roadmap to Auditability

Findings and Recommendations (NFRs); and (2) developing, 

improving, and refining the underlying end-to-end processes 

that support the preparation of the AFR by instilling sound 

fundamental practices in developing the AFR in accordance 

with OMB Circular A-136, Financial Reporting Requirements, 

as amended, and the financial statements in accordance with 

U.S. Generally Accepted Accounting Principles (GAAP).

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).

2022

The IPA issued a disclaimer of 

opinion on DLA’s FY22 financial 

statements. DLA continues to support 

the audit by identifying root causes of 

conditions, prioritizing resources, and 

developing corrective action plans. 

DLA Audit Coordination and Liaison 

group replaces Audit Task Force. 

Figure 16: DLA Auditability Timeline

Hawk View

A Navy MH-60S Seahawk 

helicopter conducts a 

vertical replenishment 

alongside the USS 

Harry S. Truman in the 

Mediterranean Sea, Jan. 

29, 2022. Photo By: Navy 

Petty Officer 3rd Class Tate 

Cardinal
Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report 28

Management’s Discussion and Analysis (Unaudited) | SECTION 1

This analysis presents a summary of DLA WCF’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 WCF 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 WCF 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 WCF’s 

management is responsible for the integrity and objectivity of 

the financial information presented in the statements. DLA WCF 

is dedicated in its pursuit of financial management excellence.

A summary of DLA WCF’s changes in key financial measures 

for FY 2022 and FY 2021 is presented in the following Analysis.

Steel Blizzard

U.S. and Italian soldiers ascend a mountain during Steel Blizzard, a multinational mountain and arctic warfare training 

exercise, in Usseaux, Italy, Feb. 15, 2022. Photo Credit: Army Staff Sgt. John Yountz
29 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

SECTION 1 | Management’s Discussion and Analysis (Unaudited)

Changes In Key Financial Measures

As of and for the Years Ended September 30, 2022 and 2021 (dollars in millions)

FY 2021

FY 2022 Restated Increase/Decrease

Financial Condition (Unaudited) (Unaudited) $ %

Fund Balance with Treasury $ 4,702.9 $ 2,706.2 $ 1,996.7 73.8%

Accounts Receivable, Net and Other 2,394.5 2,944.9 (550.4) -18.7%

Inventory and Related Property, Net 23,931.1 22,348.7 1,582.4 7.1%

General PP&E, Net 738.9 810.4 (71.5) -8.8%

Advances and Prepayments 94.3 95.6 (1.3) -1.4%

TOTAL ASSETS $ 31,861.7 $ 28,905.8 $ 2,955.9 10.2%

Accounts Payable $ 2,916.5 $ 2,451.2 $ 465.3 19.0%

Environmental and Disposal Liabilities 1,233.8 1,272.4 (38.6) -3.0%

Federal Benefits and Other Liabilities 516.9 513.1 3.8 0.7%

Advances from Others and Deferred Revenue 1,152.0 555.7 596.3 107.3%

TOTAL LIABILITIES $ 5,819.2 $ 4,792.4 $ 1,026.8 21.4%

TOTAL NET POSITION (ASSETS LESS 

LIABILITIES) $ 26,042.6 $ 24,113.4 $ 1,929.2 8.0%

Total Gross Cost $ 43,746.5 $ 50,648.1 $ (6,901.6) -13.6%

Less: Total Earned Revenue (43,013.2) (50,945.5) 7,932.3 -15.6%

NET COST OF OPERATIONS $ 733.3 $ (297.4) $ 1,030.7 -346.6%

Holiday Honors

A service member 

participates in National 

Wreaths Across America 

Day at Arlington National 

Cemetery, Va., Dec. 18, 

2021. During the annual 

event, nearly 38,000 

volunteers place 257,000 

wreaths at every gravesite, 

columbarium court column 

and niche wall column 

at Arlington National 

Cemetery. Photo By:

Elizabeth Fraser, Army

Figure 17: Changes In Key Financial Measures
Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report 30

Management’s Discussion and Analysis (Unaudited) | SECTION 1

 $-

 $5,000.0

 $10,000.0

 $15,000.0

 $20,000.0

 $25,000.0

FBwT AR, Net &

Other Assets

Inv. and

Related

Property, Net

General

PP&E, Net

Advances

and

Prepayments

$4,702.9 

$2,394.5 

$23,931.1 

$738.9 $94.3 

$2,706.2 

$2,944.9 

$22,348.7 

$810.4 

$95.6 

FY 2022 Assets FY 2021 Assets As Restated

Financial Results Summary

Assets – What DLA WCF Owns and Manages

Assets represent amounts owned and managed by DLA WCF 

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

Combat Logistics Support Agency and consist of: Fund 

Balance with Treasury (FBwT); Accounts Receivable, Net and 

Other Assets; Inventory and Related Property, Net; Advances 

and Prepayments; and General PP&E. DLA WCF’s largest 

asset was Inventory and Related Property, Net, representing 

$23.9 billion or 75.1% of Total Assets as of September 30, 

2022. Inventory and Related Property, Net consist of supply 

chain materials, equipment and repair parts, worldwide military 

supplies, and IH, primarily all held for sale. FBwT represented 

$4.7 billion or 14.8% of Total Assets as of September 30, 2022. 

In continuing support of the COVID-19 pandemic, DLA received 

cash advances from the Department of Health and Human 

Services (HHS) of $3.2 billion in FY 2022 and continued to 

execute the obligated funding in FY 2022. The collections were 

offset by increased disbursements attributed to higher DLA 

Energy fuel purchase prices in FY 2022, which also resulted 

in increases to DLA Energy Inventory and Related Property 

of $1.6 billion. The overall decrease in Accounts Receivable 

was due to the collection of $550.4 million of receivables. 

Total Assets (Unaudited)

As of September 30, 2022 

($ in millions)

Two Year Trend in Components 

of Total Assets (Unaudited)

As of September 30, 2022 and 2021 

($ in millions)

Figure 18: Total Assets by component as of September 30, 2022 and 2021

FBwT

$4,702.9 

14.8%

Accounts Receivable, 

Net & Other Assets

$2,394.5 

7.5%

Inventory and 

Related Property, 

Net

$23,931.1 

75.1%

General 

PP&E, Net

$738.9 

2.3%

Advances and 

Prepayments

$94.3

0.3%

Fund Balance with Treasury

Accounts Receivable, Net & Other Assets

Inventory and Related Property, Net

General PP&E, Net

Advances and Prepayments

Total = $31,861.7M
31 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

SECTION 1 | Management’s Discussion and Analysis (Unaudited)

Liabilities – What DLA WCF Owes

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

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

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

Environmental and Disposal Liabilities (EL); (4) Advances from 

Others and Deferred Revenue; and (5) for Other Liabilities. 

The largest liability as of September 30, 2022 was Accounts 

Payable reported at $2.9 billion or 50.1% of Total Liabilities. 

Federal Employee Benefits and Other Liabilities as of 

September 30, 2022 was approximately $516.9 million or 8.9% 

of Total Liabilities. The Accounts Payable increase of $465.3 

million or 19.0% since September 30, 2021 was primarily due 

to higher vendor payables in the Medical Supply Chain and the 

clearing of payments without goods receipt for Energy, which 

Figure 19: Total Liabilities by component as of September 30, 2022 and 2021

reduced the negative payable accrual. Advances from Others 

and Deferred Revenue increased $596.3 million or 107.3% 

primarily due to DLA Troop Support receiving additional cash 

advances from DHHS to continue the COVID-19 relief efforts. 

Since the start of the pandemic, DLA Troop Support received 

total cash advances of $5.2 billion as of September 30, 2022 

from the HHS to deliver test kits, personal protective equipment, 

face masks and medical supplies. As of September 30, 2022, 

DLA has earned $3.9 billion for COVID-19 and returned $92.0 

million of unused funds to HHS. In addition, DLA has remaining 

funds of $1.1 billion.

Total Liabilities (Unaudited)

As of September 30, 2022 

($ in millions)

Two Year Trend in Components 

of Total Liabilities (Unaudited)

As of September 30, 2022 and 2021 

($ in millions)

Accounts 

Payable

$2,916.5 

50.1%

Environmental & 

Disposal Liabilities

$1,233.8 

21.2%

Federal Emp. 

Benefits & Other 

Liabilities

$516.9 

8.9%

Advances from 

Others and 

Deferred 

Revenue

$1,152.0

19.8%

Accounts Payable

Environmental & Disposal Liabilities

Federal Emp. Benefits & Other Liabilities

Advances from Others and Deferred Revenue

 $- Total = $5,819.2M

 $500.0

 $1,000.0

 $1,500.0

 $2,000.0

 $2,500.0

 $3,000.0

Accounts

Payable

Environmental

& Disposal

Liabilities

Federal Emp.

Benefits &

Other

Liabilities

Advances from

Others and

Deferred

Revenue

$2,916.5 

$1,233.8 

$516.9 

$1,152.0 

$2,451.2 

$1,272.4 

$513.1 

$555.7 

 FY 2022 Liabilities FY 2021 Liabilities
Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report 32

Management’s Discussion and Analysis (Unaudited) | SECTION 1

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 WCF balances reflected in the Statements of Changes 

in Net Position. As of September 30, 2022, Total Net Position 

largely consisted of Cumulative Results of Operations of $25.1 

billion, derived from producing goods and providing services for 

sale to Federal and public entities. This function is the primary 

The DLA WCF operates under the mission of Sustain Warfighter 

readiness and lethality by delivering proactive global logistics 

in peace and war. DLA WCF has three activity groups: Energy, 

SCM, and Document Services. The three activity groups 

comprise a single, integrated business enterprise. For the year 

ended September 30, 2022, these three activity groups incurred 

Total Gross Cost of $43.7 billion and recognized Total Earned 

Revenue of $43.0 billion, resulting in Net Cost of Operations 

(Total Gross Cost exceeded Total Earned Revenue) of $733.3 

source of sustaining DLA WCF in its key role of logistically 

supporting missions of America’s Warfighters.

The net increase in Net Position of $1.9 billion or 8.0% from 

September 30, 2021 was largely attributable to an increase in 

appropriations received and used for DLA Energy fuel costs of 

$1.9 billion.

Net Position – What DLA WCF has Done Over Time

million. The increase in Net Cost of Operations of $1.0 billion or 

346.6% was primarily due to decreases in DLA Troop Support 

cost of goods sold for COVID-19 relief efforts. DLA Disposition 

Services Gross Cost decreased due to an inventory reversal, 

losses on disposition of assets, and decreases in other 

contract services. In addition, there were offsets related to a 

DLA Energy increase in cost of goods sold due to higher fuel 

acquisition cost and a decrease in the quantity of sales. 

Net Cost of Operations – DLA WCF Net Operating Results

Figure 20: Gross Cost by Activity for the years ended September 30, 2022 and 2021

Total Gross Cost (Unaudited)

For the Years Ended September 30, 2022 

($ in millions)

Two Year Trend in Gross Cost 

by Activity Group (Unaudited)

For the Years Ended September 30, 2022 and 2021 

($ in millions)

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

Energy SCM Document

Services

$11,899.3 

$31,599.6 

$247.6 

$8,981.2

$41,428.9 

$238.1

FY 2022 Gross Cost FY 2021 Gross Cost

Energy

$11,899.3 

27.2%

SCM

$31,599.6 

72.2%

Document Services

$247.6 

0.6%

Energy SCM Document Services

Total = $43,746.5M
33 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

SECTION 1 | Management’s Discussion and Analysis (Unaudited)

Figure 21: Earned Revenue by Activity for the years ended September 30, 2022 and 2021

Care Package

In support of Ukraine, a partner nation under the National Guard's State Partnership Program, airmen assigned to the 

129th Rescue Wing came together to build care packages at Moffett Air National Guard Base, Calif., March 8, 2022.

Photo By: Air Force Master Sgt. Ray Aquino, California Air National Guard

Two Year Trend in Earned Revenue

by Activity Group (Unaudited)

For the Years Ended September 30, 2022 and 2021 

($ in millions)

Energy

$12,187.0 

28.3%

SCM

$30,608.2 

71.2%

Document Services

$218.0 

0.5%

Energy SCM Document Services

 $- Total = $43,013.2M

 $5,000.0

 $10,000.0

 $15,000.0

 $20,000.0

 $25,000.0

 $30,000.0

 $35,000.0

 $40,000.0

 $45,000.0

Energy SCM Document

Services

$12,187.0 

$30,608.2 

$218.0 

$9,371.1 

$41,362.0 

$212.4 

FY 2022 Earned Revenue FY 2021 Earned Revenue

Total Earned Revenue (Unaudited)

For the Years Ended September 30, 2022 

($ in millions)
Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report 34

Management’s Discussion and Analysis (Unaudited) | SECTION 1

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 WCF 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 to DLA WCF to incur obligations, to pay for 

goods and services, and to sell products to customers. 

Obligations are balances for which there has been legally 

binding action during the year. 

Budgetary Activity - DLA WCF Budgetary Resources and Obligations

For the year ended September 30, 2022, Total Budgetary 

Resources were $56.3 billion and Total Obligations were 

$55.2 billion. Total New Obligations increased by $7.5 billion 

or 15.7% since September 30, 2021 due to ongoing global 

events that raised DLA Energy’s fuel purchase prices. In 

FY 2022, the average purchase price per barrel of fuel DLA 

purchased increased by $61.60/BBL, from $79.55/BBL in 

FY 2021 to $141.15/BBL in FY 2022. In addition, the related 

disbursements also increased by $4.7 billion as a result of the 

higher purchase price.

Two Year Trend in Status of Budgetary Resources and New Obligations (Unaudited)

For the Years Ended September 30, 2022 and 2021 

($ in millions)

Figure 22: Total Budgetary Resources and New Obligations for the years ended September 30, 2022 and 2021

 $42,000.0

 $44,000.0

 $46,000.0

 $48,000.0

 $50,000.0

 $52,000.0

 $54,000.0

 $56,000.0

 $58,000.0

Total Budgetary Resources New Obligations

$56,297.3 

$55,216.2 

$48,026.3 $47,724.4 

FY 2022 FY 2021
35 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

SECTION 1 | Management’s Discussion and Analysis (Unaudited)

Limitations of the Financial Statements 

The DLA WCF principal financial statements2 and accompanying notes are prepared to report the financial position and 

results of operations of DLA WCF, as required by the CFO Act 

of 1990, expanded by the GMRA of 1994, and 31 U.S.C. § 

3515(b).

The DLA WCF 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 WCF 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 WCF 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 migrating 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). Phase 1 of the two 

phased ERP Migration has been completed and Phase 2 is 

currently in process, with a planned completion date of FY 

2027. 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 WCF 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 WCF 

continues to implement interim mitigation processes to address known limitations; additionally, DLA WCF is remediating 

material weaknesses to the financial statement preparation 

process. DLA WCF 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 statements.

Ordnance Movement

Sailors aboard the aircraft carrier USS George H.W. Bush direct the movement of ordnance during a replenishment with 

the USNS Medgar Evers in the Atlantic Ocean, Feb. 3, 2022. Photo By: Navy Petty Officer 3rd Class Brandon Roberson
Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report 36

Management’s Discussion and Analysis (Unaudited) | SECTION 1

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. L. 104-208), as 

Management Assurances

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 WCF AFR.
37 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

SECTION 1 | Management’s Discussion and Analysis (Unaudited)
Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report 38

Management’s Discussion and Analysis (Unaudited) | SECTION 1

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. The self-identified deficiencies are tied to one or more 

of the three reporting categories: Internal Control over Reporting – Financial Reporting (ICOR-FR), Internal Controls over 

Reporting – Operations (ICOR-O) and Internal Control over 

Financial Reporting – Financial Systems (ICOR-FS). DLA organizations who identify deficiencies are required to create 

Corrective Action Plans (CAPs) to address those deficiencies. 

CAP owners provide periodic updates to DLA leadership and 

CAPs related to Material Weaknesses and Significant Deficiencies are reported to the Office of the Under Secretary of 

Defense (Comptroller) (OUSD(C)). Upon completion of a CAP, 

the CAP owner submits the CAP to the Enterprise Risk Management Program Management Office (ERM PMO) for review 

and validation. The ERM PMO coordinates through the ERM 

Governance Process to obtain management approval of CAP 

completion. If approved, the ERM PMO will submit the closed 

CAP information to OUSD (C) as part of the Statement of Assurance (SOA). After submitting two material weaknesses for 

closure in FY 2022, DLA’s SOA Material Weaknesses and Significant Deficiencies template included a total of one Internal 

Controls over Reporting - Operations (ICOR-O) material weakness.

Summary of Internal Control

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 
39 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

SECTION 1 | Management’s Discussion and Analysis (Unaudited)

Effectiveness of Internal Control over Operations (FMFIA § 2)

Material Weaknesses Corrective Action Summary

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.

In response to an auditor-identified NFR regarding the lack of a 

comprehensive A-123 program, DLA performed a rebaseline of 

our Assessable and Sub-Assessable Unit (AU/SAU) Structure 

in FY 2022. This will help improve the coverage of DLA’s 

end-to-end business processes to ensure more thorough and 

complete internal control testing is performed in accordance 

with OMB A-123. DLA continues to build the institutional 

capacity to execute an effective OMB Circular A-123 Program 

and demonstrates measurable progress that includes:

●	 Revising 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;

●	 Updating the Enterprise-wide Corrective Action Plan

(CAP) to document the implementation of DLA’s A-123 

program on DLA’s Audit Roadmap and provide more 

accurate milestones to support accountability and oversight. 

The corrective actions detailed in the CAPs are in process 

and have a completion date of FY2024;

●	 Rebaselining DLA’s population of Assessable and

Sub-Assessable Units to provide more comprehensive 

coverage of end-to-end business processes;

●	 Implementing DLA’s Fraud Risk Management Strategy,

that defines the framework to protect our agency’s assets 

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

●	 Performing regular reviews of ERM and A-123 efforts

and work products through a robust, multi- layered 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.

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.

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:

● Federal Financial Management System Requirements

(FFMSRs)

● Federal Accounting Standards

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

transaction level

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 

identified high-risk factors associated with all three FFMIA 

Section 803(a) requirements.
Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report 40

Management’s Discussion and Analysis (Unaudited) | SECTION 1

FFMSR: High-risk factors that indicate non-compliance in 

this area include: the disclaimer of opinion on the FY 2021 and 

FY 2022 financial statements; and material weaknesses over 

internal controls over reporting and information system noncompliance related to financial system security were reported in 

FY 2021 and FY 2022 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 2021 and FY 2022 financial statements 

and material weaknesses over internal controls over reporting 

reported by DLA in FY 2021 and FY 2022 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 2021 and FY 2022 financial statements 

and material weaknesses over internal controls over reporting 

reported in FY 2021 and FY 2022 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.

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

Departures from U.S. GAAP.

View from Above

The USS Harry S. Truman transits the Mediterranean Sea, Feb. 6, 2022. Photo Credit: Navy Petty Officer 3rd Class 

Tate Cardinal
41 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

SECTION 1 | Management’s Discussion and Analysis (Unaudited)

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 2023 -

FY 2026

• 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 2023 -

FY 2026

• 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 2023 -

FY 2026

• Finance

• Information Operations

• Acquisition

• Logistics Operations
Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report 42

Management’s Discussion and Analysis (Unaudited) | SECTION 1

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 WCF notifies 

all appropriate authorities of any potential ADA violations. In 

FY 2021 one potential DLA WCF ADA violation (Case 20-01 

Audit of DLA Use of Security Assistance Funds and Asset Accountability) did not reveal any ADA violations and has been 

resolved. At this time, there are no known ADA violations for 

DLA WCF.

The DLA WCF 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 WCF 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.

DLA developed a 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. 

During FY 2022, DLA continued implementation of its DQP, as 

well as test plans to assess controls and monitor and improve 

procurement data quality in the core financial system, Enterprise Business System (EBS). Furthermore, DLA has identified 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 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.

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 2022, DLA 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.
43 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

SECTION 1 | Management’s Discussion and Analysis (Unaudited)

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 semi- annual 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. 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 2022, there were no instances of fraud identified as 

a result of reviews or audits.

Winter Warmth

Army Pfc. Joshua Spyres 

gives blankets to an 

Afghan evacuee at Fort 

McCoy, Wisc., Oct. 20, 

2021. Task Force McCoy 

is distributing blankets 

to Afghan evacuees to 

help prepare them for the 

upcoming winter. Photo 

By: Army Spc. Froylan 

Grimaldo
Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report 44

Management’s Discussion and Analysis (Unaudited) | SECTION 1

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 Corrective Action Plans (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. 

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.

Financial Management Systems Framework

The DLA relies on the EBS as its accounting system of record 

to process, track and report all business transactions which 

impact DLA WCF. The core of EBS is Systems Applications and 

Product’s (SAP) Enterprise Resource Planning Central Component (ECC) version 6.0. This is a cloud-based, commercial offthe-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 for the creation of financial statements, 

reports, and Treasury cash management. DLA EBS ECC 6.0 

has a single, enterprise general ledger which resides in SAP 

and is used for all funds.

Future Financial Management Systems 

Framework

The DLA migrated 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 second year of a two phased ERP Migration. 

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

phase all applications that were within the EBS accreditation 

boundary were migrated to SAP’s Secure HANA Cloud platform. Phase 1 was successfully completed on February 22, 

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/4 HANA 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 
45 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

SECTION 1 | Management’s Discussion and Analysis (Unaudited)

The DLA began the implementation of the SAP Warehouse 

Management System (WMS) in FY 2022 with a target to implement all Distribution and Disposition Centers by the end of 

FY 2025 Q4. Utilizing Cloud based development, DLA is taking 

advantage of significant inherent benefits related to configuration, integration, and deployment to reduce legacy costs and 

posture the Agency to maintain alignment with next century IT 

trends. This industry standard software will enable a comprehensive warehousing solution that is integrated within the larger 

SAP framework of financial accounting. The modernization of 

software from the legacy DSS will remove system limitations, 

transactional data impediments and known audit gaps that created challenges while operating in a non- SAP warehousing 

application. DLA intends to capitalize on the software upgrade 

to enhance overall operations by leveraging warehouse automation and business process re-engineering to increase inventory accuracy and warehouse productivity. 

help address government-wide accounting elimination problems by ensuring trading partners have the same information 

for intragovernmental transactions. The G-Invoicing mandated 

implementation deadline is October 2022 for Federal Program 

Agencies (FPAs) for new 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. Currently, DLA’s G-Invoicing system solution is on track 

for production by April 2024.

The implementation of DoD SLOA will improve interoperability 

between DoD business systems and provide better end-to- end 

funds traceability and eliminations reporting to enable successful audits in DoD.

Force Fabric

Airmen spread out a collapsible fabric tank in Southwest Asia, Oct. 8, 2021. The collapsible fabric tank is flexible and 

mobile and can store over 200,000 pounds of jet fuel. Photo Credit: Air Force Senior Airman Cameron Otte
Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report 46

Management’s Discussion and Analysis (Unaudited) | SECTION 1

The following areas present insights into how the Agency 

shapes its programs and responds to challenges posed to DLA 

WCF’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 two 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 resource 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, 

accessibility, 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 recruits and retains 

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 Vaccination Documentation System that replaced the manual email 

and spreadsheet tracking previously 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 is able to ascertain the percentage 

of the workforce that has been vaccinated against COVID-19. 

This information was used to aid in distribution at locations with 

shortfalls and assisted 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 high-performing, 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, DLA 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 continue to 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 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. The DoD Workplace Guidance 

for Final Reentry of DoD Civilian Personnel, dated March 16, 

FORWARD-LOOKING INFORMATION
47 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

SECTION 1 | Management’s Discussion and Analysis (Unaudited)

2022, the Consolidated Department of Defense Coronavirus Disease 2019 Force Health Protection Guidance, dated 

August 29, 2022, and the DLA COVID-19 Reentry and Safety 

Plan, dated May 11, 2022 provides DLA-specific guidance on 

reentry and safety protocols. The DLA COVID-19 Coordination Team (CCT) continues to routinely conduct meetings to 

develop, implement, and monitor DLA’s compliance with the 

DLA COVID-19 Reentry and Safety Plan. This newly issued 

guidance includes the Health Protection Condition (HPCON) 

Level Framework & Authority which establishes the appropriate categorization of each location according to Center 

for Disease Control and Prevention COVID-19 Community 

Levels. This framework includes Occupancy Limit Authority, 

Reentry Options, Physical Distancing Requirements, Vaccination Reporting, Testing Protocols, Travel Restrictions and 

Meeting Approval Procedures. The DLA Notice of Reentry to 

the Workforce memorandum was signed on April 6, 2022, that 

provided a 30-day advance notice prior to initially recalling 

or adjusting employees’ work schedules within the HPCON 

framework occupancy limits. 

DLA leaders are committed to protecting our workforce from 

the effects of the COVID-19 pandemic while preserving the 

Agency’s ability to be mission ready. As DoD revises and 

develops new policies to protect the workforce, the DLA CCT 

will continue to provide implementation guidance as appropriate for DLA worksites. Each DLA major population center 

has its own plan for returning employees to the workplace, all 

based on common guidance for a condition- based, 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. 

The DLA is currently assessing the existence and potential 

impact of Climate-Related Risk relative to DLA operations. 

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 

Always.

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 conducted a 

review of our current strategy against the FY 2022 National 

Defense Authorization Act and the 2022 Acquisition and Sustainment (A&S) Goals and Priorities to assess their impact and 

ensure alignment and DLA’s 2021-2026 Strategic Plan remains 

in effect. Our Strategic Plan is designed to meet the evolving 

requirements of the Warfighter and the nation with a targeted 

transformative approach encompassing the most critical priorities for the next four years. DLA’s Strategic Plan reaffirms 

and extends DLA’s commitment to Warfighter readiness and 

lethality and to self-accountability. 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 Partner, 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.

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, 

mission- oriented, 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.
Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report 48

Management’s Discussion and Analysis (Unaudited) | SECTION 1

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:

● 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.

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 management process and risk acceptance at the appropriate leadership levels.

Technological Advancement and Initiatives

 

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

Tactical Lift

Marines and sailors lift 

a tactical vehicle from 

the USNS Pililaau during 

Hagatna Fury at Naval Base 

Guam, Feb. 22, 2021. The 

exercise allows Marines 

to hone abilities to seize, 

defend and provide expeditionary sustainment for 

key maritime terrain. Photo 

Credit: Marine Corps 

Lance Cpl. Moises Rodriguez

Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

Airmen wait for air evacuation aboard combat rubber raiding crafts in 

the Gulf of Mexico, Nov. 16, 2021, during Mosaic Tiger, a command-andcontrol exercise.

Financial Section

SECTION 2

◄ MOSAIC TIGER - GULF OF MEXICO

50

Page no. 

PHOTO BY: TECH. SGT. JUSTIN NORTON

UNAUDITED

DEFENSE LOGISTICS AGENCY FY 2022 | Working Capital Fund
SECTION 2 Financial Section

UNAUDITED

FY 2022 | Working Capital Fund

Platoon Inspection

Marine Corps drill masters inspect a platoon during a close order drill practice at Marine Corps Recruit 

Depot, San Diego, March 1, 2022. Photo Credit: Marine Corps Cpl. Grace Kindred

IN THIS SECTION:

52 Message from the Chief Financial Officer

53 Audit Reports

95 Management’s Response to Audit Reports

96 Introduction to the Principal Financial Statements

97 Principal Financial Statements (Unaudited)

101 Notes to the Principal Financial Statements 

(Unaudited)

142 Required Supplementary Information

Balance Sheets Statements of Net Cost

Statements of Changes 

in Net Position

Combined Statements 

of Budgetary Resources

97 98

99 100
52

Financial Section (Unaudited) | SECTION 2

Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

NOVEMBER 2022

MESSAGE FROM THE CHIEF FINANCIAL OFFICER

I 

am proud to join the Director in issuing our Fiscal Year (FY) 2022 Agency Financial 

Report (AFR), the sixth Defense Logistics Agency (DLA) has issued since an 

Independent Public Accounting firm commenced the financial statement audit of the 

Working Capital Fund (WCF). The FY 2022 DLA WCF AFR highlights valuable insights 

into the overall financial operations, accomplishments, and challenges of the Agency. This 

section of the AFR provides a comprehensive view of DLA WCF financial activities. DLA 

remains committed to providing services and 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 WCF 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 across all levels of the enterprise consist of establishing the framework 

to correct material weaknesses by reviewing, establishing, and reengineering 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 efforts include initiatives to improve financial operations (budgeting, accounting, and reporting) to enhance 

the value provided to the Warfighter and our partners. DLA continues to focus efforts and resources towards upgrading financial 

and operational systems, remediating audit findings in areas with the greatest impact to readiness and lethality, while improving 

financial data and internal controls to achieve an unmodified audit opinion.

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

our business operations and financial 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, and implement actions to remediate 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

DLA REMAINS COMMITTED TO ENSURING VALUE, 

EFFICIENCY, AND EFFECTIVENESS, AS WELL AS 

ENSURING OUTSTANDING STEWARDSHIP 

TO PROTECT AGAINST FR AUD, WASTE, 

AND ABUSE IN EVERY PROGR AM WE MANAGE.
53 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

SECTION 2 | Financial Section (Unaudited)

AUDIT REPORTS

INSPECTOR GENERAL

DEPARTMENT OF DEFENSE 

4800 MARK CENTER DRIVE

ALEXANDRIA, VIRGINIA 22350-1500

November 7, 2022 

MEMORANDUM FOR UNDER SECRETARY OF DEFENSE (COMPTROLLER)/

 CHIEF FINANCIAL OFFICER, DOD 

DIRECTOR, DEFENSE LOGISTICS AGENCY

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

Agency Working Capital Fund Financial Statements and Related Notes for 

FY 2022 and FY 2021 (Project No. D2022-D000FE-0060.000, Report No. 

DODIG-2023-024) 

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

to audit the Defense Logistics Agency (DLA) Working Capital Fund Financial Statements 

and related notes as of and for the fiscal years ended September 30, 2022, and 2021. 

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 2022, Volume 1, Volume 2 (Updated, June 2022), and Volume 3 (Updated, 

June 2022). 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 Working 

Capital 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 Working Capital Fund FY 2022 and FY 2021 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 
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controls over financial reporting.* Specifically, EY’s report stated that the DLA did not 

design or implement internal controls to:

• support Inventory balances and transactions, track inventory by owner, 

perform periodic physical counts, and accumulate the cost of inventory; 

• reconcile Fund Balance with Treasury and provide transaction-level detail for 

collections and disbursements;

• support Accounts Receivable balances, validate the balance of aged receivables 

and unfilled customer orders, and estimate valuation allowances; 

• review, approve, record and support Accounts Payable, expenses, and related 

budgetary balances;

• validate financial statement account balances, monitor reporting variances, and 

provide detailed listings for budgetary accounts that reconcile to the general 

ledger; 

• identify and address significant risks, to include documenting end-to-end 

business processes, monitoring internal control risks, and remediating audit 

findings; or 

• 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 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 

Working Capital Fund FY 2022 and FY 2021 Financial Statements and related notes. 

 

* 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.
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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. EY is responsible for the attached November 7, 2022 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
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Report of Independent Auditors

The Director of the Defense Logistics Agency and the

 Inspector General of the Department of Defense

Report on the Audit of the Financial Statements

Disclaimer of Opinion

We were engaged to audit the financial statements of the Working Capital Fund (WCF) of the 

Defense Logistics Agency (DLA), which comprise the balance sheets as of September 30, 2022 

and 2021, 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 (collectively 

referred to as the “financial statements”).

We do not express an opinion on the accompanying financial statements of DLA. Because of the 

significance of the matters described in the Basis for Disclaimer of Opinion section of our report,

we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit 

opinion on these financial statements.

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 of these matters, we were unable to determine 

whether any adjustments might have been found necessary in respect of recorded or unrecorded 

balances and the elements making up DLA’s financial statements as of and for the years ended 

September 30, 2022 and 2021.

Departures 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 DLA’s financial statements

as of and for the years ended September 30, 2022 and 2021 is not currently determinable by DLA 

and could be material.

Responsibilities of Management for the Financial Statements

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

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

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

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Fax: +1 703 747 0100

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

fraud or error.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our responsibility is to conduct an audit of DLA’sfinancial statements in accordance with auditing 

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

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

Comptroller General of the United States (Government Auditing Standards), and in accordance 

with the provisions of Office of Management and Budget Bulletin No. 22-01, Audit Requirements 

for Federal Financial Statements, and to issue an auditor’s report. However, because of the matters

described in the Basis for Disclaimer of Opinion section of our report, we were not able to obtain 

sufficient appropriate audit evidence to provide a basis for an audit opinion on these financial 

statements.

We are required to be independent of DLA and to meet our other ethical responsibilities in 

accordance with the relevant ethical requirements relating to our audit.

Required Supplementary Information

Accounting principles generally accepted in the United States of America 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 is the 

responsibility of management and, 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 section of our report. We do not express an opinion or provide any assurance on the 

information.

Other Reporting Required by Government Auditing Standards

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

November 7, 2022, 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 and 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 

A member firm of Ernst & Young Global Limited
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reporting or on compliance. Those reports are an integral part of an audit performed in accordance 

with Government Auditing Standards in considering DLA’s internal control over financial 

reporting and compliance.



November 7, 2022

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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 (Government Auditing 

Standards) and the provisions of Office of Management and Budget (OMB) Bulletin No. 22-01,

Audit Requirements for Federal Financial Statements, the financial statements of the Working 

Capital Fund of the Defense Logistics Agency (DLA), which comprise the balance sheet as of 

September 30, 2022, and the related statements of net cost and changes in net position and 

combined statement of budgetary resources for the year then ended, and the related notes

(collectively referred to as the “financial statements”), and have issued our report thereon dated 

November 7, 2022. Our report disclaims an opinion on the financial statements because DLA has

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.

Report on 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 consider 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 preceding 

paragraph 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 and in more 

detail in Appendix A, we identified certain deficiencies in internal control that we consider to be 

material weaknesses and significant deficiencies.

A deficiency in internal control 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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1775 Tysons Blvd

Tysons, VA 22102

Tel: +1 703 747 1000

Fax: +1 703 747 0100

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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. Inventory – Inventory is comprised of items held by DLA for resale. DLA also holds 

inventory items on behalf of the military services. Policies, procedures and internal controls 

surrounding documentation of procurements and disbursements, tracking of inventory by 

owner, validating the perpetual inventory systems by performing periodic physical counts, 

accumulating cost of inventory and supporting inventory balances and transactions all had 

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

weakness in internal control related to inventory. The matters identified related to inventory 

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 the U.S. Treasury. Furthermore, DLA is unable to provide 

detailed listings of collections and disbursements that reconcile to the general ledger. DLA, 

in conjunction with Defense Finance and Accounting Services (DFAS), has implemented the 

Cash Management Reconciliation (CMR) and Department 97 Report Reconciliation 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 endto-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 the resale of goods and the provision of services. Revenue is earned when DLA 

sells goods and services to the public or other federal entities. DLA was unable to support 

the balances recorded as AR and validate the significant balance of aged receivables and 

unfilled customer orders. In addition, DLA did not have procedures to estimate valuation 

allowances against receivables and had not supported transactions recorded. Furthermore,

DLA did not have adequate policies, procedures and controls to record AR and revenue 

transactions accurately and in the proper period in accordance with U.S. generally accepted 

accounting principles (GAAP). The combination of these deficiencies in aggregate results in 

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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 

obtains 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 overall 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 in accordance with 

U.S. GAAP. DLA’s financial statement preparation process lacks sufficient controls to 

review and identify inaccurate balances on the financial statements and incomplete and 

inaccurate footnote disclosures. 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. In addition, DLA does 

not have controls to review and approve transactions recorded with elevated access 

privileges. 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 endto-end business processes, monitoring of service providers, 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.

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. 

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Based on our review, we have identified five areas of deficiency which, when aggregated, 

result in a material weakness. The deficiencies relate to the following five areas:

• Access controls 

• Configuration management 

• Segregation of duties controls

• Security management/governance over implementation of security controls

• Contingency Planning

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 significant deficiencies, as defined above:

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

software and construction-in-progress. DLA has not completed an analysis of the existence 

and completeness of PP&E assets or their process to value PP&E beginning balances 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 operating lease. Therefore, DLA 

is unable to support the existence, completeness, rights and obligations, or valuation of its 

PP&E. In addition, DLA does not have signed memorandums of agreement with the military 

services that outline the reporting responsibilities, such as depreciation and maintenance 

costs, for real property assets for which DLA is the primary user. The matters identified 

related to PP&E are further described in Appendix B.

II. 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 reconcile these liabilities to the corresponding real property and 

to validate its estimation methodology. The matters identified related to EL are further 

described in Appendix B.

DLA’s Response to Findings

Government Auditing Standards require the auditor to perform limited procedures on DLA’s 

response to the findings identified in our engagement to audit and described in the accompanying 

Management’s Response to Audit Reports dated November 7, 2022. DLA’s response was not 

subjected to the other auditing procedures applied in the engagement to audit the financial 

statements and, accordingly, we express no opinion on the response.

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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.

Other Reporting Required by Government Auditing Standards

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

November 7, 2022 on our tests of DLA’s compliance with certain provisions of laws, regulations, 

contracts and grant agreements, and other matters. The purpose of that 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 compliance. That report is an integral part of an audit performed in accordance with 

Government Auditing Standards in considering DLA’s compliance.



November 7, 2022

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Appendix A – Material Weaknesses

I. Inventory

DLA’s inventory is comprised of petroleum and aerospace products, weapon system repair parts, 

food, clothing and medical supplies. Inventory also includes material from the military services 

designated for disposal or reutilization. In accordance with FMFIA, management is responsible 

for establishing effective controls over and accountability for all assets for which the agency is 

responsible. DLA’s controls and processes do not exist or are not operating in several significant 

areas, specifically: 

A. Lack of or Inadequate Documentation of Inventory Accounting Policies, Procedures and 

Controls. DLA has not documented the processes related to the significant business activities 

for acquisition, movement, warehousing and disposition of inventory; the related risks for each 

business activity; and the control activities designed to mitigate risks of material misstatement 

in the financial statements. The documentation lacks an accurate description of the following: 

financial reporting, records management, physical count policies, accounting for third-party 

managed inventory, the Inventory Reconciliation Framework (IRF) and various other business 

processes. 

B. Lack of or Inadequate Documentation to Substantiate Inventory and Inventory-Related 

Transactions. DLA was unable to provide documentation that inventory balances exist, or 

inventory transactions occurred and are accurately recorded in the financial statements. 

Specifically, documentation was not available to support:

• The completeness and accuracy of transactions recorded or the existence of balances in the 

general ledger and the accountable property system of record (APSR). 

• Shipping terms for sales transactions to evidence when the title and risk of loss are 

transferred to the buyer.

• Balances recorded in the inventory detail reports from the financial reporting system that 

do not reconcile to the site-specific end-of-month report and component financial 

statements. 

• Balances of fuel inventory held in pipelines or in-transit. 

• Posting of transactions in the general ledger resulting from financial events (i.e., sales, 

purchases, gains and losses, including gains and losses resulting from physical inventory 

counts). 

C. Lack of or Inadequate Policies, Procedures and Controls Over Inventory Processes. DLA 

lacks or has inadequate policies, procedures and controls, including the design of controls, over 

the following:

• Inadequately Designed Controls Over Inventory Processes. For controls that have been 

implemented over significant Energy and Distribution processes, the controls are not 

designed to align with DLA policies or are not executed consistently. In addition, sufficient 

documentation does not exist to evidence the performance of the control activities. 

• Inventory Held for Others. Inventory held on behalf of the military services is not always 

stored in physically segregated locations and instead, is commingled with similar inventory 
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that could be owned by multiple owners. DLA lacks controls over the commingled 

inventory. DLA does not have policies and procedures to reconcile quantities of inventory 

by owner to the total physical inventory counts on a regular basis or to account for 

inventory variances resulting from physical inventory counts for segregated inventory 

items with multiple owners. As a result, gain/loss adjustments are not assigned to the 

appropriate owner. 

• In-Transit and Pipeline Inventory (In-Transit). In-transit inventory relates to items that 

were accepted at the point of origin (free on board shipping point) and are in-transit to a 

DLA destination. Controls related to monitoring and reconciling in-transit inventory 

balances do not exist. As a result, inventory recorded as in-transit from procurement points 

of origin has remained in-transit for several fiscal years, including amounts dating back to 

2012. 

• Energy Inventory. DLA policy requires that monthly or quarterly automated tank gauging 

(ATG) verifications be performed. In addition, DLA requires that manual readings of fuel 

tank levels be obtained by calibrated tape or calibrated rod in the absence of functional 

ATG systems. However, DLA lacks controls to monitor field-level sites for compliance 

with DLA Energy policies. In addition, DLA does not monitor or review documentation to 

validate that field-level sites are performing the monthly or quarterly verifications or that 

manual readings are obtained in the absence of functional ATG systems. 

• Posting Inventory Adjustments in the General Ledger. DLA policy requires that errors 

between the APSR and the general ledger be reviewed and corrected by assigned users. 

Adjustments to correct the errors above a certain dollar threshold are reviewed by a 

supervisor. However, DLA does not have controls in place to prevent users from posting 

adjustments above the threshold or to detect that adjustments posted above the threshold 

were not reviewed. 

• Inventory Recorded in the Appropriate Period. Policies and procedures are not in place 

to record transactions in the period that the transaction occurred or to accrue for 

transactions that occurred but were not posted at period-end. 

D. Inadequate Policies, Procedures and Related Controls Over Inventory Physical Counts. 

The Department of Defense Financial Management Regulation (DoD FMR) requires that all 

inventory be counted at least annually, either in a full physical count or through cycle counts, 

to validate perpetual inventory accuracy. DLA has not adequately designed controls related to 

physical counts to validate the existence and completeness of inventory related to Supply or 

Disposition as required. For example:

• Supply Inventory. DLA policy requires an annual physical count of all items on hand as 

of the beginning balance sheet date. DLA is not in compliance with this policy or the DoD 

FMR.

• Disposition Inventory. Inventory physical counts are not required to be performed on all 

Disposition inventory received from the military services. 

E. Lack of Controls for the Reconciliation Between Inventory APSR and the General 

Ledger. DLA utilizes the IRF to reconcile the inventory quantity balance in the general ledger 
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to the inventory quantity balance in the APSRs. However, the IRF was not performed 

completely, accurately or timely. For example:

• The inventory reconciliations are not completed on a timely basis or within the normal 

financial statement close period (approximately 40-45 days from month-end). 

• There were significant unreconciled variances totaling $453 million in the reconciliation 

for June 2022. 

• The IRF does not include all appropriate general ledger accounts, including inventory intransit between storage locations and inventories/stock on hand. 

F. Lack of Controls over Inventory Held by Third Parties. DLA does not have a detailed 

listing of inventory by vendor that reconciles to the inventory recorded in DLA’s general 

ledger, nor does DLA have a listing of all vendors who hold inventory on DLA’s behalf. DLA 

is unable to support the balances of inventory held at third parties for each vendor. As a result, 

DLA is unable to substantiate the existence and completeness of inventory held at third parties. 

G. 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 an inaccurate presentation of inventory on the balance sheet and 

in the related footnote disclosure. Specifically, DLA has neither implemented nor applied the 

costing and valuation methodologies set forth by Statement of Federal Financial Accounting 

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

48, Opening Balances for Inventory, Operating Materials and Supplies, and Stockpile 

Materials. For example: 

• DLA values inventory using the moving average price (MAP). However, DLA is unable 

to provide supporting documentation of costs that are included or excluded to calculate the 

MAP. 

• DLA began implementing inventory costing methodologies in accordance with SFFAS 

No. 48 in fiscal year (FY) 2016. However, DLA did not completely and accurately value 

inventory in accordance with SFFAS No. 48. For example, the values assigned for certain 

inventory items were based on the latest acquisition cost (LAC). The LAC values did not 

properly consider inventory acquired through the implementation date. 

• DLA assigned zero-dollar values to unique material numbers and was not able to provide 

the basis for the zero-dollar valuation for all materials. 

• Work in process (WIP) inventory items or components are provided to a production facility 

for kitting, assembly or modification, or to make an end item. Policies and procedures are 

not in place to record all costs, such as the assembly and labor costs, incurred during the 

kitting, assembly or modification process. 

• Valuation allowances for various inventory items, including excess, obsolete and 

unserviceable (EOU) inventory, inventory held for repair, inventory held at net realizable 

value, etc., are not appropriately documented or supported. The documentation for the 

valuation allowance for inventory held for repair does not sufficiently describe the 
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methodology used to estimate the allowance or describe the rationale for adopting the 

methodology being used and the factors used in the estimation process. 

H. Inadequate or Lack of Controls Over Financial Reporting of Inventory. DLA lacks 

controls to classify and present inventory appropriately in the financial statements. DLA 

accounting policy states that inventory balances are based on the following categories: 

inventory held for current sale, inventory held for future sale, EOU and inventory held for 

repair. DLA uses the inventory condition codes as the basis to classify inventory between each 

category. Controls are not in place to assign inventory the appropriate condition codes. In 

addition, DLA is unable to determine whether inventory classified as EOU meets the definition 

in SFFAS No. 3. As a result, DLA was unable to substantiate the amounts classified, presented 

or disclosed. 

Recommendations

Consider the following corrective actions related to the deficiencies identified above:

A. Lack of or Inadequate Documentation of Inventory Accounting Policies, Procedures and 

Controls. Document, update and finalize the process cycle memoranda (PCM) that document 

the end-to-end processes for inventory, including receiving, distributing, recording, processing 

and reporting. Perform a risk analysis and document risks associated with the DLA inventory 

business process. Review current control documentation and perform a gap analysis for 

internal controls at the financial statement assertion level. 

B. Lack of or Inadequate Documentation to Substantiate Inventory and Inventory-Related 

Transactions. 

• Develop and maintain documentation to support that inventory transactions occurred and 

are accurately recorded in the financial statements, including: 

o Standardizing data elements included in data extracts from APSRs and the general 

ledger. For example, data elements to tie material movements to the related 

financial postings.

o Standardizing documentation requirements to support financial events.

C. Lack of or Inadequate Policies, Procedures and Controls Over Inventory Processes. 

• Inadequately Designed Controls Over Inventory Processes. Design and implement 

internal control activities and include criteria, analyses, reviews and supporting thresholds 

used in the execution of all relevant internal controls. The control activities should align to

and be executed consistently with DLA policies and maintain sufficient documentation to 

evidence these control activities. 

• Inventory Held for Others. Develop policies and procedures related to inventory held for 

others to include the following: 

o Properly identifying the inventory owner of the material, as appropriate, such as 

identifying the owner on material labels upon receipt or segregating the inventory 

by owner.
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o Accounting for inventory variances for segregated inventory items with multiple 

owners so that inventory gains/losses for inventory held on behalf of others are 

assigned to the appropriate owner. 

• In-Transit and Pipeline Inventory. Develop and implement policies and procedures to 

properly validate and reconcile in-transit and pipeline inventory and to validate that

balances are complete and accurate. 

• Energy Inventory. Design policies, procedures and controls to monitor field-level site 

compliance with DLA Energy policies. The controls should monitor the performance of 

monthly or quarterly verifications. In addition, DLA should monitor the performance of 

manual readings on tanks with malfunctioning ATGs. 

• Posting Inventory Adjustments in the General Ledger. Design application-level 

controls that prevent users from posting transactions above their approved thresholds. 

Further, DLA’s inventory process should include procedures to review transactions posted 

to verify that unauthorized transactions were not posted. 

• Inventory Recorded in the Appropriate Period. Design policies, procedures and 

controls to process and post transactions to the correct period in the general ledger and that 

an accrual is recorded at period-end for transactions that should be posted but have not 

been resolved to reflect recording in the proper period. 

D. Inadequate Policies, Procedures and Related Controls Over Inventory Physical Counts. 

DLA should design and implement policies, procedures and controls as follows:

• The inventory count for Supply and Disposition should include a requirement whereby 

quantities in the perpetual inventory system are supported via physical counts at least once 

a year, either through a wall-to-wall, year-end count or adequately designed cycle counts 

in compliance with the DoD FMR. 

E. Lack of Controls for the Reconciliation Between Inventory APSR and the General 

Ledger. Design policies and procedures to perform the IRF completely, accurately and timely. 

The policies should consider the following: 

• Reconciling or resolving variances timely, including establishing thresholds for variances 

that require a review to be performed. 

• Including all inventory general ledger accounting codes in the IRF.

F. Lack of Controls Over Inventory Held by Third Parties. Design controls over inventory 

held by third parties by performing a reconciliation of third-party managed inventory balances 

to the general ledger balances and developing a comprehensive listing of vendors and military 

services that hold DLA-owned inventory on behalf of DLA. The control activities should 

include assessing the existence and completeness of inventory held at third parties.

G. Lack of Policies, Procedures and Controls to Effectively Implement Accounting 

Standards. Design policies and procedures to implement the appropriate accounting 

standards, specifically SFFAS No. 3 and SFFAS No. 48. The policies and procedures should 

include: 

• Substantiating that the inputs to the MAP calculation include or exclude costs as 

appropriate. 
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• Establishing opening inventory balances by valuing inventory using the deemed cost 

valuation methodologies in accordance with SFFAS No. 48 and verifying that inventory 

valuation complies with SFFAS No. 3 subsequent to the implementation of SFFAS No. 

48. 

• Assigning a proper value and unit of measure at the time of receipt. 

• Tracking and recording all costs incurred during the kitting or assembly process to the 

WIP inventory. 

• Documenting the methodology, rationale and processes used to estimate valuation 

allowances for items, including EOU inventory, inventory held for repair, inventory held 

at net realizable value, etc. 

H. Inadequate or Lack of Controls Over Financial Reporting of Inventory. Design and 

implement controls to assign inventory items to the appropriate condition code, including 

controls over EOU inventory classification in accordance with SFFAS No. 3. 

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, Section 5125 requires 

agencies to implement effective and efficient reconciliation processes and perform timely 

reconciliations. However, deficiencies exist in 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. 

• Suspense Accounts. The documentation does not include the process to determine the 

amounts recorded in suspense accounts. 

• Reconciling Items to Treasury. The documentation does not include the processes to 

correct and review Defense Automatic Addressing System (DAAS) rejects; research and 

resolve differences between U.S. Treasury, disbursing system records, and accounting 

system records within a timely basis. 

• Monitoring Cash Adequacy. The documentation does not include processes to review 

cash balances throughout the year to prepare cash projections and determine whether 

DLA has enough cash to meet financial obligations. 

B. Inappropriate Policies and Procedures for Recording Cash Collections. DLA does not 

have an appropriate process to record FBwT (cash collections) upon receipt. Interfund 

transactions are not processed by U.S. Treasury until month-end reporting; however, DLA 

records the cash collection transaction in the general ledger prior to when the transactions 

occur, resulting in a misstatement of FBwT. 

C. 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 
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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. 

D. Lack of or Inadequate Documentation to Substantiate FBwT. DLA is unable to provide 

listings of collection and disbursement transactions at the detailed voucher level that reconcile 

to the general ledger. As such, the FBwT transactions are not appropriately supported. 

Recommendations

Consider the following corrective actions related to the deficiencies identified 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; the process to identify and correct DAAS rejects timely; the process to research 

and resolve differences between U.S. Treasury, disbursing system records and accounting 

system records on a timely basis; and the process to determine that DLA has sufficient cash on 

hand to meet current financial obligations. 

B. Inappropriate Policies and Procedures for Recording Cash Collections. Design and 

implement policies and procedures to properly record a debit to FBwT and a credit to accounts 

receivable (AR) when the cash transaction has occurred, and cash has been received at U.S. 

Treasury. 

C. 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 processes and controls relevant to DLA, including the CMR and DRRT, and 

reconcile the transactions recorded in the general ledger to the transactions sent to U.S. 

Treasury Systems in order to verify that the data was processed correctly. 

D. Lack of or Inadequate Documentation to Substantiate FBwT. Develop and implement 

procedures to generate complete and accurate listings of FBwT collections and disbursement 

transactions at the detailed voucher level that reconcile to the general ledger. 

III. Accounts Receivable and Revenue

Accounts receivable (AR) consists of amounts owed to DLA. Revenue is earned when DLA sells 

goods and 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. Because of the 

nature of DLA’s services, DLA has a significant volume of transactions in the order to cash 

process. This balance represents a substantial portion of their activity that involves receipt of funds 
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by DLA in order to provide inventory to their 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 (UCO), revenue and AR transactions. 

• UCOs. The 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. Additionally, documentation does not include the processes to account for and 

report UCOs with public customers. 

• AR. The documentation does not include the process to evaluate the collectability and 

validity of significantly aged AR (receivables include a significant amount of aged 

receivables (greater than 180 days)); the process to review, reconcile or clear negative 

accounts receivable balances in a periodic and consistent manner; and the process to 

account for, calculate and post the allowance for doubtful accounts. 

• Nonstandard Revenue. The documentation does not include the process for the proper 

accounting treatment for cash advances received and sales transactions related to 

nonstandard revenue, such as emergency management situations and disaster relief efforts. 

• Scrap Sales Process. The documentation does not include the process for the proper 

accounting treatment for sales transactions related to the scrap sales process. 

• Non-Monetary Exchange Transactions. The documentation does not include the process 

for the accounting treatment for non-monetary exchange transactions. 

• Offsetting Transactions. The documentation does not include the process and controls to 

analyze AR and AP transactions to determine proper offsetting, recording and presentation 

in accordance with the customer or vendor agreement. Additionally, the documentation 

does not include processes to account for the related budgetary accounts. 

 

B. Lack of or Inadequate Controls Over AR, Revenue and Cash Collection Processes. DLA 

lacks or has inadequate controls, including the design of controls, over the following:

• AR and Cash Collections. DLA lacks controls to substantiate the validity of AR balances, 

including the use of a single account for multiple customers, and to apply collections from 

customers accurately and timely. As a result, invalid AR transactions were recorded in the 

financial statements. 

• Intragovernmental Transactions. Intragovernmental transactions, including Military 

Interdepartmental Purchase Requests (MIPRs), are sales orders received from other federal 

agencies. DLA lacks controls to prevent services from being performed beyond the terms 

of the agreement and to prevent duplicate transactions from being recorded in the general 

ledger. As a result, duplicate sales orders were recorded in the general ledger. In addition, 

there were instances where revenue recorded, in aggregate, exceeded the total funding 

amount, or the services were performed outside the period of performance. 
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• Revenue Recorded Accurately and in the Appropriate Period. DLA lacks controls to 

review pricing updates and record revenue transactions appropriately and accurately in the 

period that the transaction occurred. As a result, a significant number of transactions were 

not posted using the correct price or were not recorded in the proper accounting period. In 

addition, the controls to validate that the accruals are recorded at the appropriate amount 

and in the correct period are not designed effectively. 

• Fuel Exchange Agreements. DLA does not have adequately designed controls around the 

fuel exchange agreement (FEA) process. For example, DLA does not reconcile the 

amounts receivable from, or payable to, foreign governments. In addition, sufficient 

documentation does not exist to evidence the performance of the control activities. As such, 

DLA is unable to demonstrate that the control was operating effectively. 

C. Lack of or Inadequate Documentation to Substantiate AR and Revenue Transactions. 

DLA was unable to provide documentation that AR and UCO balances exist, or that revenue 

transactions occurred and are accurately recorded in the financial statements. Specifically, 

documentation was not available to support that:

• The AR balances (federal and with the public), UCO and deferred revenue transactions are 

complete and accurate, and reconcile to the general ledger and that the balances exist. 

• The revenue transactions recorded, including emergency management situations and 

disaster relief efforts, are complete and accurate and have occurred. 

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 neither implemented nor applied the accounting 

set forth by SFFAS No. 7, Accounting for Revenue and Other Financing Sources and Concepts 

for Reconciling Budgetary and Financial Accounting. DLA performs services for other federal 

agencies without funding and records receivables from these transactions. DLA is unable to 

support revenue recognized from unfunded agreements, nor is an analysis performed on the 

collectability of the receivable related to those agreements. Uncollected billings related to 

unfunded agreements have been outstanding since FY 2017. 

Recommendations

Consider the following corrective actions related to the deficiencies identified above:

A. Lack of or Inadequate Documentation of AR and Revenue Accounting Policies, 

Procedures and Controls. Document, update and finalize the PCMs that document the endto-end processes for AR and revenue.

• UCOs. The documentation should include the process to reconcile UCOs between the 

general ledger and sales legacy module completely, accurately and timely, to review the 

aged UCO balances for validity and to account for UCOs with public customers. 

• AR. The documentation should include the process to evaluate the collectability and 

validity of significantly aged AR (AR includes a significant amount of aged receivables 

(greater than 180 days)); the process to review, reconcile or clear negative AR balances in 
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a periodic and consistent manner; and the process to account for calculating and posting 

the allowance for doubtful accounts. 

• Nonstandard Revenue. The documentation should include the financial reporting 

requirements during emergency management situations, including disaster relief efforts. 

The policies should include acceptable deviations from the normal business process, 

documentation requirements and timelines for completion. 

• Scrap Sales Process. The documentation should include the accounting and financial 

reporting requirements for the scrap sales process. 

• Non-Monetary Exchange Transactions. The documentation should include the 

accounting and financial reporting requirements for non-monetary exchange transactions. 

• Offsetting Transactions. The documentation should include the process and controls 

implemented to analyze customer and vendor agreements to determine proper offsetting, 

recording, and presentation of AR and AP transactions and the accounting for the related 

budgetary accounts. 

B. Lack of or Inadequate Controls Over AR, Revenue and Cash Collection Processes. 

• AR and Cash Collections. Design and implement controls to assess the existence and 

completeness of the receivable balances, including significantly aged receivables; controls 

to limit transactions in a customer account to a single customer, rather than a group of 

customers; and controls to properly, accurately and timely post payments and credits to 

customer accounts. 

• Intragovernmental Transactions. Design and implement controls for intragovernmental 

transactions that include system controls to prevent services from being provided beyond 

the terms of the agreement (e.g., period of performance, funding amount) and to prevent 

duplicate transactions from being recorded in the general ledger. 

• Revenue Recorded Accurately and in the Appropriate Period. Design and implement 

controls to properly record revenue transactions in the appropriate period; controls to 

review and validate pricing updates; controls to monitor sales transactions at or near periodend; controls to record revenue based on the proper triggering event; controls to manage

and maintain documentation to substantiate the revenue transaction; and controls to 

validate that the accruals are recorded at the appropriate amount and in the correct period. 

• Fuel Exchange Agreements. Design, document and implement controls around the FEA 

process and include criteria, analyses, reviews and supporting thresholds used in the 

execution of all relevant internal controls. 

C. Lack of or Inadequate Documentation to Substantiate AR and Revenue Transactions. 

• Develop documentation, including detailed listings of account balances, to substantiate that 

the population of AR (federal and with the public), UCO and deferred revenue transactions 

are complete and accurate and that the balances in the population exist. The listing should 

be reconciled to the general ledger. 

• Develop documentation to substantiate that the population of revenue transactions 

recorded, including emergency management situations and disaster relief efforts, are 

complete and accurate and have occurred. 
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D. Lack of Policies, Procedures and Controls to Effectively Implement Accounting 

Standards. Design and implement policies, procedures and controls to properly recognize 

revenue earned and to assess the collectability of the receivable related to unfunded work 

orders in accordance with SFFAS No. 7 and the DoD FMR. 

IV. Accounts Payable and Expense

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 services, DLA has a significant volume of 

transactions to procure goods and services to sell to its customers. Deficiencies exist in DLA’s 

processes for recording and supporting AP, expenses and the related budgetary balances; recording 

transactions 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, Unliquidated Obligation (ULO), AP and 

Expenses Accounting Policies, Procedures and Controls. DLA has not documented the endto-end processes to account for UDO, AP and expense transactions. 

• UDO. The documentation does not include the process to review the validity of 

significantly aged UDO. As a result, there is a significant number of UDO transactions that 

had no current-year activity. 

• 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, 

including interfund transactions received, in the general ledger and submitted to DFAS for 

timely payment; and the process to pay invoices timely or assess interest penalties for late 

payments in accordance with the Prompt Payment Act. 

• Non-monetary Exchange Transactions. Documentation does not include the process for 

the proper accounting treatment for non-monetary exchange transactions. 

• ULO. The documentation does not include the process to review the validity of 

significantly aged ULO. 

• Offsetting Transactions. Documentation does not include the process and controls to 

analyze AR and AP transactions to determine proper offsetting, recording and presentation 

in accordance with the customer or vendor agreement. 

• Foreign Currency Transactions. Documentation does not include the processes and 

controls to account for transactions made in foreign currency, including the respective 

gains and losses. 
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B. Lack of or Inadequate Controls Over UDO, ULO, AP, Expenses and Cash Disbursement 

Processes. DLA lacks or has inadequate controls, including the design of controls, over the 

following: 

• Inadequately Designed Controls Over AP and Expense Processes. Controls that have 

been implemented are not designed effectively. 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. 

• UDO. DLA lacks controls to approve and record obligations in a timely manner; controls 

to record downward and upward adjustments to UDO accurately and timely; and controls 

to close invalid UDO in a timely manner. 

• Vendor Contracts. DLA lacks controls to execute contracts in accordance with the Federal 

Acquisition Regulation (FAR) and record obligations timely for contracts, including 

Indefinite Quantity Contracts (IQC). For example, IQCs awarded did not have an 

obligation recorded at the contract award date because the IQC did not have a guaranteed 

minimum at contract award date. 

• AP and Cash Disbursements. DLA lacks controls to post goods receipts in a timely 

manner; review invoices prior to payment; and post payments, including payments that fail 

to post systematically, in a timely manner. 

• AP and Expenses Recorded in the Appropriate Period. DLA lacks controls to record 

AP and expense transactions appropriately and accurately in the period that the transaction 

occurred. 

• 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 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. Additionally, DLA lacks controls to properly classify 

vendors as federal or with the public at the transaction level. 

C. Lack of or Inadequate Documentation to Substantiate AP and Expense Transactions. 

DLA was unable to provide documentation to support the existence of AP balances, or that 

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, including AP, negative payables, UDO (paid and unpaid) and upward and 

downward adjustments to delivered and undelivered orders. 

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 neither implemented nor applied the accounting 

set forth by SFFAS No. 1, Accounting for Selected Assets and Liabilities, No. 4, Managerial 

Cost Accounting Standards and Concepts; SFFAS No. 4, Managerial Cost Accounting 

Standards and Concepts; SFFAS No. 5, Accounting for Liabilities of the Federal Government; 
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and SFFAS No. 7, Accounting for Revenue and Other Financing Sources and Concepts for 

Reconciling Budgetary and Financial Accounting. For example:

• AP and accrued liabilities are not recorded appropriately. For example, DLA policy allows 

for a liability to be recorded without confirming whether a transfer of title has occurred or 

service has been rendered. Further, DLA policy requires that only activities submitted by 

the contractors on the last day of the month are accrued and liabilities incurred prior to the 

last day of the month are not accrued. 

• DLA does not match revenue with the related cost of sales where the customers place the 

order directly with the vendor, such as medical, clothing and textile sales. DLA does not 

record the revenue earned at the same time the liability is recorded. 

• 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. This results in an understatement of expenses and payables, and a 

misstatement of UDO. 

Recommendations

Consider the following corrective actions related to the conditions described above:

A. Lack of or Inadequate Documentation of UDO, ULO, AP and Expenses Accounting 

Policies, Procedures and Controls. Update and finalize the PCMs that document the end-toend processes for UDO, AP and expenses.

• UDO. The documentation should include the process to review the validity of significantly 

aged UDO, including a process to write off residual UDO for completed transactions. 

• AP. The documentation should include the process to evaluate the validity of AP, including 

significantly aged AP and negative payables; the process to record invoices, including 

interfund transactions received, in the general ledger and submitted 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. 

• Non-Monetary Exchange Transactions. The documentation should include the 

accounting and financial reporting requirements for non-monetary exchange transactions. 

• 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. 

• Offsetting Transactions. The documentation should include the process and controls 

implemented to analyze customer and vendor agreements to determine proper offsetting, 

recording, and presentation of AR and AP transactions. 

• Foreign Currency Transactions. The documentation should include the process and 

controls to identify, monitor, and account for foreign currency transactions. 

B. Lack of or Inadequate Controls Over UDO, ULO, AP, Expenses and Cash Disbursement 

Processes. 

• Inadequately Designed Controls Over AP and Expense Processes. Design and 

implement internal control activities and include criteria, analyses, reviews and supporting 

thresholds used in the execution of all relevant internal controls. In addition, evidential 

matter should be available to demonstrate that the control activity was performed; the scope 
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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. 

• 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 close invalid UDO 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 IQC. 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 post payments, including payments 

that fail to post systematically, in a timely manner. 

• AP and Expenses Recorded in the Appropriate Period. Design and implement controls 

to record AP and expense transactions appropriately and accurately 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 balances exist, or that expense transactions 

occurred and are accurately recorded in the financial statements. 

D. Lack of Policies, Procedures and Controls to Effectively Implement Accounting 

Standards. Design and implement policies, procedures and controls to record expenses 

incurred in the proper period; and to match revenue with the related cost of sales in accordance 

with SFFAS No.1, No. 4, No. 5 and No. 7. 

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 
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financial reporting. However, deficiencies exist in DLA’s processes related to the accumulation 

and presentation of their financial position and results of operations. 

A. Lack of or Inadequate Documentation of Financial Reporting and Budgetary Policies, 

Procedures, and Controls. DLA has not documented the end-to-end processes related to 

financial reporting and funds management. 

• Financial Reporting. The documentation does not include the processes to review and 

reconcile system generated reversals of prior year JVs and processes to review the 

completeness and accuracy of reports and data used in the financial reporting analyses and 

controls. 

• Funds Management. 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 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. Additionally, DLA did not implement the TFM 

update to add USSGL account 425400 – Reimbursements and Other Income Earned –

Collected From Non-Federal Sources. In addition, the posting logic for various inventory 

transactions, such as recoupment from returns, disposal and material transfers, and service 

revenue transactions do not meet the corresponding TFM business events. 

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 and Contract Authority Carried Forward accounts. 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 AR, AP, 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 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. 

• Interfaces Between Feeder Systems and the General Ledger. DLA does not have 

adequate controls to interface and post transactions between feeder systems and the general 

ledger appropriately. As a result, failed interface transactions are not reviewed and resolved 

in a timely manner. 
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• Financial Statement Close Process. DLA does not have adequately designed controls 

around the annual close and reconciliation processes, such as the monthly or quarterly 

reconciliation between the unadjusted trial balance (UTB) and the adjusted trial balance 

(ATB) 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. 53 Budget and Accrual 

Reconciliation and SFFAS 55 Amending Inter-Entity Cost Provisions. 

• 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 JVs 

in the general ledger and the 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 and proper 

recording 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 were 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 adequate controls 

to review and approve transactions recorded with elevated access privileges. 

• Accounting for Direct Appropriations. DLA does not have adequate controls to account 

for the receipt and expenditure of direct appropriations in the general ledger accurately and 

in a timely manner. 

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 deficiencies identified above:
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A. Lack of or Inadequate Documentation of Financial Reporting and Budgetary Policies, 

Procedures, and Controls. 

• Financial Reporting. Document the financial reporting process, to accurately reflect all 

aspects of the end-to-end process, including processes and controls performed in 

providing oversight of service providers. Additionally, evaluate the current policies and 

procedures for evaluating information produced by the entity. 

• Funds Management. 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 United States Standard General 

Ledger (USSGL). Design and implement controls that configure posting logic in the general 

ledger 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 litigation to identify, 

estimate, record and disclose contingent liabilities in the financial statements. 

• Interfaces Between Feeder Systems and the General Ledger. Design and implement 

controls to review and resolve interface transactions that fail to post to the general ledger. 

• 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 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. 

• 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. 
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• Accounting for Direct Appropriations. Develop and implement policies, procedures and 

internal controls to properly record direct and expended appropriations in the general 

ledger in an accurate and timely manner. 

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 

PO and SO levels 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 their 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 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) 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.

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 
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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; 

verifying that the parameters used to generate the reports or data are appropriate; judgmentally 

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 CUECs are properly 

identified, designed and operating effectively. 

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, configuration management, and contingency planning 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. 

Control deficiencies in the design and operation of financially significant information systems 

continue to occur in the information systems environment controls. The deficiencies relate to the 

following areas:

• Access controls 

• Configuration management 

• Segregation of duties controls

• Security management/governance over implementation of security controls

• Contingency planning

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 
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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.

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 two 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. 
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• For six financially significant applications, 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. 

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 allows 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 

financially significant applications. Management does not identify and periodically monitor 

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 weaknesses that represent a significant risk to the DLA 

financial management information systems environment include the following:

• SOC 1 reports are not monitored and reviewed to assess CUECs, including validation of 

whether management’s internal controls relevant to the CUECs, are designed, implemented, 

and operating effectively. 

• For one financially significant application, the authorization for the security state of the 

organizational information system and the environment in which that system operates, is not 

documented, tracked, and reported. 

• Management internal control procedures do not identify financially significant risks, establish 

and implement controls, track known risk exposure, and remediate control gaps. 

Contingency Planning Controls

Contingency planning controls should be part of an entity-wide program designed to achieve 

continuity of operations for organizational mission and business functions and should be 

effectively monitored. Contingency planning should be considered throughout the system 

development life cycle, be a fundamental part of the system design, and reflect applicable laws, 

executive orders, directives, regulations, policies, standards, guidelines, organizational risk 

tolerance, and system impact level. Without a well-designed program, issues with systems that do 

not process to completion may not be addressed or may be addressed inappropriately, and relevant 

servers and information contained on them may not be included in the backup schedule.

The identified contingency planning weaknesses in aggregate represent a significant risk to the 

DLA financial statements, IT environment, and financial applications. Absent or ineffective 

controls around contingency planning increases the risk that hardware or software issues will result 

in the loss of financial data or the ability to accurately process that data. 

The identified contingency planning control weaknesses that represent a significant risk to the 

DLA financial management information systems environment include the following:

• Contingency planning (CP) processes and controls failed in allowing management to backup 

system data. 

Recommendations 

Implement controls to address deficiencies in access controls, configuration management, 

segregation of duties, security management procedures, and contingency planning to include:

Access 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 

terminated and inactive users. 
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• Monitor user activity, identify and audit security violations, and assess privileged and sensitive 

users and transactions. 

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. 

Segregation of Duties Controls

• Identify, periodically review, and document sensitive and 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. 

Security Management/Governance Over Implementation of Security Controls

• Document risks and controls in place, identify gaps, and complete corrective actions to 

strengthen the internal control environment. Improve documentation, test and validate 

controls, and remediate findings. 

• Establish a process to evaluate and incorporate service provider reports, findings, and controls 

into management’s security documentation, governance process, and application control 

environment. 

Contingency Planning Controls

• Design and implement controls to periodically backup and monitor system data to successfully 

respond to incidents and prevent the permanent loss of data. 
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Appendix B – Significant Deficiencies

I. Property, Plant and Equipment 

Property, plant and equipment (PP&E) is comprised of general equipment, 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 unable to support the 

existence, completeness, rights and obligations, or valuation of its PP&E. 

A. Lack of or Inadequate Documentation of PP&E Accounting Policies, Procedures and 

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 CIP has not been 

performed. DLA is in the process of establishing or revising its policies and procedures for 

performing these inventories on an ongoing basis. In addition, DLA does not have signed 

memorandums of understanding with the military services that outline the reporting 

responsibilities, such as depreciation and maintenance costs, for real property assets for which 

DLA is the primary user. 

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:

• The completeness and existence of general equipment assets. 

• The validity of PP&E additions and disposals. 

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 control activities are 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 an 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 SFFAS No. 5, Accounting for Liabilities 
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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 general equipment assets, including 

substantiating that the application of SFFAS No. 6 and SFFAS No. 50 was consistent and 

appropriate. For example, DLA could not support the value of 1 of 5 samples selected. To 

account for a significant number of assets that have not been valued, DLA assigned 

placeholder values to these assets until the valuation process is completed, resulting in 

misstatements in the financial statements. 

• DLA is unable to support the values assigned to IUS assets in accordance with SFFAS No. 

10. 

• DLA has not established a policy to account for its leasing arrangements, nor has DLA 

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 its 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 PP&E Accounting Policies, Procedures and 

Controls. Document, update and finalize the PCMs that document the end-to-end processes 

and controls for PP&E. Complete the inventory of IUS and CIP to verify the existence and

completeness of the accounting records. In addition, obtain signed memorandums of agreement 

with the military services that outline the reporting responsibilities, such as depreciation and 

maintenance costs, for real property assets owned by the services for which DLA is the primary 

user. 

B. Lack of or Inadequate Documentation to Substantiate PP&E and PP&E-Related 

Transactions. 

• Develop documentation to substantiate that all of DLA’s general equipment assets are 

recorded accurately and completely. 

• Assess the data elements in the APSR to allow DLA to differentiate between assets that 

have been added to or removed from the capital PP&E population and assets that have 

changed or to assign a unique identifier to each asset that allows for additions and disposals 

to be identified. 
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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.

• 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. 

D. Lack of Policies, Procedures and Controls to Effectively Implement Accounting 

Standards. Design policies, procedures and controls 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: 

• Substantiating the values, including the alternate values, assigned to general equipment 

assets and that the application of SFFAS No. 6 and SFFAS No. 50 is consistent and 

appropriate. 

• 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 A-136. 

II. Environmental Liabilities 

ELs are comprised of cleanup costs associated with the restoration of sites on real property that 

DLA manages. In accordance with FMFIA, management is responsible for establishing and 

maintaining internal controls to achieve reliable financial reporting. However, we identified 

deficiencies in controls listed below, which, when aggregated, we consider to be a significant 

deficiency. 

 

A. Inability to Reconcile EL Associated with the Corresponding Real Property. DLA is 

unable to completely and accurately reconcile EL associated with the corresponding real 

property, such as buildings, fuel storage tanks and pipelines, that it manages. 

B. 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. In addition, DLA has not 

designed processes and controls to calculate environmental liabilities associated with general 

equipment. 
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Recommendations

Consider the following corrective actions related to the deficiencies identified above:

A. Inability to Reconcile EL Associated with the Corresponding Real Property. Design and 

implement policies and procedures to reconcile the buildings, tanks and pipelines in the 

environmental closure and asbestos liabilities estimate to the PP&E listings and investigate 

differences. 

B. Inadequate Controls Over Estimation Processes. Design and implement adequate controls 

to estimate environmental liabilities associated with general equipment and compare actual 

costs to estimates to see if any changes to the estimation methodology are necessary. 
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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 (Government Auditing 

Standards) and the provisions of Office of Management and Budget (OMB) Bulletin No. 22-01,

Audit Requirements for Federal Financial Statements, the financial statements of the Working 

Capital Fund of the Defense Logistics Agency (DLA), which comprise the balance sheet as of 

September 30, 2022, and the related statements of net cost and changes in net position and 

combined statement of budgetary resources for the year then ended, and the related notes

collectively referred to as the “financial statements”), and have issued our report thereon dated 

November 7, 2022. Our report disclaims an opinion on the financial statements because DLA has

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.

Report on Compliance and Other Matters

In connection with our engagement to audit the financial statements, we performed tests of DLA’s

compliance with certain provisions of laws, regulations, contracts and grant agreements,

noncompliance with which could have a direct and material effect on the financial statements, as 

well as the requirements referred to in the Federal Financial Management Improvement Act of 

1996 (FFMIA). 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 or other matters that are required to be reported 

under Government Auditing Standards and the provisions of OMB Bulletin No. 22-01, 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 7, 2022, 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) 2022 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 Management’s Responsibility for 

Enterprise Risk Management and Internal Control OMB Circular No. A-123 Appendix D.

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,

security management and contingency planning. 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

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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 

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 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 2022 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.

DLA’s Response to Findings

Government Auditing Standards require the auditor to perform limited procedures on DLA’s 

response to the findings identified in our engagement to audit and described in the accompanying

Management’s Response to the Audit Reports dated November 7, 2022. DLA’s response was not

subjected to the other auditing procedures applied in the engagement to audit the financial 

statements and, accordingly, we express no opinion on the response.

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 in accordance with Government Auditing 

A member firm of Ernst & Young Global Limited
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Standards in considering the entity’s compliance. Accordingly, this communication is not suitable 

for any other purpose.

Other Reporting Required by Government Auditing Standards

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

November 7, 2022 on our consideration of DLA’s internal control over financial reporting. The 

purpose of that report is solely to describe the scope of our testing of internal control over financial 

reporting and the results of that testing, and not to provide an opinion on the effectiveness of DLA’s 

internal control over financial reporting. That report is an integral part of an audit performed in 

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

financial reporting.



November 7, 2022

A member firm of Ernst & Young Global Limited
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MANAGEMENT’S RESPONSE TO AUDIT REPORTS
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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 WCF. The IPA 

was engaged to perform the audit of DLA WCF’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 Balance Sheets present those resources owned or 

managed by DLA WCF that represent future economic 

benefits (assets), amounts owed by DLA WCF that 

will require payments from those resources or future 

resources (liabilities), and residual amounts retained by 

DLA WCF comprising the difference (net position) as of 

September 30, 2022 and 2021.

The Statements of Net Cost present the net cost of 

DLA WCF operations for the years ended September 

30, 2022 and 2021. DLA WCF’s net cost of operations is 

the gross cost incurred by DLA WCF activities, less any 

exchange revenue earned and inter-entity eliminations 

from DLA WCF activities.

The Statements of Changes in Net Position present 

the change in DLA WCF’s net position resulting from the 

net cost of DLA WCF’s operations, budgetary financing 

sources, and other financing sources for the years ended 

September 30, 2022 and 2021.

The Combined Statements of Budgetary 

Resources present how and in what amounts budgetary 

resources were made available to DLA WCF, the status of 

these resources, and the net outlays of budgetary resources 

for the years ended September 30, 2022 and 2021.

The Notes to the Principal Financial Statements

provide detail and clarification for amounts in the 

principal financial statements.

The DLA WCF financial statements consist of the following:

INTRODUCTION TO THE PRINCIPAL FINANCIAL STATEMENTS

Instrument Intrigue

A Navy musician shows his 

tuba to children during a U.S. 

Naval Forces Europe and 

Africa Band concert in the 

Jamestown district of Accra, 

Ghana, March 14, 2022, as 

part of Exercise Obangame 

Express 2022. The exercise 

aims to improve cooperation 

among participating nations 

to increase maritime safety 

and security in the Gulf of 

Guinea and West Africa coastal regions. Photo by: Navy 

Petty Officer 2nd Class Trey 

Fowler
97 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

SECTION 2 | Financial Section (Unaudited)

Unaudited

FY 2022

Unaudited 

FY 2021

As Restated 

ASSETS (Note 2)

Intragovernmental

Fund Balance with Treasury (Note 3) $ 4,702,942 $ 2,706,222 

Accounts Receivable, Net (Note 4) 1,545,284 1,724,484 

Other Assets (Note 5) 123,306 123,306 

Total Intragovernmental 6,371,532 4,554,012 

Other than Intragovernmental

Accounts Receivable, Net (Note 4) 725,889 1,097,039 

Inventory and Related Property, Net (Note 6) 23,931,134 22,348,772 

General Property, Plant and Equipment, Net (Note 7) 738,862 810,370 

Advances and Prepayments 94,303 95,645 

Total Other than Intragovernmental 25,490,188 24,351,826 

TOTAL ASSETS $ 31,861,720 $ 28,905,838 

LIABILITIES (Note 8)

Intragovernmental

Accounts Payable $ 210,541 $ 175,540 

Advances from Others 1,149,354 552,166 

Other Liabilities:

Other Current Liabilities - Benefits Program Contributions Payable (Note 9) 39,58  54,

 Other Liabilities (Note 10) 5,247 3,025 

Total Intragovernmental Other Liabilities 44,805 57,518 

Total Intragovernmental 1,404,700 785,224 

Other than Intragovernmental

Accounts Payable 2,705,924 2,275,581 

Environmental and Disposal Liabilities (Note 11) 1,233,787 1,272,377 

Federal Employee Benefits Payable (Note 9) 148,883 156,838 

Advances from Others and Deferred Revenue 2,669 3,642 

Other Liabilities (Note 10) 323,204 298,804 

Total Other than Intragovernmental 4,414,467 4,007,242 

TOTAL LIABILITIES $ 5,819,167 $ 4,792,466 

Commitments and Contingencies (Note 12)

NET POSITION

Unexpended Appropriations - Funds from Other than Dedicated Collections $ 988,353 $ 198,884

Cumulative Results of Operations - Funds from Other than Dedicated Collections 25,054,200 23,914,488 

TOTAL NET POSITION 26,042,553 24,113,372 

TOTAL LIABILITIES AND NET POSITION $ 31,861,720 $ 28,905,838 

Balance Sheets

As of September 30, 2022 and 2021 (dollars in thousands)

The accompanying notes are an integral part of these statements. 
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Statements of Net Cost

For the Years Ended September 30, 2022 and 2021 (dollars in thousands)

Unaudited

FY 2022

Unaudited 

FY 2021

Energy

Gross Cost $ 11,899,323 $ 8,981,168 

Less: Earned Revenue (12,186,946) (9,371,148)

Net Cost (287,623) (389,980)

Supply Chain Management

Gross Cost 31,599,622 41,428,876 

Less: Earned Revenue (30,608,234) (41,361,988)

Net Cost 991,388 66,888 

Document Services

Gross Cost 247,576 238,056 

Less: Earned Revenue (218,011) (212,356)

Net Cost 29,565 25,700 

Total Gross Cost 43,746,521 50,648,100 

Less: Total Earned Revenue (43,013,191) (50,945,492)

NET COST OF OPERATIONS $ 733,330 $ (297,392)

The accompanying notes are an integral part of these statements. 
99 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

SECTION 2 | Financial Section (Unaudited)

Statements of Changes in Net Position

For the Years Ended September 30, 2022 and 2021 (dollars in thousands)

Unaudited

FY 2022

Unaudited 

FY 2021 

Unexpended Appropriations

Beginning Balances $ 198,884 $ 291,494 

Appropriations Transferred-in/out 2,767,658 49,821 

Appropriations Used (1,978,189) (142,431)

Net Change in Unexpended Appropriations 789,469 (92,610)

Total Unexpended Appropriations: Ending Balance 988,353 198,884 

Cumulative Results of Operations

Beginning Balances 23,914,488 23,193,638

Appropriations Used 1,978,189 142,431 

Non-exchange Revenue 5,231 3,395 

Transfers-in/out Without Reimbursement (273,409) 117,340 

Imputed Financing 165,400 163,152 

Other (2,369) (2,860)

Net Cost of Operations 733,330 (297,392)

Net Change in Cumulative Results of Operations 1,139,712 720,850 

Cumulative Results of Operations: Ending Balance 25,054,200 23,914,488 

TOTAL NET POSITION $ 26,042,553 $ 24,113,372 

The accompanying notes are an integral part of these statements. 
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Combined Statements of Budgetary Resources

For the Years Ended September 30, 2022 and 2021 (dollars in thousands)

Unaudited

FY 2022

Unaudited 

FY 2021

BUDGETARY RESOURCES

Unobligated Balance From Prior Year Budget Authority, Net $ 3,506,136 $ 508,695 

Appropriations 128,730 49,821 

Contract Authority 52,393,056 47,204,090 

Spending Authority From Offsetting Collections 269,353 263,705 

TOTAL BUDGETARY RESOURCES $ 56,297,275 $ 48,026,311 

STATUS OF BUDGETARY RESOURCES

New Obligations and Upward Adjustments $ 55,216,166 $ 47,724,371 

Unobligated Balance, End of Year:

Apportioned, Unexpired Accounts 1,081,109 301,940 

Unexpired Unobligated Balance, End of Year 1,081,109 301,940 

Total Unobligated Balance, End of Year 1,081,109 301,940 

TOTAL BUDGETARY RESOURCES $ 56,297,275 $ 48,026,311 

OUTLAYS, NET

Outlays, Net $ 770,937 $ 1,259,017 

AGENCY OUTLAYS, NET $ 770,937 $ 1,259,017 

The accompanying notes are an integral part of these statements. 
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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 OUSD for Acquisition and Sustainment 

through the Assistant Secretary of Defense for Sustainment. 

DLA provides material and services to components of DoD 

(including the U.S. Army, Navy, Air Force, Marine Corps and 

Space 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 WCF.

The DLA WCF has the three major activity groups (DLA 

Energy, DLA SCM, and DLA Document Services) and two 

support programs, included within DLA SCM, as described 

below, to execute its mission to provide supply, logistics, distribution, and disposition service support. These activities are 

the primary revenue generators within DLA WCF.

DLA Supply Chain Management:

Troop Support (Philadelphia, Pennsylvania) - consists of 

four commodities:

●	 Subsistence – food support for the military all over the 

world;

●	 C&T - clothing, textiles and equipment to U.S. service 

members, other Federal Agencies, and partner nations;

●	 C&E - construction materials, heavy equipment, tactical 

gear, firefighting equipment, minerals and precious metals to wood products, imaging and information equipment; and

●	 Medical - medical and pharmaceutical supplies.

Aviation (Richmond, Virginia) - provides repair parts and 

industrial items such as screws, nuts, and bolts, typically referred to as bench stock for aviation weapons systems.

Land and Maritime (Columbus, Ohio) - provides repair 

parts and industrial items such as screws, nuts, and bolts, typically referred to as bench stock for ground-based, maritime, 

aviation, and foreign military systems. 

DLA Support Services Programs DLA’s Support Services Programs provide distribution support to SCM and may 

also perform disposition services on behalf of the three DLA 

Activity Groups, as well as other Federal and public entities.

● DLA Distribution (New Cumberland, Pennsylvania) - provides storage and distribution solutions, transportation 

planning, logistics planning and contingency operations, 

as well as operating a global network of 34 distribution 

centers.

● DLA Disposition Services (Battle Creek, Michigan) - disposes of excess property by reutilization, transfer, and 

demilitarization, and conducts environmental disposal and 

reuse.

DLA Document Services (New Cumberland, Pennsylvania) – provides automated document production, printing 

services, digital conversion, and document storage. 

DLA Energy (Fort Belvoir, Virginia) - provides petroleum 

products/lubricants, supply chain services, sustainment, restoration and modernization, transportation, aerospace energy, 

fuel quality/technical support, installation energy and utility 

services.

DLA ACTIVITY GROUPS
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B. Basis of Presentation and Accounting

Basis of Presentation and Accounting: The 

DLA WCF fiscal year ends September 30. The accompanying financial statements account for all resources for which 

DLA WCF is responsible. These financial statements present 

the financial position, results of operations, changes in net 

position, and the combined budgetary resources of DLA WCF, 

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 WCF 

activities in accordance with U.S. GAAP promulgated by the 

FASAB4 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 WCF 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, 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 WCF 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 WCF 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 WCF is continuing the necessary actions 

 4 FASAB is the official body for setting accounting standards of the U.S. 

government.

DLA Disposition Services

The team from DLA Disposition Services at Colorado Springs receives their site of the year award for 2021 from DSD MidAmerica Deputy Director Marc Wilson. Photo By: Courtesy Photo
103 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

SECTION 2 | Financial Section (Unaudited)

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 to existence, completeness, and accuracy 

requirements as required by U.S. GAAP and OMB Circular 

A-136. As DLA WCF identifies non-conforming data issues, 

the Agency will continue to implement interim mitigation 

processes to address these limitations. In addition, DLA WCF 

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 obligated5 amounts and unobligated6 amounts for the fiscal year); and (3) Outlays, Net for the 

fiscal year, which is comprised of Outlays7 less Actual Off-setting Receipts (cash transactions). DLA WCF’s budgetary 

resources8 include unobligated balances of resources from 

prior years and new resources, consisting of appropriations, 

contract authority, 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 WCF. Intragovernmental liabilities are claims DLA WCF owes to other Federal entities, 

whereas Other than Intragovernmental assets and liabilities 

arise 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 WCF against public entities. 

Other than Intragovernmental liabilities are amounts that DLA 

WCF owes to public entities. DLA WCF 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 WCF engages in transactions with other DoD and 

Federal entities that generate inter-DoD and intragovernmental balances; however, DLA WCF 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, Volume I, Part 

2, Chapter 4700, Federal Entity Reporting Requirements for 

the Financial Report of the United States Government. The 

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 

WCF is ultimately responsible for the accuracy of its trading 

partner data and initiating actions to reconcile balances with 

its trading partners; however, DLA WCF is unable to resolve 

the reconciling differences in amounts reported for the buyer/ 

seller transactions reciprocal category with Other Defense Organizations (ODO), (refer to Note 1.C., Departures from U.S. 

GAAP, related to Intragovernmental/Intra-departmental and 

Other than Intragovernmental Transactions). 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.

Inter-fund Transactions: Inter-fund transactions and 

balances among DLA WCF activities (Energy, SCM, and 

5 Per OMB Circular A-11, Section 20, “Obligation means a legally binding 

agreement that will result in outlays, immediately or in the future.”

6 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. 

7 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.”

8 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."
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Document Services) 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 WCF 

presents the Statements of Net Cost based on activities 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/Intra-departmental 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 WCF 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 

WCF’s estimates are based on historical experience, current 

events and other assumptions that are believed to be reasonable under the circumstances. Significant estimates underlying the accompanying financial statements include: (1) 

contingent liabilities; (2) environmental and disposal liabilities 

(E&DL); (3) accruals for accounts receivable related to aerospace, customer direct, Fuel Exchange Agreements (FEA), 

and inventory accruals; (4) allowance for doubtful accounts; 

(5) accounts payable MOCAS and outbound MIPR accruals; 

(6) undelivered orders; (7) Federal Employees’ Compensation 

Act (FECA) liability; (8) inventory defined as Excess, Obsolete, and Unserviceable (EOU); and (9) allowance for inventory held for repair as of the date of these financial statements.

C. Departures from U.S. GAAP

Financial management systems and processes continue to 

be evaluated and modified as DLA WCF strives to remediate 

its material weaknesses and record and report its financial 

activity in accordance with U.S. GAAP. Therefore, DLA WCF 

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 WCF financial statements although other departures from U.S. GAAP may exist that have not been identified.

Definition of Reporting Entity: The DLA WCF 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 WCF is unable to determine if there are consolidation 

entities that are required to be consolidated and disclosed in 

DLA WCF 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.

Statements of Net Cost: The DLA WCF does not have 

policies and compliant processes in place to present its major 

program costs aligned with DLA WCF 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 WCF does not have compliant processes in place to properly report and distinguish between 

intragovernmental, intra-departmental, and Other than Intra-governmental transactions in accordance with SFFAS 1, 

Accounting for Selected Assets and Liabilities.

In FY 2022, DLA WCF determined a significant accounts 

receivable transaction recorded in FY 2021 was improperly 

classified as Intragovernmental. As such, DLA WCF restated the FY 2021 balances reported in the prior year Balance 

Sheet to reclassify the accounts receivable as an Other than 

Intragovernmental DLA WCF asset in accordance with SFFAS 

1, Accounting for Selected Assets and Liabilities (refer to Note 

18, Restatements).

Inter-Entity Cost (Note 1. U.): The DLA WCF 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 

FY 2019). 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.
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SECTION 2 | Financial Section (Unaudited)

Fund Balance with Treasury (Note 1.G. and 

Note 3): The DLA WCF is not able to account for FBwT 

in accordance with SFFAS 1, Accounting for Selected Assets and Liabilities, due to its inability to identify and reconcile the reported differences between DLA WCF’s accounting 

system and Treasury. Monthly unsupported journal vouchers 

are made to adjust the FBwT balances in DLA WCF financial 

statements to match U.S. Treasury records.

Accounts Receivable, Net, Revenue, and Unfilled Customer Orders (Notes 1.H. 1.U. and 

1.W., Notes 4; Note 6; and Note 13): The DLA WCF 

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, Accounting for Selected Assets and 

Liabilities, 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 SFFAS 7, Accounting for Revenue and Other 

Financing Sources and Concepts for Reconciling Budgetary 

and Financial Accounting. More specifically:

Direct Sales - DLA WCF Holds the Inventory to be 

Sold: In some instances, the current distribution system that 

DLA WCF uses is not in accordance with SFFAS 7, Accounting for Revenue and Other Financing Sources and Concepts 

for Reconciling Budgetary and Financial Accounting, as revenue may be recognized before materials are shipped or delivered to the customer;

Consignment/Direct Sales - Third Party Holds the 

Inventory to be Sold: For inventory that is managed by a 

third party, revenue is recognized on the date DLA WCF bills 

the customer which may occur before DLA WCF releases control of the materials, which is not in accordance with SFFAS 

7, Accounting for Revenue and Other Financing Sources and 

Concepts for Reconciling Budgetary and Financial Accounting;

Customer Direct Sales: The customer direct process is 

where DLA WCF permits its customers to order goods directly 

from DLA WCF’s authorized vendors. Under DLA WCF’s business structure, DLA WCF has the obligation to pay the vendor 

and the right to collect payment from the customer. Therefore, 

DLA WCF incurs a liability and earns revenue at the time the 

customer accepts the goods from the vendor. However, while 

DLA WCF records an accrual for the liability incurred, DLA 

WCF does not account for the revenue earned at the same 

time in accordance with SFFAS 7, Accounting for Revenue 

and Other Financing Sources and Concepts for Reconciling 

Budgetary and Financial Accounting;

Customer Returns: The DLA WCF does not match the 

customer returns to the original sales orders and improperly 

decreases revenue, cost of goods sold, and contract authority 

liquidated for the amount of the return, which is not in accordance with SFFAS 3, Accounting for Inventory and Related 

Property, and SFFAS 7, Accounting for Revenue and Other 

Financing Sources and Concepts for Reconciling Budgetary 

and Financial Accounting;

Fuel Exchange Agreement Business Process: The 

DLA WCF does not have policies and compliant processes in 

place to (1) properly adjust the budgetary accounts in accordance with SFFAS 7, Accounting for Revenue and Other Financing Sources and Concepts for Reconciling Budgetary and 

Financial Accounting, when the netting of individual sales and 

purchase transactions occur; (2) recognize and value appropriately the replacement-in-kind transactions in accordance 

with SFFAS 3, Accounting for Inventory and Related Property; 

and (3) demonstrate that the monthly accrual methodology for 

FEA is in accordance with SFFAS 5, Accounting for Liabilities 

of the Federal Government, and SFFAS 1, Accounting for Selected Assets and Liabilities;

Unfilled Customer Orders: The DLA WCF does not properly record UCO activity and is unable to support the UCO 

balance in the accounting system in accordance with SFFAS 

7, Accounting for Revenue and Other Financing Sources and 

Concepts for Reconciling Budgetary and Financial Accounting;

Revenue: The DLA WCF performs services for other Federal 

entities and recognizes accounts receivable and revenue for 

these transactions without assessing the probability of collection which is not in accordance with Technical Bulletin 2020-

1, Loss Allowance for Intragovernmental Receivables SFFAS 

1, Accounting for Selected Assets and Liabilities, and SFFAS 

7, Accounting for Revenue and Other Financing Sources and 

Concepts for Reconciling Budgetary and Financial Accounting. In addition, DLA is unable to produce a population of cus-
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tomer disputes which impacts their ability to support the allowance for returns in accordance with SFFAS 1, Accounting 

for Selected Assets and Liabilities, and SFFAS 7, Accounting 

for Revenue and Other Financing Sources and Concepts for 

Reconciling Budgetary and Financial Accounting; and

Foreign Currency: The DLA WCF does not have a policy 

and compliant processes in place to determine the significant 

effects, if any, of changes in the exchange rate related to recording foreign currency transactions in accordance with SFFAS 7, Accounting for Revenue and Other Financing Sources 

and Concepts for Reconciling Budgetary and Financial Accounting. This also impacts accounts payable.

Inventory and Related Property, Net (Note 

1.J. and Note 6): The DLA WCF does not have policies 

and compliant processes in place to account for inventory and 

related property, net or properly account for gains and losses on adjustments to inventory in situations where DLA WCF 

owns the same material as held for a customer or held as 

EOU in accordance with SFFAS 3, Accounting for Inventory 

and Related Property, and SFFAS 7, Accounting for Revenue 

and Other Financing Sources and Concepts for Reconciling 

Budgetary and Financial Accounting. Furthermore, DLA has 

not completed establishing inventory and related property beginning balances using deemed cost and has not made an 

unreserved assertion as permitted by SFFAS 48, Opening 

Balances for Inventory, Operating Materials and Supplies, and 

Stockpile Materials, (effective FY 2017). More specifically:

Excess, Obsolete, Unserviceable: The DLA WCF does 

not have procedures in place to review and determine if additional material in its accounting system should be classified as 

EOU in accordance with SFFAS 3, Accounting for Inventory 

and Related Property. Upon receipt of EOU from other components or military services, the asset is recorded incorrectly as 

a gain rather than a transfers-in. Upon disposition of EOU, the 

expense is recorded incorrectly as cost of goods sold rather 

than determining the gain or loss based on the difference of 

the sale price and Net Realizable Value (NRV) in accordance 

with SFFAS 3, Accounting for Inventory and Related Property. 

The accounting treatment for both transfers-in and disposition 

of EOU are not in accordance with SFFAS 7, Accounting for 

Revenue and Other Financing Sources and Concepts for Reconciling Budgetary and Financial Accounting.

The DLA WCF is unable to provide the carrying value of the 

inventory before it was identified as EOU inventory, in accordance with SFFAS 3, Accounting for Inventory and Related 

Property;

Raw Materials and Inventory Work in Process: The 

DLA WCF does not properly account for inventory provided to 

vendors against contracts and work orders for manufacturing 

and assembly in accordance with SFFAS 3, Accounting for Inventory and Related Property. These items should be initially 

accounted for as Raw Material, and then as Inventory Work in 

Process;

Additional Inventory Costs: The DLA WCF does not 

properly account for additional inventory costs in the manufacturing and assembly process, in accordance with SFFAS 3, 

Accounting for Inventory and Related Property;

Categories of Inventory: The DLA WCF does not have 

policies and procedures in place for management’s criteria to 

determine the category of inventory in accordance with SFFAS 3, Accounting for Inventory and Related Property;

Booster Vaccine

Navy Seaman Sabrina Moncada, 

assigned to the medical department 

aboard the USS Gerald R. Ford, 

administers a COVID-19 booster 

vaccine to Navy Petty Officer 2nd Class 

Tyler Neff during a COVID-19 booster 

shot exercise in Newport News, Va., Jan. 

19, 2022. Photo By: Navy Petty Officer 

3rd Class Zack Guth
107 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

SECTION 2 | Financial Section (Unaudited)

Customer Direct: The DLA WCF does not record Customer 

Direct transactions in accordance with SFFAS 3, Accounting 

for Inventory and Related Property. DLA WCF combines the 

purchase from the vendor and the cost of goods sold into a 

single entry in the accounting system that does not include the 

receipt or issuance of inventory; and

Goods Receipt: The DLA WCF does not have sufficient 

policies and procedures to properly account for receipts of 

goods when the receipted quantity does not match the purchase order quantity in accordance with SFFAS 3, Accounting 

for Inventory and Related Property. In addition, under the contractual agreement, if the contractor delivers and DLA WCF 

receives quantities of any item in excess of the quantity called 

for, DLA WCF may retain such excess quantities without compensating the contractor. Rather than adjusting the unit cost 

based on the updated quantity received, DLA WCF is recording a gain to account for the excess items.

General Property, Plant and Equipment, Net 

(Note 1.K and Note 6): The DLA WCF does not have 

policies and compliant processes in place to account for general PP&E, net, at historical cost, in accordance with SFFAS 

7, 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 

buildings, general equipment, Construction-in-Progress (CIP), 

Internal Use Software (IUS), and IUS in Development using 

the alternative valuation methods permitted by SFFAS 50, Establishing Opening Balances for General Property, Plant, and 

Equipment, (effective FY 2017). In addition, DLA WCF 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:

Transferred assets: The DLA WCF is unable to determine 

the valuation of general equipment assets previously transferred from the military services in accordance with SFFAS 6, 

Accounting for Property, Plant, and Equipment;

Internal-Use Software: The DLA WCF is unable to substantiate the valuation of internal-use software in accordance 

with SFFAS 10, Accounting for Internal Use Software, and SFFAS 50, Establishing Opening Balances for General Property, 

Plant, and Equipment;

Internal-Use Software in Development: The DLA WCF 

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;

Construction-in-Progress Balances: The DLA WCF 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;

Capitalization: The DLA WCF does not properly follow the 

policies and procedures to effectively implement and consistently apply the capitalization threshold, in accordance with 

SFFAS 6, Accounting for Property, Plant, and Equipment, and 

SFFAS 10, Accounting for Internal Use Software;

Depreciation: The DLA WCF does not properly follow the 

policies and procedures to effectively implement and consistently apply depreciation and amortization, in accordance with 

SFFAS 6, Accounting for Property, Plant, and Equipment, and 

SFFAS 10, Accounting for Internal Use Software; 

Rights and Obligations: The DLA WCF is unable to substantiate whether DLA WCF has the rights and obligations to 

the recorded general PP&E assets in accordance with SFFAS 

6, Accounting for Property, Plant, and Equipment; and

Leases (Note 1.L.): The DLA WCF 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, and SFFAS 6, Accounting for Property, Plant, and 

Equipment. As such, DLA WCF does not have any capital or 

operating leases reported or disclosed as of September 30, 

2022 and 2021

.

Advances and Prepayments (Note 1.M.):

The DLA WCF does not have policies and compliant processes in place to record advances and prepayments related to 

organic manufacturing and outstanding contract financing 

payments in accordance with SFFAS 1, Accounting for Selected Assets and Liabilities. Specifically, the accounts payable 

adjustment methodology for a negative payable is inaccurate 

and does not comply with TFM/USSGL posting logic.
108

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Accounts Payable, Expenses, and Undelivered Orders (Notes 1.O. and 1.W; Note 8; and Note 14): The 

DLA WCF does not have policies and compliant processes in 

place to account for accounts payable, expense accruals, and the 

related Undelivered Orders (UDOs) in accordance with SFFAS 1, 

Accounting for Selected Assets and Liabilities, and SFFAS 5, Accounting for Liabilities of the Federal Government. More specificall

Accrual Methodology for Liabilities: The DLA WCF 

does not properly accrue liabilities in the period incurred, recognize the related expenses, and reduce UDOs in accordance 

with SFFAS 5, Accounting for Liabilities of the Federal Government;

Capitalized Expenses: The DLA WCF does not properly 

recognize in its accounting records the full cost of the goods 

or services it receives as an expense in accordance with SFFAS 4, Managerial Cost Accounting Standards and Concepts;

Negative Payable: The DLA WCF processes allow for payment without receipt, thus resulting in a negative payable that 

is not in accordance with SFFAS 5, Accounting for Liabilities 

of the Federal Government. This occurs when a payment is 

made prior to the goods receipts being posted in DLA WCF’s 

accounting system. This results in an understatement of current year expenses and payables, and an overstatement of 

UDOs; and

Undelivered Orders: The DLA WCF does not have sufficient policies and procedures in place to record obligations at 

the time contracts are awarded in accordance with SFFAS 5, 

Accounting for Liabilities of the Federal Government. In addition, DLA WCF is unable to support the UDO balance in the 

accounting system.

Environmental and Disposal Liabilities (Note 

1.P; Note 11; and Note 12): The DLA WCF does not 

have policies and compliant processes in place to reconcile 

asset listings to the amounts recorded for E&DL 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.N; 

Note 10; Note 11; and Note 12): The DLA WCF does 

not have policies and compliant processes in place to reconcile asset listings to the amounts recorded for E&DL 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.

Reconciliation of Net Cost to Net Outlays 

(Note 16): The DLA WCF 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 WCF 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.

Public-Private Partnerships: The DLA WCF has not 

completed analyzing all applicable business relationships to 

determine if these arrangements or transactions indicate the 

existence of Public-Private Partnership (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 

WCF 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.
109 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

SECTION 2 | Financial Section (Unaudited)

E. Appropriations and Funding

Initial Corpus: The DLA WCF received its initial corpus 

through an appropriation from the DWWCF. The corpus financed

initial operations to obtain goods and services sold to customers 

on a reimbursable basis to maintain the corpus. In addition, DLA 

WCF receives direct or supplemental appropriations through 

DoD reprogramming actions, Title V (Revolving and Management 

Funds), IX (Overseas Contingency Operations), and X (Required 

Additional Appropriations). For the years ended September 30, 

2022 and 2021, DLA WCF received direct appropriations in the 

amount of $2.8 billion and $49.8 million, respectively (refer to 

Note 15, Contributed Capital).

The DWWCF consists of six activity groups. DLA WCF operates 

three of the six activity groups, which include DLA Energy, DLA 

SCM, and DLA Document Services. DFAS and the DISA operate 

the other three activity groups. DLA WCF is the cash manager for 

the DWWCF funding and is responsible for developing DWWCF 

activity group budget exhibits related to cash and monitoring cash 

execution. Although DLA WCF shares its accounting code with 

DFAS and DISA, each Agency receives their own separate Annual Operating Budget. OUSD(C) uses a data element referred to 

as a ‘limit’ to differentiate the various ODOs under Treasury Index

(TI)-97. DLA WCF uses limits assigned to the TI-97 organizations 

to track spending at a level below the Treasury Account Symbol 

(TAS) level.

Contract Authority: The DLA Energy and DLA SCM receive contract authority for their operating and capital programs. 

Contract authority is a type of budget authority that permits obligations to be incurred in advance of an appropriation, offsetting

collections, or receipts to make outlays to liquidate the obligations. Typically, the Congress provides contract authority in an 

authorizing statute to allow DoD components to incur obligations 

in anticipation of the collection of receipts or offsetting collections that will be used to liquidate the obligations. Subsequently, 

the contract authority liquidates through the receipt of customer 

funds.

Spending Authority from Offsetting Collections:

The DLA Document Services receives spending authority from 

offsetting collections for its operation program. Spending authority from offsetting collections represent authority that permits

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 WCF upon 

implementation. DLA WCF has not completed the process of 

evaluating the effects of these pronouncements and is unable 

to determine the materiality of changes that these pronouncements will have on its financial position, results of operations, 

changes in net position, and 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 2019, and SFFAS 

60, Omnibus Amendments 2021: Leases-Related Topics, 

amend 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) SFFAS 60

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

Omnibus Amendments 

FY 2021

Adoption 

Required in FY Deferred to FY 2024 Effective FY 2024 Effective 2023
110

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obligations and outlays to be financed by reimbursements from

the funding Agencies and requires the receipt of customer orders 

prior to incurring obligations.

F. Entity and Non-Entity Assets

The DLA WCF reports both entity and non-entity assets. Entity assets are assets that the reporting entity has authority 

to use in its operations. Management may have authority to 

decide how funds are used or it may be legally obligated to 

use the funds a certain way. Non-entity assets are not available for use in DLA WCF’s operations. DLA WCF maintains 

stewardship accountability and reporting responsibilities for 

non-entity assets and will subsequently remit these non-entity 

assets to the Treasury. DLA WCF records a corresponding liability, custodial liability, for these accounts receivable. (Refer 

to Note 2, Non-Entity Assets, and Note 10, Other Liabilities).

G. Fund Balance with Treasury

The DLA WCF does not maintain cash in a commercial bank, 

but rather in the U.S. Treasury. DLA WCF’s FBwT includes 

the amount available for DLA WCF to pay current liabilities 

and finance authorized purchases, except as restricted by 

law. The disbursing offices of DFAS, the U.S. Army Corps of 

Engineers, GSA, and the Department of State’s financial service centers process DLA WCF’s cash collections, disbursements, and adjustments.

In recent years, DLA WCF implemented Treasury Direct Disbursing (TDD), which provides DLA WCF the capability to 

transmit directly from accounting systems to Treasury for disbursements. With the implementation of TDD, DLA WCF has 

a unique accounting code allowing DLA WCF to identify the 

transactions.

On a monthly basis, DLA WCF adjusts its FBwT account balance to bring its cash balance in agreement with the U.S. 

Treasury cash balance reported on the Central Accounting 

and Reporting System 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 Treasury, but have not yet been posted to DLA WCF’s accounting systems. Undistributed amounts can be a result of 

timing, invalid line of accounting, invalid TAS information, and 

unsupported and unreconciled differences.

The DLA WCF’s accounting service provider, DFAS, uses 

suspense accounts to hold transactions temporarily prior to 

identifying the correct funding. Suspense account items

represent the amounts that are reported to U.S. Treasury at 

the Treasury Index (TI) Level (TI-17, TI-21, T-57, T-97), but 

have not yet been classified to a DLA WCF TAS. The transactions in suspense accounts include unidentified collections, 

disbursements, Recyclable Materials, and Intra-Governmental Payment and Collection Transactions at month end. DFAS 

researches suspense transactions to post them against the 

appropriate line of accounting. The current balances for DLA 

WCF 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 U.S. Treasury Regional Financial Centers and

notifies DoD of differences in collection and disbursement

data on the Statement of Differences (SOD) report. The

current balances for DLA WCF SOD transactions are derived

from DFAS management analysis and the SOD UoT.

(Refer to Note 1.C., Departures from U.S. GAAP, related to Fund 

Balance with Treasury, and Note 3, Fund Balance with Treasury.)

H. Accounts Receivable, Net

Accounts Receivable, Net: Accounts receivable represents amounts due to DLA WCF from other Federal entities 

(Intragovernmental) and the public (Other than Intergovernmental). DLA’s accounts receivable arises from sales of inventory and services performed.

DLA WCF presents its accounts receivable net of an allowance for doubtful accounts, which is based on a systematic 

methodology of grouped aged public and Federal accounts 

receivables. DLA WCF evaluates the allowance methodology and estimated allowance percentages quarterly based on 

historical average collections on aged public and Federal accounts receivable. The allowance for doubtful accounts is calculated based on the aged accounts receivable balances from 

the preceding month, with the exception of FEA accounts receivable, as these are reconciled in periodic settlements with 

the foreign governments (refer to Note 1.W, Transactions with 

Foreign Governments and International Organizations, for additional information on FEA sales and settlements).
111 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

SECTION 2 | Financial Section (Unaudited)

(Refer to Note 1.C., Departures from U.S. GAAP, related to 

Intragovernmental/Intra-departmental and Other than Intragovernmental Transactions and Accounts Receivable, Net, 

Revenue, and Unfilled Customer Orders, Note 4, Accounts 

Receivable, Net, and Note 18, Restatements.)

I. Other Assets

The DLA WCF other assets include the Strategic Petroleum 

Reserve. DLA Energy’s Strategic Petroleum Reserve consists 

of crude oil held by the Department of Energy (DoE) on behalf 

of DoD. Public Law 102-396, Section 9149 enacted in November 1992 established the requirement for DoE to acquire and 

maintain a strategic petroleum reserve for National defense 

purposes. Section 9149 provided appropriations for the acquisition, storage, and drawdown of such reserve. Proceeds from 

sales of this reserve will be deposited to DoD’s accounts and 

remain available until expended. DoE reports this crude oil in 

inventory in their financial statements, with an offsetting custodial liability to DoD. By law, the reserve cannot be drawn down 

or released to DoD without a Presidential Order along with the 

advice from the Secretary of Defense. As of September 30, 

2022, and 2021, none of the reserve has been drawn upon, 

therefore the full inventory remains on hand with DoE (Refer to 

Note 5, Other Assets). 

J. Inventory and Related Property, Net

The DLA WCF inventory is comprised of material held at DLA 

Energy and DLA SCM and categorized into:

Inventory Held for Sale: Inventory that is in the process of production for sale or to be consumed in the production of goods for sale or in the provision of services for a fee 

(refer to Note 1.A., Reporting Entity), for items held for sale by 

activity group. Additionally, DLA WCF has inventory held for 

sale, in-transit. This consists of material in-transit from commercial and Government suppliers to the financial reporting 

entity or material in-transit between storage locations.

Inventory Reserved for Future Sale: Inventory 

that is maintained and not readily available in the market or 

because there is more than a remote chance that they will 

eventually be needed (although not necessarily in the normal 

course of operations). Similar to the Inventory Held for Sale, 

the inventories primarily include weapon system repair parts 

from DLA Aviation and DLA Land and Maritime, and food and 

medical supplies from DLA Troop Support.

Inventory Held for Repair: Inventory that is damaged 

and requires repairs to make it suitable for sale, which includes consumable spares, repair parts and repairable items. 

Inventory Held for Repair is valued using the allowance method as described in SFFAS 3, Accounting for Inventory and 

Related Property, and DoD Financial Management Regulation 

(FMR), Volume 4, Chapter 4.

Excess, Obsolete, and Unserviceable Inventory: 

Excess inventory exceeds management requirements to 

meet DLA WCF’s mission. Obsolete inventory is no longer 

needed due to technology, laws, customs, or operations. 

Unserviceable inventory is damaged inventory that is more 

economical to dispose of than to repair.

Inventory Valuation: The DLA WCF uses the Moving 

Average Cost (MAC) method to value Inventory Held for Sale, 

Reserved for Future Sale and Held for Repair. Inventory Held 

for Repair is valued at MAC less an allowance for the estimated repair cost. The allowance is calculated based on 2.0% of 

the total value of Inventory Held for Repair. The MAC is calculated each time inventory is purchased dividing the total cost 

of units available by the number of total units available.

EOU inventory is valued at its expected NRV. An NRV factor 

is applied to the assets’ original acquisition value to determine 

NRV. The FY 2022 NRV calculation resulted in an NRV of 

zero as of September 30, 2022.

(Refer to Note 1.C., Departures from U.S. GAAP, related to 

Inventory and Related Property, Net, and Note 6, Inventory 

and Related Property, Net.)

K. General Property, Plant and Equipment, 

Net

The DLA WCF general PP&E consists of buildings, CIP, structures, linear structures, IUS, IUS in development, and general equipment that are used to facilitate the Agency’s mission. 

The land that these assets reside on is not owned by DLA 

WCF.

Capitalization Threshold: The DLA WCF general 

PP&E assets are recorded at historical acquisition cost plus 

improvements when an asset has a useful life of two or more 

years, and the acquisition cost exceeds the $250,000 capitalization threshold, effective October 01, 2013. The general 

PP&E assets acquired prior to October 1, 2013, were capi-
112

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talized at various thresholds and are carried at the remaining 

net book value. However, some of the assets capitalized after 

October 1, 2013 do not exceed the $250,000 capitalization 

threshold.

In FY 2020, DLA WCF transferred real property assets to the 

Military Departments and is in process of establishing Memorandum of Agreements (MOAs) with the Military Departments 

for the use of real property and the recording of related imputed costs, in accordance with DoD policy.

The DLA WCF continues to validate its general PP&E balances by verifying the existence and completeness, confirming 

rights and obligations by validating documentation from the 

military services to ensure DLA WCF is the appropriate Financial Reporting Organization, and documenting processes through reviewing and updating policy guidance to define 

the procedures used for the valuation method. DLA WCF 

has not yet finalized the inventory and valuation process for 

their general PP&E. Accordingly, DLA WCF has not made 

an unreserved assertion that the opening balances of general PP&E for FY 2022 are presented fairly in accordance with 

U.S. GAAP and SFFAS 50, Establishing Opening Balances for 

General Property, Plant, and Equipment.

The DLA WCF determines the useful life of its general PP&E 

using the asset classification and the type of assets based 

on the DoD FMR 7000.14-R Volume 4, Chapters 24, 25, 27 

and the OUSD Memorandum “Financial Reporting Policy for 

Real Property Estimated Useful Lives, Land Valuation, and 

Accounting for Real Property Outside of the United States.”

(Refer to Note 1.C., Departures from U.S. GAAP, related to 

General Property, Plant and Equipment, Net and Note 7, General Property, Plant, and Equipment, Net.)

L. Leases

As of September 30, 2022, and 2021, DLA WCF has not completed the process of developing policies and procedures to 

identify, evaluate, 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.)

M. Advances and Prepayments

Advances: Assets such as civil service employee pay and 

travel advances, and certain contract financing payments not 

reported elsewhere in DLA WCF Balance Sheets.

The DLA SCM conducts business with commercial contractors under two primary types of contracts: fixed price and cost 

reimbursable. To alleviate the potential financial burden on 

the contractor that long-term contracts can cause, DLA WCF 

may provide financing payments. The Federal Acquisition 

Regulation, Part 32, defines contract financing payments as 

“authorized disbursements of monies to a contractor prior to 

acceptance of supplies or services by the Government”.

Prepayments: Payments made in advance of the receipt 

of goods and services. DLA WCF’s policy is to expense and/or 

properly classify assets when the related goods and services 

are received.

(Refer to Note 1.C., Departures from U.S. GAAP, related to 

Advances and Prepayments.)

Depreciation Method and Useful Life

Asset Classes Depreciation/

Amortization Method Useful Life (Years)

Buildings, Structures, and Facilities Straight-line 20, 40 or 45

IUS Straight-line 2, 5 or 10

General Equipment Straight-line 5 or 10

CIP Not Applicable Not Applicable

IUS in development Not Applicable Not Applicable
113 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

SECTION 2 | Financial Section (Unaudited)

N. 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 WCF evaluates all contingent liabilities based on 

three criteria: probable, reasonably possible and remote. DLA 

WCF recognizes contingent liabilities in DLA WCF’s Balance 

Sheets and Statements of Net Cost when the loss is determined to be probable and reasonably estimable. DLA WCF 

discloses those contingencies that are reasonably possible in 

Note 12, Commitments and Contingencies. DLA WCF does not 

disclose or record contingent liabilities when the loss is considered remote.

The DLA WCF 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.

In the event of an adverse judgment against the Government, 

some of the liabilities may be payable from the U.S. Treasury. 

For legal contingency matters where DLA Counsel is unable 

to express an opinion regarding the likely outcome of the case 

and an estimate of the potential legal 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; Note 10, Other Liabilities; Note 11, Environmental and Disposal Liabilities; and Note 12, Commitments 

and Contingencies.)

O. 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 amounts owed in excess of available, congressionally appropriated funds and, 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 8, Liabilities Not Covered by Budgetary 

Resources.)

Liabilities not Requiring Budgetary Resources: Liabilities that have not in the past required and will not in 

the future require the use of budgetary resources are referred 

to as liabilities not requiring budgetary resources.

Current and Noncurrent Liabilities: The DLA 

WCF discloses its other liabilities between current and noncurrent liabilities in accordance with SFFAS 1, Accounting for 

Selected Assets and Liabilities. The current liabilities represent 

liabilities that DLA WCF expects to settle within the 12 months 

of the Balance Sheet dates. Noncurrent liabilities represent liabilities that DLA WCF does not expect to be settled within the 

12 months of the Balance Sheet dates (refer to Note 10, 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 WCF. DLA WCF 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 when an invoice is received 

and posted without a goods receipt). DLA WCF also accrues liabilities incurred at month-end but not yet recorded using data 

from Third Party Payment Systems, Government Purchase 

Card (GPCs), various feeder systems, and estimates of costs 

incurred when goods or services received but not invoiced.

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, and Note 

8, Liabilities Not Covered by Budgetary Resources.)
114

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P. Environmental and Disposal Liabilities

E&DLs 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 WCF is responsible for accurate reporting of E&DL 

and expenses for the real property and/or equipment that it 

records and reports in its financial statements as assets. DLA 

identifies and estimates accrued E&DL through its annual 

cost- to-complete (CTC) process. DLA’s accrued E&DL comprises of environmental cleanup costs associated with restoration of environmental sites on real property that it does not 

own but has received contract authority 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 is not able to reconcile the population of real property assets that encompass 

the environmental sites closure and asbestos liabilities.

(Refer to Note 1.C., Departures from U.S. GAAP, related to 

Environmental and Disposal Liabilities and Commitments and 

Contingencies; Note 11, Environmental and Disposal Liabilities; and Note 12, Commitments and Contingencies.)

Q. Payroll and Annual Leave Accruals

Accrued payroll consists of salaries, wages, and other compensation earned by employees, but not yet disbursed as of 

the Balance Sheet date. DLA 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 10, Other Liabilities).

R. 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 WCF 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 WCF. DLA WCF 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 WCF. As a result, DLA WCF recognizes 

an intragovernmental liability, not covered by budgetary resources, for the claims paid by DOL that will be reimbursed by 

DLA. (Refer to Note 8, Liabilities Not Covered by Budgetary 

Resources, and Note 9, 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 Intragovernmental, 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, among other things: (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 

8, Liabilities Not Covered by Budgetary Resources, and Note 

9, Federal Employee Benefits Payable and Related Other Liabilities.)

S. Pension Benefits

Based on the effective Federal government start date, DLA 

WCF’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 applies to calculate and recognize imputed costs, as 

reported in its Statements of Net Cost, and a corresponding 

imputed financing sources in the Statements of Changes in 
115 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

SECTION 2 | Financial Section (Unaudited)

Net Position. DLA WCF 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.

T. 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 remaining 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 WCF’s unexpended appropriations primarily consist of supplemental appropriations and overseas 

contingency operations.

Cumulative Results of Operations: Cumulative results of operations consist of the net difference since inception between: (1) expenses and losses; (2) revenue and gains; 

and (3) other financing sources.

(Refer to Note 1.C., Departures from U.S. GAAP, related to 

Accounts Receivable, Net, Revenue, and Unfilled Customer 

orders and Accounts Payable, Expenses, and Undelivered Orders, and Note 14, Undelivered Orders.)

U. Revenue and Other Financing Sources

Exchange and Non-exchange Revenue: The DLA 

WCF classifies revenue as either exchange revenue or 

non-exchange revenue. Exchange revenue arises when DLA 

WCF 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.

The DLA WCF activities recognize exchange revenue from the 

sale of petroleum products from DLA Energy, weapon system 

repair parts from DLA Aviation and DLA Land and Maritime, 

food and medical supplies from DLA Troop Support, DLA Disposition Services sells eligible DoD excess personal property 

or its residual materials from disposal operations, or from the 

reimbursements for goods and services provided to other DoD 

activities, other Federal Agencies and the public. The sale of 

materials include DLA WCF’s Direct sales and Customer Direct sales. DLA WCF’s Direct sales are from DLA WCF stock 

to the customer, whereas Customer Direct sales are from the 

vendor directly to the customer.

Non-exchange revenue is derived from the government’s sovereign right to demand payment, such as specifically identifiable, legally enforceable claims. DLA WCF non-exchange 

revenue includes interest penalties and administrative fees. 

Non-exchange revenue is considered to reduce the cost of 

DLA WCF’s operations and is reported in the Statements of 

Changes in Net Position as a financing source.

DLA Energy Standard Fuel Price: The DLA WCF uses a 

Standard Fuel Price (SFP) per barrel of fuel sold to customers 

to include DoD, U.S. Coast Guard, and Foreign Governments.

DLA WCF is responsible for recommending a SFP to OUSD(C). In the process of determining the recommended SFP, 

DLA WCF considers the amount necessary to recover the 

cost of the products and services. Upon receiving DLA WCF’s 

proposed SFP, OUSD(C) performs an evaluation of the proposed SFP and determines the final SFP that DLA WCF is 

required to use for DLA WCF Energy sales.

OUSD(C) sets the final SFP based on OMB derived product 

assumptions and approved non-product costs for DLA Energy. Based on OUSD(C) direction, the following SFPs were set 

during FY 2022:

Without the consideration of intragovernmental eliminations, 

DLA WCF was unable to recover the full costs of the goods 

and services provided by DLA Energy during FY 2021. DLA 

was able to recover the full costs of the goods and services 

provided by DLA Energy during the fiscal year ended September 30, 2022.

DLA Energy Cost Plus: Federal civilian Agencies and other authorized customers are charged cost plus as follows, (1) 

Effective Date SFP per Barrel

October 1, 2021 $118.44

January 1, 2022 $129.36

May 1, 2022 $186.06

July 16, 2022 $129.36
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for Customer Direct sales, customers are charged the acquisition cost of fuel billed to DLA Energy by the vendor on the 

day of delivery plus the cost-plus rate; and (2) for DLA Direct 

Sales, customers are charged the average acquisition cost of 

fuel plus the cost-plus rate. The cost-plus rate for FY 2022 is 

$0.065 cents per gallon. The cost-plus rate for FY 2021 was 

$0.06 cents per gallon.

Supply Chain Cost Recovery Rate: The DLA WCF establishes the selling price in two separate methods depending on the type of items. For Non-National Stock Numbers 

(NSNs), which include part numbers, local stock numbers or 

service materials as described in a vendor’s product catalog 

or contract solicitation that a customer can order, the selling 

price is based on latest acquisition cost plus a Cost Recovery 

Rate (CRR). The latest acquisition cost is the cost of acquiring 

the goods and services. The CRR is a percentage added to 

the acquisition cost that allows DLA WCF to recover the full 

cost of the goods and services provided, including depreciation of capital assets, in accordance with U.S. Code Title 10, 

§ 2208.

For NSNs, a standard price is established annually. The selling price is based on the average acquisition cost over the 

course of the previous twelve months, other material cost 

(testing, transportation, etc.) and the CRR.

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 WCF’s other financing 

sources come from unexpended appropriation transfers-in and 

non-expenditure transfers-in initiated by OUSD, and are 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 is the estimated fair value at the date 

of transfer.

Imputed Financing and Imputed Cost: In certain cases, DLA WCF 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 WCF 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 WCF 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 WCF financial statements.

(Refer to Note 1.C., Departures from U.S. GAAP, related to 

Accounts Receivable, Net; Revenue, and Unfilled Customer 

Orders and Inventory and Related Property, Net; Note 4, Accounts Receivable, Net; Note 6, Inventory and Related Property, Net; Note 13, Exchange Revenue; and Note 18, Restatements.)

V. Expenses

Expenses are recognized when there are outflows, usage of 

assets, or incurrences of liabilities (or a combination) from 

carrying out functions related to DLA WCF’s activity groups, 

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 and Note 18, Restatements).

W. Transactions with Foreign Governments 

and International Organizations

The DLA WCF sells defense articles and services to foreign 

governments and international organizations. Foreign Military 

Sales (FMS) are governed under the provisions of the Arms 

Export Control Act of 1976.

DLA Energy enters into fuel supply and services transactions 

with foreign governments in accordance with DoD Directives 

5530.3 and 2010.9, under international agreement statutory 

authorities. FEA and Direct Bills are governed under the provisions of Acquisition Cross Servicing Agreements or Title 10 

Section 2922 (e). The FEAs are international acquisition and 

cross-servicing agreements established between DLA and 

the Military Departments of other nations. DLA Energy utilizes 

FEAs to account for fuel provided by foreign militaries to the 

U.S. Military as well as fuel provided by DLA to other nations. 
117 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

SECTION 2 | Financial Section (Unaudited)

For FEA transactions, settlement occurs on a periodic basis 

as prescribed in the FEA. Upon settlement with the foreign 

country, the purchases of fuel from foreign governments net 

against sales to the foreign government. Settlement can be 

made either in fuel or cash. Settlement in fuel is based on 

the agreed upon price. For cash settlements, the agreements 

typically call for reciprocal pricing (i.e., prices cannot be more 

than the participants charge their military service components). Payment for fuel after offsetting quantities is based on 

a quantity and a price and is an arms-length transaction. Foreign governments with an Acquisition Cross Servicing Agreement and no FEA are Direct Bills and are settled in cash.

DLA Aviation, DLA Distribution, DLA Energy, DLA Troop Support and DLA Land & Maritime support FMS by working directly with Military Departments to fulfill orders for FMS customers. In these cases, the respective Military Department acts 

as the implementing Agency, and not DLA.

DLA Disposition Services conducts the sale of excess defense articles to authorized foreign governments. Property is 

issued free to grant aid eligible countries and for the adjusted present value for non-grant-aid-eligible countries. All FMS 

customers are charged for packing, crating and handling. DLA 

Disposition Services is reimbursed for administration costs 

only. This program is overseen and reported by the Defense 

Security Cooperation Agency (DSCA).

(Refer to Note 1.C., Departures from U.S. GAAP, related to 

Accounts Receivable, Net, Revenue, and Unfilled Customer 

Orders; and Accounts Payable, Expenses, and Undelivered 

Orders.)

X. Reclassifications 

The FY 2021 Balance Sheet was reclassified to conform to 

the FY 2022 financial statement presentation requirements in 

accordance with the Treasury Financial Manual USSGL and 

included changes in the presentation to: Note 4, Accounts 

Receivable, Net; Note 5, Other Assets; Note 8, Liabilities Not 

Covered by Budgetary Resources; Note 10, Other Liabilities; 

and Note 16, Reconciliation of Net Cost to Net Outlays. The 

reclassifications had no effect on total assets, total liabilities, 

or net position.

Deck Duty

Army paratroopers load 

onto an Army CH-47 

Chinook helicopter to 

conduct joint air assault 

training at a nearby location 

in Trzcianiec, Poland, April 

6, 2022. Photo By: Navy 

Army Staff Sgt. Thomas 

Mort
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Note 2: Non-Entity Assets (Unaudited)

Non-Entity Assets as of September 30, 2022 and 2021, respectively, consist of the following (dollars in thousands):

FY 2022 FY 2021

Other than Intragovernmental

Accounts Receivable, Net $ 4,377 $ 2,897 

Total Other than Intragovernmental Assets 4,377 2,897 

Total Non-Entity Assets 4,377 2,897 

Total Entity Assets 31,857,343 28,902,941 

Total Assets $ 31,861,720 $ 28,905,838

Concrete Crew

Sailors smooth out a concrete roof during a bathhouse project at Naval Base Guam, Dec. 15, 2021. Photo By: Navy Petty 

Officer 2nd Class Sean P. Rinner

Accounts Receivable, Net consists of administrative fees, interest, and penalties and fine receivables.
119 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

SECTION 2 | Financial Section (Unaudited)

Note 3: Fund Balance with Treasury (Unaudited)

Fund Balance with Treasury as of September 30, 2022 and 2021, respectively, consists of the following (dollars in thousands):

FY 2022 FY 2021

Status of Fund Balance with Treasury

Unobligated Balance:

Available $ 1,081,109 $ 301,940 

Obligated Balances Not Yet Disbursed 3,621,833 2,404,282 

Total Fund Balance with Treasury $ 4,702,942 $ 2,706,222 

Status of Fund Balance with Treasury presents 

the budgetary and proprietary resources that constitute DLA 

WCF FBwT. It consists of unobligated and obligated balances. 

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., contract authority and 

budgetary receivables).

Unobligated Balance - Available represents the 

cumulative amount of budgetary authority that has not been 

set aside to cover outstanding obligations and can be used 

for future obligations. This balance includes $397.9 million 

of unobligated but apportioned funds that are restricted and 

pending litigation. For FY 2021, the noted funds were included 

in the deposit accounts as part of DoD consolidated financial 

statements and reported as an accounts receivable in DLA 

financial statements.

 

Unobligated Balance – Unavailable includes the 

cumulative amount of budget authority and funds not available 

for obligation from offsetting collections. As of September 30, 

2022 and 2021, DLA WCF does not have unobligated unavailable balances.

Obligated Balance Not Yet Disbursed represents 

funds that have been obligated for goods and services not 

received, and those received but not paid. This balance 

includes $143.0 million of accounts payable that is restricted and pending litigation. For FY 2021, the noted funds were 

included in the deposit accounts as part of DoD consolidated 

financial statements and reported as an accounts receivable in 

DLA financial statements. 

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, 2022 and 2021, DLA 

WCF does not have non-budgetary FBwT.

Other Information includes the following tables summarizing the undistributed collections and disbursements between 

U.S. Treasury and DLA WCF as of September 30, 2022 and 

2021, respectively:

(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 WCF Trial Balance

Balances Not Yet Recorded in DLA 

Accounting System - 

Undistributed 

Collections $ 40,593,842 $ 40,658,374 $ (64,532)

Disbursements $ 41,852,859 $ 41,940,193 $ (87,334)

FY 2022 Adjustments of Undistributed Collections and Disbursements (dollars in thousands)

Transaction Type

Treasury 

Balance based on CMR DLA WCF Trial Balance

Balances Not Yet Recorded in DLA 

Accounting System - 

Undistributed 

Collections $ 43,107,778 $ 42,843,452 $ 264,326

Disbursements $ 43,878,715 $ 43,681,368 $ 197,347
120

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FY 2022

Accounts 

Receivable

(Less: Allowance 

for Doubtful 

Accounts)

Accounts 

Receivable, Net

Intragovernmental Accounts Receivable, Net

Energy $ 250,127 $ (1,998) $ 248,129 

Supply Chain Management 1,410,273 (140,434) 1,269,839 

Document Services 36,952 (9,636) 27,316 

Total Intragovernmental Accounts Receivable, Net $ 1,697,352 $ (152,068) $ 1,545,284 

Other than Intragovernmental Accounts 

Receivable, Net

Energy $ 425,813 $ (35,961) $ 389,852 

Supply Chain Management 362,486 (27,610) 334,876 

Document Services 1,185 (24) 1,161 

Total Other than Intragovernmental Accounts Receivable, Net $ 789,484 $ (63,595) $ 725,889 

Note 4: Accounts Receivable, Net (Unaudited)

Accounts Receivable, Net as of September 30, 2022 and 2021, respectively, consists of the following (dollars in thousands):

FY 2021 As Restated

Accounts 

Receivable

(Less: Allowance 

for Doubtful 

Accounts)

Accounts 

Receivable, Net

Intragovernmental Accounts Receivable, Net

Energy $ 144,853 $ - $ 144,853 

Supply Chain Management 1,542,183 - 1,542,183 

Document Services 37,448 - 37,448 

Total Intragovernmental Accounts Receivable, Net $ 1,724,484 $ - $ 1,724,484 

Other than Intragovernmental Accounts 

Receivable, Net

Energy $ 241,778 $ (30,601) $ 211,177 

Supply Chain Management 897,390 (12,614) 884,776

Document Services 1,086 - 1,086 

Total Other than Intragovernmental Accounts Receivable, Net $ 1,140,254 $ (43,215) $ 1,097,039 

Of the total other than intragovernmental accounts receivable, 

net, criminal restitutions, net consist of $ 7.5 million and $2.8 

million, as of September 30, 2022 and 2021, respectively. The 

gross amount of criminal restitutions consists of $11.6 million 

and $5.0 million with a related allowance of doubtful accounts 

of $4.1 million and $2.2 million as of September 30, 2022 and 

2021, respectively.

Interest Receivable totaled $ 2.4 million and $1.3 million as of 

September 30, 2022 and 2021, respectively.

(Refer to Note 1.C., Departures from U.S. GAAP, related to 

Accounts Receivable, Net, Revenue, and Unfilled Customer 

Orders.)
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SECTION 2 | Financial Section (Unaudited)

Note 6: Inventory and Related Property, Net (Unaudited)

Inventory and Related Property, Net as of September 30, 2022 and 2021, respectively, consist of the following (dollars in 

thousands):

Valuation Method FY 2022 FY 2021

Inventory Categories:

Held for Sale MAC $ 23,562,928 $ 21,982,848 

Reserved for Future Sale MAC 259,727 249,657 

Held for Repair MAC 110,693 118,640 

Less: Allowance for Repairs (2,214) (2,373)

Total Inventory and Related Property, Net $ 23.931,134 $ 22,348,772 

As of September 30, 2022 and 2021, respectively, DLA SCM 

is holding $107.2 million and $96.8 million, respectively, of 

inventory not available for sale due to litigation.

MAC = Moving Average Cost

All inventory identified as EOU has an expected Net Realizable Value of zero as of September 30, 2022 and 2021.

Note 5: Other Assets (Unaudited)

Other Assets as of September 30, 2022 and 2021, respectively, consist of the following (dollars in thousands):

FY 2022 FY 2021

Intragovernmental Other Assets

Other Assets $ 123,306 $ 123,306 

Total Intragovernmental Other Assets 123,306 123,306 

Total Other Assets $ 123,306 $ 123,306

Intragovernmental Other Assets consist of 

Strategic Petroleum Reserve for national defense purposes. 

This includes crude oil held by the DoE on behalf of the DoD. 

(Refer to Note 1.C., Departures from U.S. GAAP, related to Inter-Entity Cost and Inventory and Related Property, Net.)

The strategic petroleum reserve is valued at historical acquisition cost.
122

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Note 7: General Property, Plant and Equipment, Net

(Unaudited)

General Property, Plant and Equipment, Net as of September 30, 2022 and 2021, respectively, consist of the following (dollars in 

thousands):

The DLA WCF Building, Structures, and Facilities primarily 

consist of fuel storage tanks, tanker hydration systems, supply 

chain warehouses, and office buildings. These are transitory 

assets from DLA’s Construction-in-Progress (CIP) to real 

property to Military Department (MILDEPs). Software primarily 

consists of e-Procurement software, Risk Based Inspection 

software, and DAI software. General Equipment primarily 

consists of fuel handling systems, conveyor systems, scrap 

shredders, and electronic security systems.

FY 2022

Acquisition Value

Accumulated 

Depreciation/

Amortization

Net Book Value

Major Asset Classes:

Buildings, Structures, and Facilities $ - $ - $ - 

Internal-Use Software 718,685 (687,784) 30,901 

General Equipment 401,479 (344,806) 56,673 

Internal-Use Software in Development 67,726 - 67,726 

Construction-in-Progress 583,562 - 583,562 

Total General PP&E, Net $ 1,771,452 $ (1,032,590) $ 738,862 

FY 2021

Acquisition Value

Accumulated 

Depreciation/

Amortization

Net Book Value

Major Asset Classes:

Buildings, Structures, and Facilities $ 143,120 $ (11,610) $ 131,510 

Internal-Use Software 705,967 (655,674) 50,293 

General Equipment 431,323 (361,739) 69,584 

Internal-Use Software in Development 53,672 - 53,672 

Construction-in-Progress 505,311 - 505,311 

Total General PP&E, Net $ 1,839,393 $ (1,029,023) $ 810,370 

(continued on next page)
123 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

SECTION 2 | Financial Section (Unaudited)

FY 2022 FY 2021 

General PP&E, Net - Beginning Balances $ 810,370 $ 754,564

Capitalized Acquisitions 125,508 139,888

Dispositions (6,306) (15,962)

Depreciation (61,188) (76,117)

Transfers in/out without reimbursements (129,522) 7,997

General PP&E, Net - Ending Balances $ 738,862 $ 810,370

Effective FY 2020, DoD’s policy regarding real property is that 

it must be reported in the financial statements of the military 

service that is the Installation Host having jurisdiction of the 

real property asset.

In FY 2022, DLA WCF transferred 92 real property 

assets in the amount of $298.6 million to the military 

services. This amount consisted of an acquisition value and 

accumulated depreciation of $315.8 million and $17.2 million, 

respectively. 

In FY 2021, DLA WCF disposed of 269 assets and transferred 19 assets to the military services, in the amount of 

$12.5 million and $16.7 million, respectively. These amounts 

consisted of an acquisition value and accumulated depreciation, for the dispositions and transfers, of $110.8 million and 

$98.3 million, and $17.9 million and $1.2 million, respectively.

(Refer to Note 1.C., Departures from U.S. GAAP, related to 

General Property, Plant and Equipment, Net, and Leases.)

The table below discloses activity for General Property, Plant and Equipment, Net as of September 30, 2022 and 2021, respectively 

(dollars in thousands):

Boarding Line

Soldiers board an Air Force C-17 Globemaster III during training at Pope Army Airfield, N.C., Jan. 31, 2022. 

Photo By: Air Force Airman 1st Class Charles Casner
124

Financial Section (Unaudited) | SECTION 2

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Note 8: Liabilities Not Covered by Budgetary Resources

(Unaudited)

Liabilities Not Covered by Budgetary Resources as of September 30, 2022 and 2021, respectively, consist of the following (dollars 

in thousands):

Other Liabilities - Benefits Program 

Contributions Payable (Intragovernmental)

consist of unfunded accrued FECA liability based on DOL 

records.

Other Liabilities (Intragovernmental) represent 

Judgment Fund liabilities. DLA is required to reimburse 

Treasury for the litigative and administrative payments/settlements made on behalf of DLA pursuant to the Contract 

Disputes Act and the Notification and Federal Employee Antidiscrimination and Retaliation Act of 2002 (No FEAR Act).

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, 2022, and 2021, the total liabilities covered 

by budgetary resources for the E&DL consist of $148.1 million 

and $201.2 million, respectively.

FY 2022 FY 2021

Intragovernmental Liabilities

Other Liabilities - Benefits Program Contributions Payable $ 14,999 $ 14,230 

Other Liabilities 870 128 

Total Intragovernmental Liabilities 15,869 14,358 

Other than Intragovernmental Liabilities

Environmental and Disposal Liabilities 1,085,673 1,071,128 

Federal Employee Benefits Payable 148,883 156,838 

Other Liabilities 189 496 

Total Other than Intragovernmental Liabilities 1,234,745 1,228,462 

Total Liabilities Not Covered by Budgetary Resources 1,250,614 1,242,820 

Total Liabilities Covered by Budgetary Resources 4,564,176 3,546,749 

Total Liabilities Not Requiring Budgetary Resources 4,377 2,897 

Total Liabilities $ 5,819,167 $ 4,792,466 

Federal Employee Benefits Payable (Other 

than Intragovernmental) are comprised of FECA 

actuarial liability based on DOL records.

Other Liabilities (Other than Intragovernmental) are comprised of contingent legal liabilities to recognize 

the information obtained from DLA General Counsel for the 

cases determined to be probable (liability).

(Refer to Note 1.C., Departures from U.S. GAAP, related to 

Accounts Payable, Expenses, and Undelivered Orders; and 

Commitments and Contingencies; Note 9, Federal Employee 

Benefits Payable and Related Other Liabilities; Note 11, Environmental and Disposal Liabilities, and Note 12, Commitment 

and Contingencies.)
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Note 9: Federal Employee Benefits Payable and Related 

Other Liabilities (Unaudited)

Federal Employee Benefits Payable and Related Other Liabilities as of September 30, 2022 and 2021, respectively, consist of the

following (dollars in thousands):

FY 2022

Liabilities

(Less: Assets 

Available to Pay 

Benefits)

Unfunded 

Liabilities

Intragovernmental Other Liabilities 

Employer Contribution and Payroll Taxes Payable $ 19,523 $ (19,523) $ - 

Unfunded FECA Liability 17,790 (2,791) 14,999 

Other Post Employment Benefits Due and Payable 2,245 (2,245) - 

Total Intragovernmental Other Liabilities $ 39,558 $ (24,559) $ 14,999 

Other than Intragovernmental Federal Employee 

Benefits Payable

Actuarial FECA Liability $ 148,883 - $ 148,883 

Total Other than Intragovernmental Federal Employee 

Benefits Payable $ 148,883 $ - $ 148,883 

(continued on next page)

FY 2021

Liabilities

(Less: Assets 

Available to Pay 

Benefits)

Unfunded 

Liabilities

Intragovernmental Other Liabilities

Employer Contribution and Payroll Taxes Payable $ 35,117 $ (35,117) $ - 

Unfunded FECA Liability 15,215 (985) 14,230 

Other Post Employment Benefits Due and Payable 4,161 (4,161) - 

Total Intragovernmental Other Liabilities $ 54,493 $ (40,263) $ 14,230 

Other than Intragovernmental Federal Employee 

Benefits Payable

Actuarial FECA Liability $ 156,838 - $ 156,838 

Total Other than Intragovernmental Federal Employee 

Benefits Payable $ 156,838 $ - $ 156,838 
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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.

Unfunded FECA Liability (Intragovernmental) include the accrued FECA liability paid by DOL but not yet 

reimbursed by DLA WCF.

Other Post-Employment Benefits Due and 

Payable (Intragovernmental) consist of amounts due 

to former or inactive employees (not retired) and/or beneficiaries.

Actuarial FECA Liability (Other than Intragovernmental) are workers’ compensation benefits developed 

by the DOL Office of Workers’ Compensation Programs and 

provided to DLA WCF 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 OMB’s 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.

(Refer to Note 1.C., Departures from U.S. GAAP, related to 

Accounts Payable, Expenses, and Undelivered Orders.)

Desert Landing

Marines practice confined landing drills outside of Naval Air Facility El Centro, Calif., Feb. 7, 2022.

Photo By: Marine Corps Cpl. Jonathan Gonzalez
127 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

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Note 10: Other Liabilities (Unaudited)

Other Liabilities as of September 30, 2022 and 2021, respectively, consist of the following (dollars in thousands):

FY 2022

Current Non-Current Total

Intragovernmental Other Liabilities

Custodial Liabilities $ 4,377 $ - $ 4,377 

Other Liabilities 870 - 870 

Total Intragovernmental Other Liabilities $ 5,247 $ - $ 5,247 

Other than Intragovernmental Other Liabilities

Accrued Funded Payroll and Benefits $ 323,018 $ - $ 323,018 

Contract Holdbacks - (3) (3)

Contingent Liabilities 189 - 189 

Total Other than Intragovernmental Other Liabilities $ 323,207 $ (3) $ 323,204 

FY 2021

Current Non-Current Total

Intragovernmental Other Liabilities

Custodial Liabilities $ 2,897 $ - $ 2,897 

Other Liabilities 128 128

Total Intragovernmental Other Liabilities $ 3,025 $ - $ 3,025 

Other than Intragovernmental Other Liabilities

Accrued Funded Payroll and Benefits $ 298,311 $ - $ 298,311 

Contract Holdbacks - (3) (3)

Contingent Liabilities 496 - 496 

Total Other than Intragovernmental Other Liabilities $ 298,807 $ (3) $ 298,804 

Custodial Liabilities (Intragovernmental) are 

liabilities for collections reported as non-exchange revenues 

where DLA is acting on behalf of another Federal entity. (Refer 

to Note 2, Non-Entity Assets.)

Other Liabilities (Intragovernmental) represent 

U.S. Treasury Judgment Fund liabilities. DLA is required to 

reimburse Treasury for the litigative, and administrative payments/settlements made on behalf of DLA pursuant to the Contract Disputes Act and the Notification and Federal Employee 

Antidiscrimination and Retaliation Act of 2002 (No FEAR Act). 

Accrued Funded Payroll and Benefits (Other 

than Intragovernmental) include salaries, wages, 

leave, and other compensation earned by employees but not 

yet disbursed.

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.

Contingent Liabilities (Other than Intragovernmental) are a loss determined to be probable and the 

amount is estimable based on the outcome of an uncertain 

future event. The current portion is contingencies related to 

litigation (refer to Note 12, Commitments and Contingencies).

(Refer to Note 1.C., Departures from U.S. GAAP, related to 

Accounts Payable, Expenses, and Undelivered Orders; and 

Commitments and Contingencies, and Note 12, Commitments 

and Contingencies.)
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Note 11: Environmental and Disposal Liabilities (Unaudited)

Environmental and Disposal Liabilities as of September 30, 2022 and 2021, respectively, consist of the following (dollars in 

thousands):

FY 2022 FY 2021

Environmental and Disposal Liabilities

Other Accrued Environmental Liabilities - Non-BRAC:

Environmental Corrective Action $ 366,218 $ 420,990 

Environmental Closure Requirements 865,816 850,255 

Asbestos 1,753 1,132 

Total Environmental and Disposal Liabilities $ 1,233,787 $ 1,272,377 

The DLA WCF E&DL are comprised of two primary elements: 

(1) existing obligations supporting the Defense WCF environmental restoration programs; and (2) the Cost to Complete 

(CTC) which includes anticipated future costs necessary to 

complete the environmental restoration requirements at DLA 

Energy and Non-Energy environmental restoration sites.

In FY 2022 and FY 2021, DLA WCF utilized the Remedial 

Action Cost Engineering and Requirements (RACER) software 

to generate the CTC estimates of anticipated future costs. 

DLA WCF includes E&DL for environmental corrective action 

sites under both DLA Energy and Non-Energy management 

and asset-related E&DL.

As of September 30, 2022 and 2021, the total E&DL consist of 

$1.2 billion and $1.3 billion, respectively. 

FY 2022 cost estimates for sites under DLA Energy management were generated for sites with environmental corrective 

action costs, assets with environmental closure requirements 

costs, and assets with asbestos costs. Cost estimates for 

sites under Non-Energy management were generated for 

sites with environmental corrective action costs, assets with 

environmental closure requirements costs, and assets with 

asbestos cost.

Types of Environmental Liabilities and Disposal 

Liabilities: The DLA WCF is responsible for the recognition, measurement, reporting, and disclosure of Non-BRAC 

E&DL and Environmental Disposal for General Equipment 

(GE). Non-BRAC E&DL are specifically related to past and 

current installation restoration activities and operations, 

and closure and disposal of Property, Plant and Equipment 

(PP&E). All clean-up and disposal actions are conducted in 

coordination with regulatory Agencies, other responsible 

parties, and current property owners. 

The DLA WCF reportable E&DL is under Other Accrued E&DL 

– Non-BRAC and includes the following line items:

Environmental Corrective Action: E&DL associated 

with the cleanup sites not eligible for DERP funding, typically 

conducted under Resource Conservation and Recovery Act 

(RCRA) or other Federal or state statutes and regulations.

Environmental Closure Requirements: E&DL associated with the future closure/decommissioning of facilities on an 

installation that have environmental closure requirements to 

include fuel storage tanks and pipelines; and

Asbestos: E&DL associated with the removal, containment, 

and/ or disposal of friable (immediate health threat) and nonfriable (not an immediate health threat): (1) asbestos-containing materials from property; or (2) material and/or property 

that consists of asbestos-containing material at permanent or 

temporary closure or shutdown of associated general PP&E 

on Non-BRAC installations.

The DLA WCF assessed its GE inventory and does not 

currently have reportable E&DL for GE. There are no other 

reportable E&DL categories as listed on the DoD FMR 

Volume 6B, Chapter 10 – Notes to the Financial Statements, 

Paragraph 1017, Figure 10-31. Environmental and Disposal Liabilities (March 2020).

Applicable Laws and Regulations for Cleanup 

Requirements: The DLA WCF is required to clean up 

contamination resulting from past waste disposal practices, 
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leaks, spills and other prior activities, which may have created 

a public health or environmental risk. DLA WCF is required to 

comply with the following laws and regulations for Corrective 

Actions, where applicable: The Comprehensive Environmental Response, Compensation, and Liability Act; the Superfund 

Amendments and Reauthorization Act; 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 WCF is named as a potentially responsible party by a 

regulatory Agency. DLA WCF reports corrective action related 

E&DL in accordance with SFFAS 5: Accounting for Liabilities 

of the Federal Government and Federal Financial Accounting and Auditing Technical Release 2: Determining Probable 

and Reasonably Estimable for Environmental Liabilities in the 

Federal Government.

The DLA WCF is also required to ensure all hazardous substances are removed prior to closing or disposing of PP&E, 

such as Petroleum, Oil, and Lubricant (POL) storage tanks 

and pipelines and GE in accordance with applicable Federal, 

State, and local laws and regulations. Per DoD Manual 

4140.25 - DoD Management of Energy Commodities, DLA is 

required to fund closure of all POL tanks and pipelines used 

for capitalized fuel. DLA WCF reports E&DL associated with 

closures of PP&E in accordance with SFFAS 5: Accounting 

for Liabilities of the Federal Government, SFFAS 6: Accounting for Property, Plant, and Equipment, Federal Financial Accounting and Auditing Technical Release 11: Implementation 

Guidance on Cleanup Costs Associated with Equipment, and 

Federal Financial Accounting and Auditing Technical Release 

14: Implementation Guidance on the Accounting for the 

Disposal of General Property, Plant, and Equipment.

The DLA WCF is required to abate or properly dispose of 

asbestos containing material in accordance with the Toxic 

Substances Control Act. DLA WCF reports E&DL associated 

with asbestos cleanup in accordance with Federal Financial 

Accounting and Auditing Technical Release 2: Determining 

Probable and Reasonably Estimable for Environmental Liabilities in the Federal Government, and Technical Release 10: 

Implementation Guidance on Asbestos Cleanup Costs Associated with Facilities and Installed Equipment.

The DLA WCF is required to abate or properly dispose of 

asbestos containing material in accordance with the Toxic 

Substances Control Act. DLA WCF reports E&DL associated with asbestos cleanup in accordance with FASAB Federal 

Financial Accounting and Auditing Technical Release 2: Determining Probable and Reasonably Estimable for Environmental Liabilities in the Federal Government and Technical 

Release 10: Implementation Guidance on Asbestos Cleanup 

Costs Associated with Facilities and Installed Equipment. Additionally, DLA WCF reports E&DL associated with asbestos 

cleanup in accordance with DoD FMR Volume 4, Chapter 24 

– Real Property (Section 2.4.1. Recognition Responsibility), 

which requires that real property assets be reported on the 

financial statements of the installation where they are located.

Methods for Assigning Estimated Total Cleanup 

Costs to Current Operating Periods: To estimate 

future environmental costs, DLA WCF 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 WCF E&DL are adjusted for inflation 

and reported in current year dollars. The RACER Steering 

Committee ensures that the RACER software is Validated, 

Verified, and Accredited 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 the 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 E&DL Site 

Identification (ID) process tracks environmental events such 

as spills and releases in an Environmental Event Repository and evaluates each event annually for inclusion in the 

CTC estimates if applicable. The DLA WCF E&DL estimates 

are created annually for all projected requirements and are 

finalized and approved by July. 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 the DoD 7000.14-R FMR 

Volume 4, Chapter 13 – Environmental and Disposal Liabilities (March 2022). 

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, material changes to 
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approved CTC estimates for one site were identified through 

the Roll Forward review. In accordance with the Roll Forward 

process, costs were recalculated to capture the changes, and 

revised costs are reflected in the Environmental Corrective 

Action E&DL balance stated above. In addition, DLA WCF 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. E&DL estimates are 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 WCF E&DL includes prior year obligations and 

the estimate of future costs necessary to complete requirements. DLA WCF has instituted extensive controls to ensure 

that these estimates are accurate and reproducible. The cost 

estimates produced through the ELM 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 

costs may materially vary from the accounting estimates if 

agreements with regulatory Agencies require remediation or 

closure activities to a different degree than anticipated when 

calculating the estimates. WCF E&DL can be further affected 

if investigation of the environmental sites reveals contamination levels that differ from the estimated parameters.

The calculation of DLA WCF E&DL relies on site/asset inventories. Asset inventories obtained from the DLA system of 

record provide the basis for asset-related E&DL estimates, 

which includes Other Accrued Environmental Liabilities – NonBRAC Environmental Closure Requirements, and Asbestos. 

The E&DL for these line items are estimated annually to 

account for changes to inventories.

DLA utilizes a formalized Site ID process to identify, track, 

and evaluate environmental events where the potential for 

an out-year E&DL exists but the E&DL 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/data is available 

to create an estimate of future costs that would be included in 

the Environmental Corrective Action E&DL balance.

Red Hill Bulk Fuel Storage Tank Facility

The Red Hill Underground Bulk Fuel Storage Tank Facility is 

located on the Island of Oahu, Hawaii, and consists of twenty 

steel-lined concreted tanks encased in concrete built into 

cavities mined inside Red Hill during the period immediately 

preceding World War II. 

On November 20, 2021, an incident occurred in which fuel 

was released into the environment and migrated into the Red 

Hill well, contaminating the water supply for Joint Base Pearl 

Harbor Hickam. On August 31, 2022, the DoD issued a Report 

on Red Hill Response Cost Projections to inform Congress of 

DoD’s known and projected costs to defuel and permanently close the storage tank facility to comply with the State of 

Hawaii Department of Health (DOH) order and protect the 

health and safety of the local population. The cost projections 

to date reflect ongoing DoD conferrals with the Hawaii Department of Health and the Environmental Protection Agency. 

The complete array of associated closure requirements and 

parameters for the Facility will not be known until full defueling 

has been completed, which is not expected until June 2024. 

Identification of all remediation requirements will continue 

beyond that point.

Through September 2022, the DOD-wide known projected 

costs total $2.0 billion, as documented in the “Department of 

Defense Report on Red Hill Response Cost Projections, dated 

August 31, 2022”. Of this amount, DLA projected cost is $1.4 

billion to restore access to safe water, support for families, 

emergency defueling and fuel dispersal. In FY 2022, DLA 

obligated $100.7 million of the $1.4 billion. DLA’s assessment 

for the out-year requirements has not yet been completed. 

This event will continue to be tracked as a Potential Out-Year 

Environmental Liability.

Unrecognized Costs: The DLA WCF systematically recognizes asset-related DLA WCF E&DL over the useful life of 

PP&E assets in accordance with DoD FMR Volume 4, Chapter 

13 – Environmental and Disposal Liabilities, Paragraph 130203 

(March 2022). The total recognized Asbestos and Environmental Closure Requirements E&DL balance is stated above 

in the footnote. The associated unrecognized Asbestos and 

Environmental Closure Requirements E&DL is not disclosed. 

DLA WCF has no reportable Asset-related E&DL for GE. Asset-related E&DL are amortized based on the useful life of the 

assets as defined in DoD FMR Volume 4, Chapter 24 – Real 
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Note 12: Commitments and Contingencies (Unaudited)

Accrued and reasonably possible legal and environmental contingent liabilities as of September 30, 2022 and 2021, 

respectively, consist of the following (dollars in thousands):

FY 2022

Accrued 

Liabilities

Estimated Range of Loss

 Lower End Upper End

Legal Contingencies

Probable $ 189 $ 189 $ 230 

Reasonably Possible $ 2,227 $ 334,204 

Environmental Contingencies

Probable $ 1,233,787 $ - $ -

Reasonably Possible $ - $ - 

FY 2021

Accrued 

Liabilities

Estimated Range of Loss

 Lower End Upper End

Legal Contingencies

Probable $ 496 $ 496 $ 5,680

Reasonably Possible $ 2,189 $ 210,535

Environmental Contingencies

Probable $ 1,272,377 $ - $ -

Reasonably Possible $ - $ - 

Property, Paragraph 240206.B, Table 24-1: DoD Useful Lives 

for Depreciable Real Property Assets (October 2019).

Cleanup Costs Associated with Overseas Environmental Liabilities: Associated with Overseas Environmental Liabilities: Total overseas cleanup E&DL includes 

environmental closure requirements assets, asbestos cleanup-related requirements assets, and environmental corrective 

action sites at installations across various countries/territories.

(Refer to Note 1.C., Departures from U.S. GAAP, related to 

Environmental and Disposal Liabilities and Commitments and 

Contingencies; Note 8, Liabilities Not Covered by Budgetary 

Resources; and Note 12, Commitments and Contingencies.
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Legal Contingencies: The DLA WCF is a party in various administrative proceedings and legal actions related to 

claims for environmental damages, equal opportunity matters, 

employee or applicant related matters, contract related matters, and contractual bid protests. DLA’s Automated Work-flow 

and Reporting System is used by the Office of General Counsel to report the outcomes and possible liability amounts of 

open cases.

The DLA WCF has accrued the lower end of the range for probable contingent liabilities for legal actions where the Office of 

General Counsel considers an adverse decision probable, and 

the amount of loss is estimable. In the event of an adverse 

judgment against the Government, some of the liabilities may 

be payable from the U.S. Treasury Judgment Fund. DLA WCF 

records contingent liabilities (refer to Note 10, Other Liabilities) 

within Other Liabilities in the Balance Sheets.

Cases for which legal counsel determines an adverse outcome is reasonably possible and the possible financial outflow 

is measurable, are not recorded, but disclosed as reasonably 

possible for financial reporting purposes.

Of the 115 legal matters classified as “Reasonably Possible”, 

there are 35 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. In these 35 

matters, the total claimed against the government is $0. 

 

Environmental Contingencies: The DLA WCF has 

developed a process to identify, estimate, and record contingent E&DL. The WCF does not estimate a potential range of 

loss in this process. Where DLA WCF is aware of probable and 

measurable future outflow of resources due to a past event or 

exchange transaction, the appropriate program categories are 

reported in Note 11, Environmental and Disposal Liabilities.

Potential Loss Related to Economic Price 

Clause Contracts: The DLA WCF is a party in numerous 

individual contracts that contain clauses, such as price escalation, award fee payments, or dispute resolution, that may result in a future outflow of expenditures. DLA WCF has limited 

automated system processes by which it captures or assesses 

these potential liabilities; therefore, the amounts reported may 

not fairly present DLA WCF’s total contingent liabilities. Known 

contingencies that are considered both measurable and probable have been recognized and recorded as liabilities in the 

Balance Sheets. DLA WCF does not have contract financing 

payment contingencies as of September 30, 2022.

Commitments: The DLA WCF does not have obligations 

related to canceled appropriations for contractual commitments.

(Refer to Note 1.C., Departures from U.S. GAAP, related to 

Environmental and Disposal Liabilities; and Commitments and 

Contingencies, Note 10, Other Liabilities; and Note 11, Environmental and Disposal Liabilities.)

Note 13: Exchange Revenue (Unaudited)

The DLA WCF pricing policy for SCM and Energy Management 

is to seek full cost recovery for products and services provided. 

These DLA WCF activities maintain the goal to break-even 

over a single year or two-year period; however, the SCM 

may request a waiver from the OUSD(C) to recover costs 

beyond the budget year to maintain a stabilized CRR. DLA 

WCF establishes its selling or standard prices in the budget 

to ensure sufficient budgetary resources are available to cover 

the costs of operations. The prices are normally stabilized or 

fixed during execution to mitigate the impact of unforeseen 

fluctuations. DLA WCF will not change the prices during the 

fiscal year unless prior approval from OUSD(C) is received, 

except for those instances in which the SCM out-of-cycle price 

changes may be made without OUSD(C) approval.

The DLA Energy Management generally bills its customers 

using petroleum standard price mandated by OUSD(C). 

OUSD(C) establishes the standard price for petroleum and 

product costs on an annual basis (refer to Note 1.U, Revenue 

and Other Financing Sources, related to non-NSN and costplus pricing).

For the years ended September 30, 2022 and 2021, DLA WCF 

recognized other accounting gains of approximately $1.2 billion 

and $9.6 billion, respectively, and losses of approximately $1.6 

billion and $9.3 billion, respectively, derived from supply chain 

(continued on next page)
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SECTION 2 | Financial Section (Unaudited)

Note 14: Undelivered Orders (Unaudited)

Undelivered Orders (UDOs) for the years ended September 30, 2022 and 2021, respectively, consist of the following (dollars in 

thousands):

UDOs represent the amount of goods and/or services ordered 

to perform DLA WCF’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, 2022 and 2021, respectively, DLA WCF does not 

have Intragovernmental Paid UDO balances.

Due to system limitations, DLA WCF is unable to determine 

the Intragovernmental and Other than Intragovernmental allocation of UDOs. DLA WCF 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.

(Refer to Note 1.C., Departures from U.S. GAAP, related to 

Intragovernmental/Intra-departmental and Other than Intergovernmental Transaction; and Accounts Payable, Expenses, and 

Undelivered Orders.)

FY 2022 FY 2021

Intragovernmental Undelivered Orders

Unpaid $ 2,030,544 $ 1,814,726 

Total Intragovernmental Undelivered Orders 2,030,544 1,814,726 

Other than Intragovernmental Undelivered Orders

Unpaid 25,798,159 21,980,443 

Paid 94,303 95,645 

Total Other than Intragovernmental Undelivered Orders 25,892,462 22,076,088 

Total Undelivered Orders $ 27,923,006 $ 23,890,814 

Note 15: Contributed Capital (Unaudited)

The DLA WCF received additional funding through the 

allotment of appropriations from DoD reprogramming actions 

in the amount of $2.8 billion, which consists of $2.7 billion of 

transfers of prior year balances and $128.7 million of current 

year authority, for the year ended September 30, 2022, and 

$49.8 million for the year ended September 30, 2021.

activities involving MAC updates, receipts without purchase 

orders, errors due to inventory receipts, NRV updates, and 

disposal of demilitarized property.

(Refer to Note 1.C., Departures from U.S. GAAP, related to 

Accounts Receivable, Net, Revenue, and Unfilled Customer 

Orders; and Inventory and Related Property, Net.)
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Note 16: Reconciliation of Net Cost to Net Outlays (Unaudited)

Reconciliation of Net Cost to Net Outlays for the years ended September 30, 2022 and 2021 consist of the following (dollars in 

thousands):

FY 2022

Intragovernmental Other than 

Intragovernmental Total

NET COST $ (31,998,444) $ 32,731,774 $ 733,330 

Components of Net Cost That are Not Part of Net 

Outlays

General Property, Plant and Equipment Depreciation - (61,188) (61,188)

General Property, Plant and Equipment Disposal - (6,306) (6,306)

Cost of Goods Sold (5,562,520) (27,845,094) (33,407,614)

Net Gains/(Losses) - (365,702) (365,702)

Other - - -

Increase/(Decrease) in Assets:

Accounts Receivable, Net (179,200) (371,150) (550,350)

Cash and Other Monetary Assets - - - 

Advances and Prepayments - (1,342) (1,342)

(Increase)/Decrease in Liabilities:

Accounts Payable (35,001) (430,343) (465,344)

Environmental and Disposal Liabilities - 38,590 38,590 

Federal Employment Benefits Payable - 7,955 7,955 

Advances from Others and Deferred Revenue (597,188) 973 (596,215)

Other Liabilities 12,713 (24,400) (11,687)

Financing Sources:

Imputed Financing (165,400) - (165,400)

Total Components of Net Cost That are Not Part 

of Net Outlays (6,526,596) (29,058,007) (35,584,603)

Components of Net Outlays That are Not Part of 

Net Cost

Acquisition of General Property, Plant and Equipment - 125,508 125,508 

Acquisition of Inventory and Related Property 232,853 35,309,865 35,542,718 

 Financing Sources:

Transfer in/out without Reimbursements (479) - (479) 

Total Components of Net Outlays That are Not Part 

of Net Cost 232,374 35,435,373 35,667,747 

Miscellaneous Items

Other 530 (5,232) (4,702)

Total Other Reconciling Items 530 (5,232) (4,702)

NET OUTLAYS $ (38,292,136) $ 39,103,908 811,772 

Outlays, Net, Statements of Budgetary Resources 770,937 

Reconciling Difference $ 40,835
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FY 2021 As Restated

Intragovernmental Other than 

Intragovernmental Total

NET COST $ (32,334,435) $ 32,037,043 $ (297,392)

Components of Net Cost That are Not Part of Net 

Outlays

General Property, Plant and Equipment Depreciation - (76,117) (76,117)

General Property, Plant and Equipment Disposal - (15,962) (15,962)

Cost of Goods Sold (5,654,464) (27,017,880) (32,672,344)

Net Gains/(Losses) - 320,922 320,922

Other - (1,968) (1,968)

Increase/(Decrease) in Assets:

Accounts Receivable, Net (140,491) (17,914) (158,405)

Cash and Other Monetary Assets - (7,074) (7,074)

Advances and Prepayments - 6,577 6,577 

(Increase)/Decrease in Liabilities:

Accounts Payable 49,375 220,242 269,617

Environmental and Disposal Liabilities - (85,236) (85,236)

Federal Employment Benefits Payable - 3,012 3,012 

Advances from Others and Deferred Revenue 1,246,828 2,765 1,249,593 

Other Liabilities (3,571) (3,776) (7,347)

Financing Sources:

Imputed Financing (163,152) - (163,152)

Total Components of Net Cost That are Not Part 

of Net Outlays (4,665,475) (26,672,409) (31,337,884)

Components of Net Outlays That are Not Part of 

Net Cost

Acquisition of General Property, Plant and Equipment - 139,888 139,888

Acquisition of Inventory and Related Property 1,675 32,594,511 32,596,186

 Financing Sources:

Transfer in/out without Reimbursements - (2,690) (2,690) 

Total Components of Net Outlays That are Not Part 

of Net Cost 1,675 32,731,709 32,733,384 

Miscellaneous Items

Other 290 (3,395) (3,105)

Total Other Reconciling Items 290 (3,395) (3,105)

NET OUTLAYS $ (36,995,945) $ 38,092,948 1,095,003 

Outlays, Net, Statements of Budgetary Resources 1,259,017 

Reconciling Difference $ (164,014)
136

Financial Section (Unaudited) | SECTION 2

Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

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 Combined 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) cost financed by other Federal entities (imputed 

inter-entity cost).

For FY 2022, the key reconciling differences between the net 

cost and the net outlays for DLA WCF included: (1) the cost of 

goods sold were operating expenses for inventory purchases 

and have no impact on net outlays; (2) Advances from Others 

and Deferred Revenue were primarily due to additional cash 

advances from the HHS related to COVID-19 relief efforts 

(refer to Note 17, COVID-19 Activity); and (3) the acquisition of 

capital assets that have no impact on net cost.

For FY 2021, the key reconciling differences between the net 

cost and the net outlays for DLA WCF included: (1) the cost of 

goods sold were operating expenses for inventory purchases 

and have no impact on net outlays; (2) Advances from Others 

and Deferred Revenue were primarily due to decreases in 

cash advances from the HHS and FEMA related to COVID-19 

relief efforts (refer to Note 17, COVID-19 Activity); and (3) the 

acquisition of capital assets that have no impact on net cost.

The resulting reconciling difference is primarily 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.

(Refer to Note 1.C., Departures from U.S. GAAP, related to 

Accounts Receivable, Revenue, and Gains, Inventory and 

Related Property, Net, Intragovernmental/Intra-departmental 

and Other than Intragovernmental Transactions, Accounts 

Payable, Undelivered Orders, and Reconciliation of Net Cost 

to Net Outlays.)

Secure Stryker

Soldiers assigned to Eagle Troop, 2nd Squadron, 2nd Cavalry Regiment, secure hooks to a Stryker armored vehicle at 

Novo Selo Training Area, Bulgaria, Feb. 23, 2022. Photo By: Army Spc. Osvaldo Fuentes
137 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

SECTION 2 | Financial Section (Unaudited)

Note 17: COVID-19 Activity (Unaudited)

On March 27, 2020, Congress signed the CARES Act under 

P.L. 116-136. The CARES Act appropriated $1,450.0 million to 

the Department of Defense Working Capital Fund as a transfer 

of current year authority. The allocation of the $1,450.0 million 

is as follows: (1) $475.0 million Navy Working Capital Fund; 

(2) $475.0 million to Air Force Working Capital Fund; and (3) 

$500.0 million to the Defense-Wide Working Capital Fund. 

The OUSD-C Program/Budget allocated the Defense-Wide 

Working Capital Fund appropriation of $500 million to the DLA 

SCM. In August 2020, DLA received additional $30.2 million 

CARES Act funding through OUSD(C) internal reprogramming. 

The funding did not provide new obligation authority and was 

executed through contract authority.

The CARES Act funding was used to purchase PPE to ensure 

DoD has sufficient stock available for personnel to follow 

COVID-19 health protocols and continue its mission through 

the Coronavirus pandemic.

The DLA SCM expended budgetary resources related to 

CARES Act appropriations in FY 2020 and did not receive 

appropriations that were used for COVID-19 for the years 

ended September 30, 2022 and 2021.

HHS and FEMA entered into Intragovernmental Agency 

Agreements (IAAs) with DLA for DLA SCM to deliver goods and 

services. These goods include ventilators, Battelle sterilization 

units, personal protective equipment, medical supplies, food 

supplies and test kits to support the National COVID-19 

response through the Public Health and Social Services 

Emergency Fund (Provider Relief Fund) appropriated as part 

of the CARES Act.

Defense Health Agency (DHA) entered into an agreement with 

HHS for the distribution of COVID-19 vaccines to the DoD. 

DLA SCM was designated by the DoD to manage, track, and 

distribute COVID-19 vaccines to OCONUS Military services 

and other Defense customers. The DLA SCM does not have 

title to the vaccines and is not designated as an owner of 

the vaccine inventory in the agreement. DLA SCM does not 

hold any Moderna, Janssen or Pfizer vaccine in inventory for 

resale to customers. The vaccines are delivered weekly and 

COVID-19 Mission Training

Hundreds of Maryland National Guard members participate in joint training and in-processing at the Dundalk Readiness Center, Dundalk, Md., Jan. 6, 2022. MDNG members participated in training hosted by the Maryland Department 

of Health on coaching self swab COVID-19 tests, patient registration, and proper usage of personal protective equipment. Photo By: Air Force Staff Sgt. Sarah M. McClanahan, Maryland Air National Guard
138

Financial Section (Unaudited) | SECTION 2

Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

HHS FY 2022

DLA Organization Item Description

Unfilled

Customer 

Orders with 

Advance

Unfilled

Customer 

Orders without 

Advance

Earned 

Revenue

Available 

Reimbursable

Amount

Medical Ventilators Test Components & Kits $ 3,144,809 $ 52,502 $ 2,006,556 $ 1,190,755 

C&E and Medical PPE - 532 - 532 

C&E PPE and Battelle CCDS Systems - 119,140 6,913 112,227 

C&E and C&T PPE for Surge Sites 40,810 47 31,753 9,104 

C&T PPE - 20,553 (3,508) 24,061 

C&T and Medical PPE - 1,246 1,258 (12)

Total $ 3,185,619 $ 194,020 $ 2,042,972 $ 1,336,667 

addition, DLA has reimbursable agreements without advances 

with HHS totaling $194.0 million and $2.9 billion for the years 

ended September 30, 2022 and 2021, respectively. 

DLA WCF also received a total of $121.8 million in cash 

advances from FEMA and had reimbursable agreements without 

advances totaling $68.2 million for the year ended September 

30, 2021. The remaining FEMA available amount of $62.4 

million, which consisted of $28.8 million in cash advances and 

$33.6 million of reimbursable agreements without advances 

for the year ended September 30, 2021, was returned to FEMA 

in the beginning of FY 2022. 

COVID-19 activities for DLA SCM are summarized by supply 

chain and scope for the years ended September 30, 2022 and 

2021 (dollars in thousands):

HHS FY 2021

DLA Organization Item Description

Unfilled

Customer 

Orders with 

Advance

Unfilled

Customer 

Orders without 

Advance

Earned 

Revenue

Available 

Reimbursable

Amount

Medical Ventilators Test Components & Kits $ 1,627,500 $ 2,131,931 $ 1,332,338 $ 2,427,093 

C&E and Medical PPE - 7,730 1,349 6,381

C&E PPE and Battelle CCDS Systems 767,674 269,131 874,958 161,847

C&E and C&T PPE for Surge Sites - 377,497 377,450 47

C&T PPE - 92,834 72,282 20,552

C&T and Medical PPE - 2,030 783 1,247

Total $ 2,395,174 $ 2,881,153 $ 2,659,160 $ 2,617,167 

distributed within days of receipt. While in-transit, DLA SCM 

bears no liability for loss or replacement. As a result, the vaccine 

quantities are posted to DLA Distribution Standard System 

and EBS solely for the purpose of accountability, tracking and 

distribution. DLA is required by 10 U.S.C. 2208, “WorkingCapital Funds” and OSD regulations to recover all costs for 

products and services as a DWWCF entity. DLA will recover 

its costs for the reimbursable services provided in support of 

this effort under agreements with HHS or DHA, as appropriate. 

Applicable funding agreement(s) are in place to fully reimburse 

DLA for all costs in support of COVID-19 vaccine storage and 

distribution response operations via reimbursable orders.

DLA WCF has received a total of $3.2 billion and $2.4 billion in 

cash advances to support COVID-19 requirements from HHS 

for the years September 30, 2022 and 2021, respectively. HHS 

has remaining funding of $1.1 billion and $552.2 million for the 

years ended September 30, 2022 and 2021, respectively. In 
139 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

SECTION 2 | Financial Section (Unaudited)

FEMA FY 2022

DLA Organization Item Description

Unfilled Customer

Orders with 

Advance

Unfilled Customer

Orders without 

Advance

 Earned 

Revenue

Available 

Reimbursable

Amount

HQ Staff National Response 

Coordination Center staffing $ - $ - $ - $ - 

Distribution Storage - - - - 

Medical

Test components, 

pharmaceuticals, medical 

supplies and human remains 

pouches.

 - - - - 

C&E and C&T PPE - - - -

C&E PPE - - - -

C&T PPE - - - -

Subsistence Food boxes and meals - - - - 

Total $ - $ - $ - $ -

FEMA FY 2021

DLA Organization Item Description

Unfilled Customer

Orders with 

Advance

Unfilled Customer

Orders without 

Advance

 Earned 

Revenue

Available 

Reimbursable

Amount

HQ Staff National Response 

Coordination Center staffing $ 25 $ - $ 25 $ - 

Distribution Storage 8,003 - 7,853 150

Medical

Test components, 

pharmaceuticals, medical 

supplies and human remains 

pouches.

48,152 30,039 18,113

C&E and C&T PPE 113,816 - 85,201 28,615

C&E PPE - 3,593 3,590 3

C&T PPE - 16,469 947 15,522

Subsistence Food boxes and meals - - - - 

Total $ 121,844 $ 68,214 $ 127,655 $ 62,403 

The DLA WCF recognized revenue in relation to the COVID-19 

relief effort totaling $2.1 billion for the year ended September 

30, 2022, which consists of revenue recognized from: (1) 

HHS above totaling $2.0 billion for DLA WCF Troop Support; 

(2) other Federal entities (e.g., USMC, Navy, Army, Air Force, 

etc.) totaling $84.7 million for DLA WCF Troop Support; and 

(3) other DLA WCF activities totaling $9.9 million.

The DLA WCF recognized revenue in relation to the COVID-19 

relief effort totaling $3.1 billion for the year ended September 

30, 2021, which consists of revenue recognized from: (1) 

FEMA and HHS above totaling $2.8 billion for DLA WCF Troop 

Support; (2) other Federal entities (e.g., USMC, Navy, Army, 

Air Force, etc.) totaling $261.8 million for DLA WCF Troop 

Support; and (3) other DLA WCF activities totaling $18.3 

million.

The impact of COVID-19 activity to Fund Balance with Treasury 

(refer to the Balance Sheets and Note 3, Fund Balance 

with Treasury), Accounts Receivable (refer to the Balance 

Sheets), Accounts Payable (refer to the Balance Sheets and 

Note 4, Accounts Receivable, Net), Net Position (refer to the 

Balance Sheets and Statements of Changes in Net Position), 

Gross Cost (refer to the Statements of Net Cost), and New 

Obligations (refer to the Combined Statements of Budgetary 

Resources) cannot be quantified 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, and the MD&A Analysis 

of Systems, Controls and Legal Compliance: Compliance with 

Laws and Regulations, DATA Act.
140

Financial Section (Unaudited) | SECTION 2

Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

In FY 2022, DLA WCF restated its FY 2021 financial statements to correct an error in the Balance Sheet. The impact of 

this error resulted in DLA WCF’s Intragovernmental accounts 

receivable and Other than Intragovernmental accounts receivable reported on the financial statements to be overstated and 

understated, respectively, by $540.8 million. DLA WCF made 

adjustments to properly classify accounts receivable related to 

deposit funds that are due from OUSD. The correction required 

a prior period adjustment to the FY 2021 Balance Sheet.

(Refer to Note 1.C., Departures from U.S. GAAP, related to Intragovernmental/Intra-departmental and Other than Intragovernmental Transactions.)

Warrior on Watch

A soldier participates in an emergency deployment readiness exercise to provide security at the U.S. Embassy in Mogadishu, Somalia, April 22, 2022. Photo By: Air Force Staff Sgt. Alysia Blake

Note 18: Restatements (Unaudited)
141 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

SECTION 2 | Financial Section (Unaudited)

Balance Sheet

(dollars in thousands)

As of September 30, 2021

Unaudited

FY 2021 

As Previously 

Reported9

Unaudited

FY 2021 

Adjustments

Unaudited

FY 2021 

As Restated

ASSETS (Note 2)

Intragovernmental

Fund Balance with Treasury (Note 3) $ 2,706,222 $ - $ 2,706,222 

Accounts Receivable, Net (Note 4) 2,265,316 (540,832) 1,724,484 

 Other Assets (Note 5) 123,306 - 123,306 

Total Intragovernmental Assets 5,094,844 (540,832) 4,554,012 

Other than Intragovernmental

Accounts Receivable (Note 4) 556,207 540,832 1,097,039 

Inventory and Related Property, Net (Note 6) 22,348,772 - 22,348,772 

General Property, Plant and Equipment, Net (Note 7) 810,370 - 810,370 

Advances and Prepayments 95,645 - 95,645 

Total Other than Intragovernmental 23,810,994 540,832 24,351,826 

TOTAL ASSETS $ 28,905,838 $ - $ 28,905,838 

LIABILITIES (Note 8)

Intragovernmental

Accounts Payable $ 175,540 $ - $ 175,540 

Advances from Others 552,166 - 552,166 

Other Liabilities: - 

 Other Current Liabilities -

Benefit Contributions Payable (Note 9) 54,93 -  54,

 Other Liabilities (Note 10) 3,025 - 3,025 

 Total Intragovernmental Other Liabilities 57,518 - 57,518 

Total Intragovernmental 785,224 - 785,224 

Other than Intragovernmental

Accounts Payable 2,275,581 - 2,275,581 

Environmental and Disposal Liabilities (Note 11) 1,272,377 - 1,272,377 

Federal Employee Benefits Payable (Note 9) 156,838 - 156,838 

Advances from Others and Deferred Revenue 3,642 - 3,642 

Other Liabilities (Note 10) 298,804 - 298,804 

Total Other than Intragovernmental 4,007,242 - 4,007,242 

TOTAL LIABILITIES $ 4,792,466 $ - $ 4,792,466 

Commitments and Contingencies (NOTE 12)

NET POSITION

Unexpended Appropriations-Funds from Other than 

Dedicated Collections $ 198,884 $ - $ 198,884 

Cumulative Results of Operations-Funds from Other than 

Dedicated Collections 23,914,488 - 23,914,488 

TOTAL NET POSITION 24,113,372 - 24,113,372 

TOTAL LIABILITIES AND NET POSITION $ 28,905,838 $ - $ 28,905,838 

9Certain balances were reclassified on the FY 2021 Balance Sheet to conform to the FY 2022 financial statement presentation requirements in

accordance with OMB Circular A-136, as amended.
142

Financial Section (Unaudited) | SECTION 2

Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

Beginning 

Balance

Ending 

Balance

Active

Category 1: Building, Structures, and Linear Structure $ 1,102,050 $ 1,254,632

(Enduring Facilities)

Category 2: Building, Structures, and Linear Structure 15 15

(Heritage Assets)

Total Active $ 1,102,065 $ 1,254,647

Inactive and Excess

Category 3: Building, Structures, and Linear Structure $ - $ -

(Excess Facility or Planned for Replacement)

Total Inactive and Excess - -

Total Deferred Maintenance $ 1,102,065 $ 1,254,647

M&R Policies M&R Policies Installation & Equipment 

(DM-I) manages only the DLA Non-Energy portion of the Sustainment, Restoration, and Maintenance (SRM) program. DLA 

Energy runs a separate SRM program independent of DM-I. 

DM-I continues to conduct condition assessments of DLA 

Non-Energy facilities using the U.S. Army Corps of Engineer 

Sustainment Management System (SMS) BUILDER. The 

Under Secretary of Defense memorandum dated Sep 10, 

2013, mandated use of the reported SMS BUILDER for all 

DoD facilities. BUILDER captures all assessed facility deficiencies or work items categorized by fiscal year along with a cost 

estimate. As a result, BUILDER generates a consistent and 

uniform Facility Condition Index (FCI) for assessed DoD facilities.

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

Deferred Maintenance and Repairs

M&R Prioritization Planning, programming, and 

execution of the DLA Non-Energy SRM program is executed 

IAW DLAI 4165.02 (dated 30 Oct 2018) using the following priorities: 

a. Life, health, and safety concerns (cannot mitigate)

b. Facilities with an FCI of 60 or less

c. Security deficiencies including cyber security (cannot 

mitigate)

d. Environmental deficiencies addressing non-compliance 

(cannot mitigate)

e. Warfighter support facilities (mission failure)

The DLA WCF pays for the operating cost of five stewardship 

properties. These properties were transferred in FY 2020 to 

the Department of the Army, and the Army is responsible for 

all financial reporting for these assets (i.e., financial reporting 

and disclosures such as, but not limited to, note disclosures, 

deferred maintenance and repair, and other required supplemental information (RSI)). DLA WCF and the Army continue 

to negotiate the final transfer of all responsibilities of these 

assets as of September 30, 2022. In addition, DLA also pays 

for operation costs related to RP transferred out to other 

Military Services since FY 2020 and continue usage of these 

properties.

Therefore, DLA WCF included the additional disclosure related 

to the maintenance and repair needs of these assets which 

were identified primarily through the condition assessment 

process. Maintenance and repairs that were not performed 

when they should have been or were scheduled and delayed 

for a future period are considered Deferred Maintenance and 

Repairs (DM&R). DM&R for the years ended September 30, 

2022, and 2021, respectively, consist of the following (dollars 

in thousands):
143 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

SECTION 2 | Financial Section (Unaudited)

f. Energy conservation projects (as mandated)

g. Warfighter support facilities (mission impact)

h. Routine maintenance (no mission impact)

Field sites submit their candidate projects ranked with the 

above-prioritized criteria. Prioritized DLA Non-Energy projects, 

forming a 1 – N list, are submitted to a Sustainment (maintenance and repair) board for review and voting similar to the 

MILCON Installation Level Review Board. The DLA Chief of 

Staff and DLA’s MSCs chiefs of staff chair the Sustainment 

board. Approved projects above the MSC funding line move 

forward for execution based on the priority list.

For DLA Energy, the SRM program is executed in accordance 

with DLA Energy P-12 and the DLA Energy SRM Handbook. All 

work is prioritized by the Service Control Point in accordance 

with Service and DoD mission priorities.

Acceptable Condition Standards OSD and DLA 

considers an asset acceptable when it is in good condition 

with an assigned minimum FCI of 80%. Failing facilities have 

an FCI below 60% whereas facilities are classified in “Poor” 

condition with an FCI between 60 and 79. This acceptance 

criterion is in accordance with the Under Secretary of Defense 

memorandum dated Apr 29, 2014, titled Facility Sustainment 

and Recapitalization Policy. DLA also considers life, health, 

safety, and mission when assessing acceptable conditions. 

For Non-Energy, BUILDER has three separate criteria to assist 

in the assessment of DLA facilities: the FCI, Condition Index, 

and BUILDER Condition Index. Those technical criteria are 

used differently to assess facility conditions.

Capitalization of DM&R The deferred maintenance 

and repair information presented relates to all DLA operated 

DoD facilities where DLA has the maintenance responsibility 

and is not solely restricted to capitalized assets.

Asset Exclusions The deferred maintenance and repair 

information include only facilities in Active and To Be Acquired 

status. It excludes facilities in a semi-active status, caretaker, 

out granted, non-functional, environmental hold status, closed, 

disposed, excess, surplus, or returned to the service Components.

Changes year-to-year the change of deferred maintenance and repair balance is due to stalled contract negotiations, these projects were planned/funded, and funds returned 

early September due to not making contract. Anticipate these 

projects funded in 1st Quarter FY23. The decrease in the DLA 

Plant Replacement Value (PRV) is due to changes in asset 

valuation implemented in EBS. 

Neptune Strike

Sailors fast-rope from a Navy MH-60S Seahawk helicopter onto the Italian Navy patrol vessel Orione during Neptune Strike

in the Mediterranean Sea, Jan. 27, 2022. The exercise highlights NATO’s ability to integrate the high-end maritime warfare 

capabilities of a carrier strike group to support the defense of the alliance. Photo By: Navy Petty Officer 3rd Class
144

Financial Section (Unaudited) | SECTION 2

Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

Combining Statements of Budgetary Resources

The Combining Statements of Budgetary Resources combines 

the availability, status, and outlays of DLA WCF’s budgetary 

resources. The following schedules provide the Combining 

Statements of Budgetary Resources disaggregated by DLA 

WCF activities for the years ended September 30, 2022 and 

2021 respectively.

(Refer to Note 1.B., Basis of Presentation and Accounting, 

related to Combined Statements of Budgetary Resources.)

Combining Statement of Budgetary Resources

For the Year Ended September 30, 2022 (dollars in thousands)

Energy Supply Chain

Management

Document 

Services

FY 2022

Total

BUDGETARY RESOURCES 

Unobligated Balance From 

Prior Year Budget Authority, Net $ 2,640,056 $ 739,717 $ 126,363 $ 3,506,136 

Appropriations 40,000 88,730 - 128,730 

Contract Authority 19,053,389 33,339,667 - 52,393,056 

Spending Authority From 

Offsetting Collections 1 474 268,878 269,353 

TOTAL BUDGETARY RESOURCES $ 21,733,446 $ 34,168,588 $ 395,241 $ 56,297,275 

STATUS OF BUDGETARY RESOURCES 

New Obligations and Upward 

Adjustments $ 20,992,519 $ 33,932,832 $ 290,815 $ 55,216,166 

Unobligated Balance, End of Year:

Apportioned, Unexpired Accounts 740,927 235,756 104,426 1,081,109 

Unexpired Unobligated Balance, 

End of Year 740,927 235,756 104,426 1,081,109 

Total Unobligated Balance, End of Year 740,927 235,756 104,426 1,081,109 

TOTAL BUDGETARY RESOURCES $ 21,733,446 $ 34,168,588 $ 395,241 $ 56,297,275 

OUTLAYS, NET

Outlays, Net $ 2,312,942 $ (1,549,452) $ 7,447 $ 770,937 

AGENCY OUTLAYS, NET $ 2,312,942 $ (1,549,452) $ 7,447 $ 770,937 
145 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

SECTION 2 | Financial Section (Unaudited)

Combining Statement of Budgetary Resources 

For the Year Ended September 30, 2021 (dollars in thousands)

Energy Supply Chain

Management

Document 

Services

FY 2021

Total

BUDGETARY RESOURCES 

Unobligated Balance From 

Prior Year Budget Authority, Net $ 92,155 $ 286,109 $ 130,431 $ 508,695 

Appropriations - 49,821 - 49,821 

Contract Authority 13,680,969 33,523,121 - 47,204,090 

Spending Authority From 

Offsetting Collections 55 2,600 261,050 263,705 

TOTAL BUDGETARY RESOURCES $ 13,773,179 $ 33,861,651 $ 391,481 $ 48,026,311 

STATUS OF BUDGETARY 

RESOURCES 

New Obligations and Upward 

Adjustments $ 13,773,179 $ 33,662,766 $ 288,426 $ 47,724,371 

Unobligated Balance, End of Year:

Apportioned, Unexpired Accounts - 198,885 103,055 301,940 

Unexpired Unobligated Balance, 

End of Year - 198,885 103,055 301,940 

Total Unobligated Balance, End of 

Year - 198,885 103,055 301,940 

TOTAL BUDGETARY RESOURCES $ 13,773,179 $ 33,861,651 $ 391,481 $ 48,026,311 

OUTLAYS, NET

Outlays, Net $ 32,217 $ 1,190,833 $ 35,967 $ 1,259,017 

AGENCY OUTLAYS, NET $ 32,217 

 

$ 1,190,833 $ 35,967 $ 1,259,017 
146

Financial Section (Unaudited) | SECTION 2

Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

Spartan Fury

Marines conduct a convoy in a joint light tactical vehicle at Pohakuloa Training Area, Hawaii, March 3, 2022, during 

Spartan Fury, a battalion-level exercise. Photo By: Marine Corps Staff Sgt. Olivia Knapp

Airmen prepare a C-17 Globemaster III before an airlift mission at Joint 

Base Lewis-McChord, Washington, Nov. 6, 2021, during Rainier War, a 

semi-annual, large readiness exercise.

Other Information

SECTION 3

◄ MISSION TRIO - JBLM, WASHINGTON

148

Page no. 

PHOTO BY: AIR FORCE MASTER SGT. JULIUS DELOS REYES

UNAUDITED

DEFENSE LOGISTICS AGENCY FY 2022 | Working Capital Fund
IN THIS SECTION:

150 Summary of Financial Statement Audit 

and Management Assurances

154 Foregone Revenue

155 Management Challenges

158 Payment Integrity

SECTION 3 Other Information

UNAUDITED

FY 2022 | Working Capital Fund

Labor Line

Sailors conduct line handling aboard the USS Chafee during a replenishment in the South China Sea, 

Nov. 17, 2021. Photo Credit: Navy Petty Officer 2nd Class Felipe Mendoza

PLACEHOLDER
Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report 150

Other Information (Unaudited) | SECTION 3

Table 1: FY2022 Summary of the Financial Statement Audit

Audit Opinion Disclaimer

Restatement Yes

Material Weaknesses Beginning 

Balance New Resolved Consolidated Ending Balance

Inventory 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

SUMMARY OF FINANCIAL STATEMENT AUDIT 

AND MANAGEMENT ASSURANCES

The audit reports on the FY 2022 and FY 2021 DLA WCF 

financial statements identified seven material weaknesses for 

DLA WCF. Table 1 below provides a summary of the financial 

statement audit results for FY 2022 and FY 2021, 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. For FY 2022, DLA has 

completed and validated corrective actions for two of the three 

ICOR-O Material Weaknesses, summarized in the table below. 

In FY 2022, the six ICOR material weaknesses and four ICOFS 

non-conformances were based on financial statement audit 

NFRs. However, DLA has determined these audits identified 

ICOR material weaknesses and ICOFS non-conformances are 

still present and have not been remediated in FY 2022. The 

DLA Audit Coordination & Liaison group continues to separately track financial statement audit findings and CAPs and report 

these to the ODCFO.

Sunlit Huey

An Air Force UH-1N 

Huey returns to Joint 

Base Andrews after a 

flyover in Baltimore, 

Dec. 19, 2021. Photo 

By: Air Force Senior 

Airman Spencer Slocum
151 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

SECTION 3 | Other Information (Unaudited)

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

Oversight and 

Monitoring 1 - - - 1

Financial Reporting 1 - - - - 1

Fund Balance with 

Treasury 1 - - - - 1

Plan-to-Stock: 

Inventory 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 2022 material weaknesses associated with WCF.

Loading Supplies

Air Force airmen assigned to the 730th Air Mobility Squadron, the 515th Air Mobility Operations Group and soldiers 

assigned to the Japan Ground Self-Defense Force unload and sort humanitarian aid cargo from the government of Japan 

onto air-cargo pallets at Yokota Air Base, Japan, Mar. 14, 2022. Photo By: Air Force Staff Sgt. Ryan Lackey
Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report 152

Other Information (Unaudited) | SECTION 3

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 

oversight of First 

Article Test

 Exhibits 

1 - 1 - - 0

Contract 

Administration: 

Nonverification of

supplier invoices

1 - - - - 1

Business Process 

Controls: Lack of 

procedures over the 

Scrap Management 

program

 1 - 1 - - 0

Total Material

 Weaknesses 3 - 2 - - 1

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

Contingency 

Planning - 1 - - - 1

Total NonConformances 4 1 - - - 5
153 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

SECTION 3 | Other Information (Unaudited)

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

Instructor Conductor

A Marine Corps drill instructor yells at attendees of an educator’s’ workshop at Marine Corps Recruit Depot Parris Island, 

S.C., Feb. 3, 2022. Marine Corps Recruiting Command conducts the workshops annually to inform high school educators, 

coaches and counselors about the process of becoming a Marine. Photo By: Marine Corps Cpl. Alexa Hernandez

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. 
Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report 154

Other Information (Unaudited) | SECTION 3

Force Foundation

Airmen work on the concrete foundation of a new frangible floodgate at Altus Air Force Base, Okla., Dec. 9, 2021. 

Photo Credit: Air Force Tech. Sgt. Robert Sizelove

The DLA provides a fuel service to both military and public 

entities. The price for fuel supplied is determined by OUSD(C). 

Often, DLA prices do not match market prices, and therefore 

DLA can incur a loss in terms of foregone revenue for a given 

fiscal year. Foregone revenue denotes the difference between 

the price DLA charges in exchange transactions and the full 

cost or market price. DLA Energy’s incurred foregone revenue 

from fuel sales totaled $2,589.7 million and $809.9 million for 

the years ended September 30, 2022 and 2021, respectively. 

The demand for the quantity of petroleum products did not 

change as a result of the difference in price. While DLA WCF 

calculates the dollar impact of foregone revenue using the 

Standard Fuel Price (SFP), certain transactions recorded by 

DLA use the cost-plus method. Due to DLA WCF’s utilization 

of the cost-plus method, the table below is not a complete 

depiction of foregone energy revenue. DLA WCF does not track 

foregone revenue for the SCM and Document Services activity 

groups. In addition, the foregone revenue, disclosed below, is 

presented on a net basis. However, higher prices based on 

full cost or market price might reduce the quantity of goods 

or services demanded and, therefore, the difference between 

revenue received and such higher prices does not necessarily 

provide an indication of revenue foregone.

Foregone Revenue cannot be quantified due to limitations 

of financial and non-financial management processes and 

systems that support the financial statements, as disclosed in 

Note 1.B., Basis of Presentation and Accounting.

Energy Foregone Revenue

(dollars in millions)

FY2022 FY2021 FY2020 FY2019 FY2018

Energy Foregone

Revenue $ (2,590) $ (810) - - $ (1,305)

Total Foregone

Revenue $ (2,590) $ (810) - - $ (1,305)

FOREGONE REVENUE
155 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

SECTION 3 | Other Information (Unaudited)

MANAGEMENT CHALLENGES
Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report 156

Other Information (Unaudited) | SECTION 3
157 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

SECTION 3 | Other Information (Unaudited)
Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report 158

Other Information (Unaudited) | SECTION 3

The Payment Integrity Information Act of 2019 (PIIA) (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

DLA Energy Commander Visits Texas Aerostat Site

Air Force Senior Airman Kim Doyle and Airman 1st Class Spencer Kans watch as bundles exit an aircraft during a flight 

out of Andersen Air Force Base, Guam, as part of Operation Christmas Drop, Dec. 10, 2021. Photo by: Air Force Senior 

Airman Aubree Owens

(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 OMB Circular A-136 Section II.4.5 and PIIA, 

each Executive Branch agency must complete the Annual Data 

Call issued by OMB and provide a link to PaymentAccuracy.gov

in their AFR or Performance and Accountability Reports (PAR) 

to fulfill reporting requirements. In addition, each Executive 

Branch agency should report on the actions taken in their AFR 

or PAR. For detailed reporting on DoD payment integrity, refer 

to the OI section of the consolidated DoD AFR at: https://comptroller.defense.gov/odcfo/afr/.

The Blue Angels, the Navy’s flight demonstration squadron, fly over 

the aircraft carrier USS Carl Vinson as it arrives at its homeport of San 

Diego following an eight-month deployment to the Indo-Pacifc region.

APPENDIX

160

Page no. 

PHOTO BY: NAVY PETTY OFFICER 2ND CLASS HAYDN SMITH

DEFENSE LOGISTICS AGENCY FY 2022 | Working Capital Fund

◄ ANGELS OVERHEAD - SAN DIEGO, CALIFORNIA
161 Defense Logistics Agency | FY 2022 WORKING CAPITAL 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; or

(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

 implementation 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.

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.

APPENDIX A: SUMMARY OF FMFIA DEFINITIONS AND REPORTING
Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report 162

Summary of FMFIA Definitions and Reporting | APPENDIX A 

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. 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 entry-level 

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: CONTINUED
163 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

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

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. 

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. 
Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report 164

J/D Codes, DLA HQ Program Support Structure, Roles and Responsibilities | APPENDIX B 

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 high-risk 

list.

The following are DLA WCF MSCs:

DLA Troop Support, headquartered in Philadelphia, 

Pennsylvania, is DLA’s lead center responsible for managing 

food, clothing, medical supplies, C&E, and general and industrial supplies worldwide. Troop Support delivers optimal, global 

supply chain solutions to Warfighters and other valued partners 

through five LOEs: Warfighter Always, Support to the Nation, 

Trusted Mission Partner, Modernize Acquisition and Supply 

Chain Management, and Future of Work. DLA Troop Support 

accomplishes these missions through the following Supply 

Chains: Subsistence, C&T, C&E and Medical.

DLA Land and Maritime, headquartered in Columbus, 

Ohio, is the primary source for repair parts for DoD weapon 

systems. DLA Land and Maritime supply chains support U.S. 

Army, U.S. Navy Surface and Subsurface, and USMC customers through dedicated customer relations, while working with 

numerous suppliers to fulfill requirements for assigned stock 

classes across the DoD. Furthermore, DLA Land and Maritime 

supply chains provide logistical services directly to Army and 

USMC industrial sites and Navy shipyards.

DLA Major Subordinate Commands

Helicopter Horizon

A Marine Corps AH-1Z Viper helicopter and two UH-1Y Venom helicopters fly over Lamar, Colo., Nov. 12, 2021.

Photo Credit: Marine Corps Lance Cpl. Elias Pimentel III
165 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

DLA Aviation, headquartered in Richmond, Virginia, is 

the primary source for repair parts and operating supply items 

for approximately 2,400 major weapon systems. The DLA Aviation supply chain provides mapping, kitting, chemical, petroleum packaging, gases, and cylinder items to the military 

services. In addition, DLA Aviation provides engineering, sustainability, ozone depleting substances reserve, and industrial 

plant equipment services.

DLA Distribution, headquartered in New Cumberland, 

Pennsylvania, is responsible for the receipt, storage, issuance, 

packing, preservation, and transportation of items worldwide. 

It operates a network of distribution centers around the world 

that provide timely and quality support to the Warfighters. Their 

Global Stock Position Plan ensures rapid distribution of critical 

military items. DLA Distribution’s overseas distribution operations are located in Europe, Middle East, and Pacific Asia regions.

 

DLA Energy, headquartered in Fort Belvoir, Virginia, 

serves as DLA’s executive agent for the bulk petroleum supply 

chain. DLA Energy’s business includes:

● Selling petroleum and aerospace fuels

● Arranging for petroleum support services

● Providing facility/equipment maintenance on

fuel infrastructure

● Performing energy-related environmental assessment and cleanup

● Storing and transporting for bulk and aerospace products, and Performing quality functions for petroleum in support of the military 

services, as well as for the privatization of their 

utility systems

● Providing Installation Energy products and

Utility Services

DLA Disposition Services, headquartered in Battle 

Creek, Michigan, receives EOU DoD property and provides ultimate disposal services through reutilization, transfer, donation, 

and sales. Property not reutilized within DoD is available for 

transfer to other Federal agencies or for donation to authorized 

non- profit organizations or state and local governments. Property not reused, transferred, or donated is either competitively 

sold or disposed of in an environmentally safe manner. DLA 

Disposition Services also arranges for the worldwide disposal 

of hazardous waste in compliance with laws and regulations.

 

APPENDIX B | J/D Codes, DLA HQ Program Support Structure, Roles and Responsibilities

California Lights

An air crew flies over the lights of southern California on its way to the Channel Islands Air Guard Station, Calif., Dec. 15, 

2021. Photo Credit: Air Force Tech. Sgt. Paul Duquett
Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report 166

Abbreviations & Acronyms | APPENDIX C 

APPENDIX C: ABBREVIATIONS & ACRONYMS

A&FP Accounting & Finance Policy Directorate

A/BO 

ADA	 Anti-Deficiency Act

AFR Agency Financial Report

A/OPC Agency/Organization Program Coordinators

APR Annual Performance Report 

BRAC Base Realignment and Closure

C&E Construction and Equipment

C&T Clothing and Textiles

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

COVID-19 Coronavirus-19

CPM Component Program Manager 

CRR Cost Recovery Rate

CSRS Civil Service Retirement System

CCT Coordination Team 

CTC Cost To Complete 

DATA Act Digital Accountability and Transparency Act of 2014

DCAS Defense Contract Administration Services

DFAS Defense Finance and Accounting Service

DAI Defense Agencies Initiative

DHA Defense Health Agency 

DISA Defense Information System Agency 

DLA Defense Logistics Agency

DM-I Installation Management – Installation & Equipment

DM&R Deferred Maintenance and Repairs

DoD Department of Defense

DoE Department of Energy

DOL Department of Labor

ODCFO 

DQP Data Quality Plan

DSA Defense Supply Agency

DSS Distribution Standard System

DWWCF Defense-Wide Working Capital Fund

EBS Enterprise Business System

ECC Resource Planning Central Component

E&DL Environmental and Disposal Liabilities 

EOU Excess, Obsolete, and Unserviceable

ERM Enterprise Risk Management

ERP Enterprise Resource Planning

FASAB Federal Accounting Standards Advisory

FBwT Fund Balance with Treasury

FCI Facility Condition Index

FEA Fuel Exchange Agreements

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

GPC Government Purchase Card 

GPRA Government Performance and Results Act
167 Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report

APPENDIX C | Abbreviations & Acronyms

GSA General Services Administration

HHS Health and Human Services

HIPCON Health Protection Condition 

HQ Headquarter 

ICOFS Internal Controls Over Financial Systems

ICOR Internal Control over Reporting

ICOR-O Internal Control over Operations

ID 

IH Industrial Hardware

IOD Insight on Demand

IPA Independent Public Accounting

IPs Improper Payments

IT Information Technology

IUS Internal Use Software

LOEs	 Lines of Effort

MAC Moving Average Cost 

MOCAS Mechanization of Contract Administration Service 

MSC Major Subordinate Command

NDAA The National Defense Authorization Act

NFR Notice of Findings and Recommendations

NRV Net Realizable Value

NSNs Non-National Stock Numbers

OCONUS Outside the Continental United States

ODCFO 

ODOs Other Defense Organizations

OIG 

OMB	 Office of Management and Budget

OPM	 Office of Personnel Management

OSD	 Office of the Secretary of Defense

OUSD	 Office of the Under Secretary of Defense

OUSD(C)	 Office of the Under Secretary of Defense (Comptroller)

P3 Public-Private Partnerships

PAR Performance and Accountability Report

PMO 

POCs Point-of-Cares

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

SAO 

SAP Systems Applications and Product

SCM Supply Chain Management

SFFAS Statement of Federal Financial Accounting Standards 

SFP Standard Fuel Price 

SLOA Standard Line of Accounting 

SOA Statement of Assurance

SMS Sustainment Management System

SNS Strategic National Stockpile

SRM Sustainment, Restoration and Maintenance

TAS Treasury Account Symbol 

TDD Treasury Direct Disbursing

TF Transaction Fund

TI Treasury Index

U.S. United States 

UCO	 Unfilled Customer Orders

UDO Undelivered Orders 

UoT Universe of Transactions 

USACE U.S. Army Corps of Engineers

USMC United States Marine Corps

USSGL U.S. Standard General Ledger

WCF Working Capital Fund
Defense Logistics Agency | FY 2022 WORKING CAPITAL FUND | Agency Financial Report 168

Abbreviations & Acronyms | Acknowledgments | APPENDIX 

ACKNOWLEDGMENTS

This Agency Financial Report (AFR) was prepared with the talents, energies and dedication of the Defense Logistics Agency workforce and our contract partners. A special note of appreciation is extended to the many diligent employees in the 

Financial Reporting Division within in the Office of the Chief 

Financial Officer, for your time and efforts in preparing the AFR.

Icons created by Sahab Uddin, Gregor Cresnar, 

Made x Made and Vectors Point and from Noun Project.

We offer our sincerest thanks and acknowledgement 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. 

Physical Training

Sailors conduct physical training during a tactical combat casualty care course at Marine Course Base Camp Pendleton, 

Calif., Dec. 17, 2021. Photo Credit: Marine Corps Sgt. Maximiliano Rosas