♦♦♦

 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 | General Fund

AGENCY FINANCIAL REPORT
i

ABOUT THE AGENCY FINANCIAL REPORT

All information within this report pertains to DLA GF unless 

specifically noted otherwise. DLA GF’s financial results are 

unaudited because there are limitations due to underlying 

processes and internal controls that support the principal 

financial statements. DLA GF continues to implement 

processes and system improvements addressing these 

limitations. The AFR consists of three primary sections:

Management’s Discussion and Analysis

(Unaudited)

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

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

overall performance related to its strategic goals and primary 

objectives; financial analysis; management’s assurance on 

internal controls; system analysis; compliance with laws and 

regulations; and forward-looking information.

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

Agency Financial Report (AFR) provides financial and 

summary performance results enabling the President, 

Congress, and the American people to assess its accomplishments, and to understand its financial results and operational functions. The AFR consists of DLA GF financial 

statements and other reports. The principal financial statements1 have been prepared to report the financial position 

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

statements and accompanying notes have been prepared 

from the books and records of DLA GF using guidance from 

the following applicable laws and regulations for which DLA 

GF is unable to provide assurance:

Financial Section (Unaudited)

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

management’s response to the audit reports, financial 

statements and the accompanying notes, as well as required 

supplementary information (RSI).

Other Information (Unaudited)

This section details DLA GF’s Summary of Financial Statement 

Audit and Management Assurances, management and 

performance challenges, payment integrity reporting, and 

grants program reporting.

1 Refer to the Financial Section Introduction for definition of 

 principal financial statements.

Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

● 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.
ii
TABLE OF CONTENTS

IV

Message from the Director

2 SECTION 1

Management’s Discussion 

and Analysis (Unaudited)

4 Mission and Organizational Structure

10 Performance Goals, Objectives, and 

Results

28 Analysis of Financial Statements and 

Stewardship Information 

35 Analysis of Systems, Controls, and 

Legal Compliance 

44 Forward-Looking Information

48 SECTION 2

Financial Section (Unaudited)

50 Message from the Chief Financial 

Officer

51 Audit Reports 

84 Management’s Response to Audit 

Reports 

85 Introduction to the Principal Financial 

Statements

86 Principal Financial Statements 

(Unaudited) 

90 Notes to the Principal Financial 

Statements (Unaudited)

121 Required Supplementary Information

The AFR is available on the DLA website at: 

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

126 SECTION 3

Other Information (Unaudited)

128 Summary of Financial Statement Audit 

and Management Assurances

132 Management Challenges 

136 Payment Integrity

136 Grants Program

138 APPENDIX

139 Appendix A: Summary of FMFIA 

Definitions and Reporting

141 Appendix B: J/D Codes, DLA HQ 

Program Support Structure, Roles and 

Responsibilities 

143 Appendix C: Abbreviations & Acronyms 

145 Acknowledgments

Sailors receive ammunition aboard the USS Jason 

Dunham during a replenishment in the Ionian Sea, 

Feb. 19, 2022. Photo by: Navy Petty Officer 3rd Class 

Theoplis Stewart II

◄ Sea Ops
iv Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

Message from the Director

MESSAGE FROM THE DIRECTOR

FY 2022 | General Fund

On behalf of 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 General 

Fund (GF) Financial Statements. Information obtained through this report will be valuable in our ongoing efforts to improve all 

aspects of DLA GF operations. The IPA reported material weaknesses in key areas involving policies and procedures, critical 

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

Message from the Director

♦♦♦

Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

As we close out DLA’s Diamond Anniversary year, I am of 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.

A sailor conducts maintenance on an MH-60S Seahawk aboard the USS 

Gerald R. Ford in the Atlantic Ocean, March 12, 2022.

Management’s Discussion 

and Analysis

SECTION 1

DEFENSE LOGISTICS AGENCY

◄ MAINTENANCE MISSION - ATLANTIC OCEAN

2

Page no. 

 PHOTO BY:

NAVY PETTY OFFICER 2ND CLASS NOLAN PENNINGTON

UNAUDITED

FY 2022 | General Fund
IN THIS SECTION:

4 Mission and Organizational Structure

10 Performance Goals, Objectives, and Results

28 Analysis of Financial Statements and Stewardship Information

35 Analysis of Systems, Controls, and Legal Compliance

44 Forward-Looking Information

SECTION 1 UNAUDITED

Management’s Discussion 

and Analysis

FY 2022 | General Fund

Desert Disconnection

A Marine unplugs a fuel hose at Prince Sultan Air Base, Saudi Arabia, March 5, 2021. Photo Credit: Marine 

Corps Lance Cpl. Jacob Yost
Defense Logistics Agency | FY 2022 GENERAL 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

DLA Energy’s roots date back to World War II. Originally, the organization was an entity of the Department of 

Interior as the Army-Navy Petroleum Board with the mission of administering critical petroleum requirements 

during the war. In 1945, the organization was transferred to the War Department and became the Joint ArmyNavy Purchasing Agency.

MISSION AND ORGANIZATIONAL STRUCTURE

♦♦♦
5 Defense Logistics Agency | FY 2022 GENERAL 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.

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 GENERAL 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 GENERAL 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 

Army, Navy, and Air Force), other Federal Agencies, and 

public entities. DLA sources and provides nearly all the consumable items America’s military forces need to operate, 

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

construction material. DLA provides support around the clock 

and around the world to meet the needs of America’s Armed 

Forces and other designated customers in times of peace, 

National Emergency, and war. DLA supports DoD objectives 

and missions with involvement in the full range of military operations from participation with multi-national forces engaged 

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

The DLA GF employs approximately 213 civilian personnel, 

whose labor is paid from DLA GF.

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

Federal law specifying annual budget and expenditures of the 

DoD.

What DLA Does

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

which are represented through its efforts and impact around the world.

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.
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 8

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

There are five major activities within DLA GF. DLA GF receives 

appropriations under the Agency identifier code for the OUSD 

(Treasury Index (TI)-97), along with Other Defense Organizations 

(ODOs). OUSD (Comptroller) (OUSD(C)) uses a data element 

referred to as a ‘limit’ to identify the various ODOs under TI-97. 

Defense-wide (DW) appropriations allotted to DLA GF include: 

(1) Operation and Maintenance (O&M), (2) Procurement Defense-wide (PDW), (3) Research, Development, Test and Evaluation (RDT&E), (4) Military Construction (MILCON), and (5) 

Family Housing O&M. The appropriations provide the funding 

to incur obligations and to pay for goods and services. DLA GF 

sub-allots RDT&E and MILCON funding to other DoD organizations (i.e., Defense Microelectronics Activity (DMEA), U.S. Army 

Corps of Engineers (USACE) and U.S. Naval Facilities Engineering Command (NAVFAC)). DLA GF is responsible for reporting 

sub-allottee balances in the DLA GF AFR.

Operation and Maintenance (O&M)

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

appropriations to support the sustainment of ongoing mission 

support initiatives at the Agency level and department wide. The 

O&M appropriation continues the path to achieving full spectrum 

readiness and advances DoD’s multi-pronged, multi-year 

approach to build a more lethal and ready force with targeted investments in industrial readiness, microcircuit emulation, soldier, 

and family programs. For the years ended September 30, 2022 

and 2021, O&M was appropriated a total of $426.8 million and 

$395.0 million, respectively.

Procurement Defense – Wide (PDW) 

PDW funds have an availability period of three years. As the 

Nation’s Combat Logistics Support Agency, DLA procures, 

manages, stores, and distributes items the components of 

the DoD (including the U.S. Army, Navy, and Air Force, Marine 

Corps and Space Force) need to operate. Commodities include 

everything from maritime and land weapons systems support to 

medical supplies. DoD uses the appropriations to obtain various 

categories of material, such as: new military hardware, aircraft, 

armored vehicles, and other major equipment; upgrades to 

existing equipment, including extending service life, or remanufacturing existing systems; weapons and ammunition, ranging from 

air-to-air missiles to rounds for individual rifles; and spare parts, 

particularly those that are centrally managed. For the years ended 

September 30, 2022 and 2021, PDW was appropriated a total of 

$510.9 million and $390.5 million, respectively, due to funding for 

equipment.

Research, Development, Test & Evaluation 

(RDT&E)

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

maintain technological superiority on the battlefield, DoD relies 

on scientific and technical knowledge developed in large measure 

through RDT&E. DLA’s RDT&E funding is appropriated in Title IV 

Research, Development, Test and Evaluation. DLA’s Research & 

Development (R&D) is a program funded by the RDT&E appropriation that enables supply-chain innovation that directly supports 

the Warfighter. The program’s goal is to deliver innovative and responsive solutions to the Warfighters and other valued customers. 

For the years ended September 30, 2022 and 2021, RDT&E was 

appropriated a total of $350.0 million and $252.9 million, respectively.

Family Housing (O&M, Defense-Wide) 

Family Housing funds have an availability period of one year. 

The Family Housing appropriations encompass Military Family 

Housing authorized by law to meet the requirements of the DoD 

and include all DoD Component family housing, leases of real 

property utilized by DoD Components for family housing, and 

associated family housing support services. DLA GF did not 

receive Family Housing appropriations in FY 2022 as DLA GF has 

divested all its Family Housing units. Due to the size and materiality of Family Housing, DLA GF combined the Family Housing 

program with MILCON in its Statements of Net Cost for presentation and reporting purposes.

Military Construction (MILCON)

MILCON funds have an availability period of five years. MILCON 

appropriations are provided to construction agents. The three 

main funding categories include: (1) planning and design for the 

initial engineering phase of developing and scoping of all MILCON 

projects; (2) major construction to replace or renovate DoD Fuels, 

Distribution, and Inventory Control Point Facilities around the 

world; and (3) unspecified minor construction to address lower 

dollar add-on/related smaller projects, which emerge as new requirements during the major construction process, and weren’t 

included in the original scope of the major construction projects. 

For the years ended September 30, 2022 and 2021, MILCON 

was appropriated a total of $137.5 million and $304.8 million, respectively. DLA’s funds are primarily sub-allotted to USACE and 

NAVFAC for execution. Due to the long-term nature of construction projects, MILCON funds are held by DLA GF and released 

How DLA GF Accomplishes its Mission
9 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

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

to suballottees on a scheduled basis based on the project phase 

and related funding categories. From the FY 2022 and FY 2021 

newly appropriated funds, USACE was sub-allotted a total of 

$10.0 million and $42.1 million, respectively. From the FY 2021 

newly appropriated funds, NAVFAC was sub-allotted a total $62.9 

million, respectively. No new appropriated funding was sub-allotted to NAVFAC in FY 2022.

Organizational Chart

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

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

Figure 1: DLA Organizational Chart
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 10

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

The DLA has established performance assessments of its 

programs for purposes of evaluating Agency performance and 

improvement, based on the GPRA Modernization Act of 2010. 

DoD produces an Annual Performance Report (APR) for all its 

components, including DLA GF, and will include its FY 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 specific Director’s emphasis in 

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

and CCs below.

PERFORMANCE GOALS, OBJECTIVES, AND RESULTS

Figure 2: 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

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
11 Defense Logistics Agency | FY 2022 GENERAL 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 costeffectiveness 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 GF 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 GENERAL FUND | Agency Financial Report 12

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.

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.

(continued on next page)
13 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

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

Critical Capability C: Digital Business 

Transformation

Objective C1: Transformational information technology

capabilities

Objective C2: Advanced analytics and automation

Objective C3: Cybersecurity

Objective C4: Technology governance

Technology is changing at an exponential rate, generating 

new possibilities in logistics and customer support. It is also 

increasing the capabilities of our competitors, the risks to our 

supply chains and operations.

We are focusing our IT and digital capability investments on 

key areas that will enable us to enhance performance, reduce 

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

We will transform our systems and processes to improve 

transparency, reliability, and security for our employees, 

customers, and suppliers.

We will work internally and with our partners to ensure the 

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

emerging and complex cyber threats.

Heavy Lifting

Airmen load cargo onto a HC-130J Combat King II during a training exercise at Moody Air Force Base, Ga., March 24, 

2022. Photo Credit: Air Force 1st Lt. Katie DuBois
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 14

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

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

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

Procurement Technical Assistance Program

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

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

expand the number of businesses capable of participating in 

government contracts; it executes cooperative agreements 

with eligible program participants to establish the Procurement 

Technical Assistance Centers (PTACs) that assist businesses 

in pursuing and executing contracts with DoD, other Federal 

Agencies, and state and local governments. PTACs provide 

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

such as helping prepare bids/proposals, marketing to potential 

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

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

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

specifications, procurement histories, and other information 

necessary to successfully compete for government contracts.

As of September 30, 2022, there were 95 PTACs assisting 

business in 49 states, Washington, D.C., Puerto Rico, Guam, 

the U.S. Virgin Islands, and in regions established by the 

Indian Affairs bureau of the U.S. Department of the Interior. As 

of September 30, 2022, DLA OSBP has obligated $47.9 million 

for the PTAC’s use. As a cost sharing program, $23.7 million 

in non-federal funding was also committed by the states and 

other local entities.

This performance measure relates to the objective 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 4.1: Expand industry engagement to foster innovation and maximize value for 

our customers; and Objective 4.2: Improve the end-to-end post-award segment to enable collaborative 

customer support, increase responsiveness, and manage costs.

Performance Measures (Unaudited)
15 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

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

Distressed areas represent areas that have a per capita 

income of 80.0% or less of the state average; or an unemployment rate that is 1.0 % greater than the national average for 

the most recent 24-month period.

Funding for the PTAP and for DLA’s administration of the program is provided by an annual O&M appropriation, in accordance with 10 USC Ch 388. FY 2022 and FY 2021 obligations 

for the PTAP cost sharing program are shown in the below 

chart, for both distressed and non-distressed areas.

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

Fighting the Flames

Navy recruits spray a 

hose into a simulated 

fire during a firefighting 

training exercise at 

the Recruit Training 

Command in Great 

Lakes, Ill., March 9, 

2022. Photo Credit:

Navy Petty Officer 2nd 

Class Christopher M. 

O'Grady
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 16

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

Warstopper Program

Readiness Investments

Readiness Investments in industry are made when the forecasted readiness demand is higher than the commercial industry is willing to invest. These types of investments can occur 

across all DLA Supply Chains including the DoD Nuclear Enterprise items. Additionally, DoD policy allows these industrial base measures to be used to offset War Reserve Material 

stocks and potentially avoid stock spoilage due to shelf-life expiration and changes to system configurations. 

Warstopper investments are like a catastrophe or disaster 

business insurance policy and deliver expedited products to 

our customers (i.e., Military Services and Agencies) when triggered by an event (e.g., war, contingency, National Emergency, or disaster). Readiness investments support Objectives 

1.3, 4.1, 4.3 and 4.4 by collecting market intelligence type information to confirm industrial base risk(s) exist, foster industry innovation to resolve industrial base risk, mitigate customer 

contingency requirement shortfalls and enhances acquisition 

alternatives to effectively and efficiently improve readiness for 

contingencies. 

Another type of investment establishes a sub-tier raw material 

buffer. Buffers are established when there is a first-tier readiness issue caused by a raw material production input and the 

material is used by more than one producer. They are established with sub-tier suppliers to ensure the material title, certifications, pedigree, and warranty are passed on to the first-tier 

producer (e.g., manufacturer) or sub-tier component manufacturer. Material from these buffers can be directed towards 

many requirements including the DoD Nuclear Enterprise. The 

buffer material is not Government Furnished Material and the 

investment required is lower in cost then an end item investment and can have very wide application across the Defense 

Industrial Base (DIB). Performance is measured by the value 

of the finished mill material released from the buffer. 

Regular execution of these types of investments is essential 

to ensuring our customers, contracting officials and industry 

knows how to access the materials available during times of 

National Emergency.

Preservation of Capabilities/Capacities

A Warstopper investment is required to preserve an industrial base capability or capacity that would have closed but is 

needed for future readiness demand. The two major objectives 

are (1) preserving and/or (2) cold start of industrial base capabilities and capacities. The performance measure is based on 

the Warstopper Program’s success in implementing an industrial base preservation initiative. The applicable performance 

target is to successfully preserve identified capabilities and 

capacities within the available funding to prevent more costlier Diminishing Manufacturing Sources and Material Shortages 

solutions. These are targets of opportunity as industry closes 

or discontinues support, typically due to financial reasons. 

Some opportunities exceed available funding in any specific 

fiscal year and become an unfunded requirement.

Typically, a Preservation of Capabilities and/or Capacities involves a Warstopper funded Industrial Base Maintenance Contract or a similar type of contract, and as a last resort, to a 

Minimum Sustaining Rate contract. These investments support 

Objective 1.3, 4.1 and 4.4 by ensuring the ability to acquire 

critical supplies for military operations and the nuclear enterprise.

The program has three energy preservation investments to 

maintain domestic capability:

● Dinitrogen Tetroxide (N2O4) critical for military satellites 

● Hydrazine critical for military satellites 

● Gaseous Nitrogen facility at Vandenberg Space Force 

Base that feeds a USG real property pipeline suppling 

the launch pads 

This performance measure relates to the objectives described above:

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

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

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

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

and Objective 4.4: Enhance our acquisition capabilities to improve readiness for contingencies.
17 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

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

Scenic Ride

Marines ride in a combat rubber raiding craft to return to the USS Arlington after joint training off the coast of Skyros 

Island, Greece, May 16, 2022. Troops assigned to the Arlington are participating in Alexander the Great 22, an exercise 

to strengthen interoperability and force readiness between U.S., Greece and allied nations. Photo Credit: A Navy Petty 

Officer 1st Class John Bellino

The other type of preservation investment is a cold start of industrial base capabilities and/or capacities. These investments 

typically result from service life extension and/or reactivation of 

older weapon systems. The Warstopper Program has one cold 

start preservation investment for the TF-33 Analysis Program. 

Risk Analysis

Risk analysis and studies are used to determine the health of 

selected industries, as well as maintaining DLA industrial acquisition policies, assessing supplier on their ability to address 

surge and sustainment to meet readiness demand, and other 

program administrative duties.

The risk analysis program analyses support Objective 4.3 that 

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

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

to ensure the availability of adequate industrial resources and 

production capability, including services and critical technology 

for National defense requirements. These risk analyses and 

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

providing information to the appropriate decision makers and 

shared with other government agencies as appropriate.
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 18

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

The Defense Agencies Initiative (DAI) is a financial management system of nine integrated business processes as 

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

web-based accessible capabilities for financial managers and 

other DoD employees to make sound business decisions in 

support of the Warfighter. Currently, 29 Defense Organizations 

use DAI, including Defense Contract Audit Agency, Defense 

Information Services Agency (DISA), United States Marine 

Corps (USMC), Missile Defense Agency, Defense Finance Accounting System (DFAS) and Naval Special Warfare (NSW). 

Defense Agencies Initiative 

This performance measure relates to the objectives described above:

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

Campaign Plans and Integrated Contingency Plans in competitive and contested logistics environments; 

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

and Objective 3.2: Provide greater financial transparency to customers.

The DAI program continually requires innovation to meet the 

current dynamic technological and operational environment. 

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

receives allotments through DLA GF RDT&E appropriations. 

In FY 2022, DAI was allotted $68.9 million of O&M funds, 

which represents 16.0% of DLA’s total O&M appropriation of 

$430.8 million. In FY 2022, DAI was allotted $31.1 million of 

RTD&E funds, which 8.9% of DLA’s total RDT&E appropriation 

of $350.9 million.

(continued on next page) 

Figure 5: DAI’s Nine Integrated Business Processes
19 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

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

In FY 2022, DAI received an unmodified opinion on all DAI 

control objectives design and operating effectiveness of the 

control objectives stated above. No adverse performance 

trends were identified during FY 2022. The reported performance information maps to the DAI Performance Baseline requirements. This information is regularly reviewed with using 

organizations and DAI leadership with a series of system 

technical reviews ending and Authorization to Proceed (ATP) 

decisions. The most recent DAI SOC-1 Type 2 report provides 

an unmodified opinion on all DAI control objectives design and 

operating effectiveness. During October 2024 DAI will migrate 

application hosting from DISA to commercial Cloud hosting. 

The shift to Cloud hosting is planned to improve scalability 

of the application to allow for growth in using organizations, 

maximize supportability and reduce cost.

The DMEA uniquely accomplishes this mission for the department by providing a guaranteed and trusted source of supply of 

microelectronics parts that are essential to combat operations. 

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

microelectronic solutions to enhance mission capability for 

customers across the department. DMEA provides decisive, 

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

components that are unobtainable in the commercial market. 

DMEA accomplishes these missions by performing organic 

engineering services and production of microelectronic parts, 

acquisition of microelectronic foundry production, through the 

DMEA Trusted Access Program Office, accelerated acquisition 

of microelectronic development solutions in the defense industry utilizing the Advanced Technology Support Program, and 

Defense Microelectronics Activity

This performance measure relates to the objectives described above:

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

DAI Operating Metrics

FY 2022

Target

FY 2022

Actual

FY 2021

Target

FY 2021

Actual 

System 

Availability 98.00% 99.28% 98.00% 99.80%

Timeliness and 

Accuracy of Data 

Transfers

98.00% 99.70% 98.00% 99.80%

For FY 2022, DAI targeted to provide assurance that:

● DAI implements and executes an auditable financial 

management system to support customer organizations’ 

financial end-to-end processes. DAI received an unmodified opinion in a System and Organization Controls (SOC) 

1 Type 2 report for the period October 1, 2021 through 

June 30, 2022 (latest available). (Targets O&M and 

RDT&E)

● DAI targets to provide system performance availability 

(% system is online and available to end users) 99.0% 

objective (desired performance level); 95.0% threshold 

(minimum acceptable performance). As displayed in 

Figure 6, DAI 2022 and 2021 system availability exceeded 

the objective. (Targets O&M)

● DAI interfaces have data integrity checks in place to ensure 

no loss or corruption of data during transmission, as well 

as no loss of interoperability across business systems 

(timeliness and accuracy of data transfers) (100.0% 

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

timliness and accuracy for 2022 and 2021 were close to 

the objective. (Targets O&M and RDT&E)

● DAI successfully deployed Global Model capabilities to the 

United States Marine Corps (USMC) in accordance with 

its implementation plan. (Targets O&M and RDT&E)

● DAI is developing and implementing Global Model capabilities to the DFAS and NSW in accordance with its implementation plan. (Targets O&M and RDT&E)

Figure 6: DAI Operating Metrics
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 20

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

The DLA ManTech program enables DLA to explore and 

develop innovative solutions to improve and modernize manufacturing processes directly aligned to the National Defense 

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

for a more lethal force and achieve reform through greater performance and affordability, predictive analytics, and continuous communication.

For FY 2022, DLA ManTech focused on the following programs:

Battery Network Program

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

tested advanced batteries to be used virtually in every 

Manufacturing Technology Program

This performance measure relates to the objectives described above:

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

Commander Campaign Plans and Integrated Contingency Plans in competitive and contested logistics 

environments; 

Objective 1.2: Partner with customers at the wholesale and retail levels to address Service- specific 

challenges and develop solutions; 

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

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

Objective 3.3: Provide next generation customer service, including a customer feedback mechanism; 

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

Objective 4.2: 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 C.1: Enhanced IT Capabilities; 

and Objective C.2: Advanced Analytics and Automation.

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

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

Prototypes were completed and delivered to the US Army 

for testing.

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

feasibility for injection molded nickel-zinc and nickel-cadmium solid-state electrolyte cells.

leveraging the DMEA microelectronic manufacturing capabilities.

DMEA assists hundreds of Department programs every year. 

DMEA has provided its specialized engineering assistance 

and capabilities to older systems, current systems, and even 

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

E-4B Advanced Extremely High Frequency (AEHF) Integration, CH-53K UPC V3 Software Architecture Upgrade, Allied 

Ground-Based Air Defense Command and Control (GBAD C2) 

Interoperability, Air and Missile Defense Planning and Control 

System (AMDPCS), Mobile AEHF Terminal (MAT) Design, Development and Engineering (MAT DDE), Medium Range Intercept Capability Radar Mode Development, B-1B Enhanced 

Preprocessor Avionics Control Unit (PACU) Replacement 

Computer NAS Drive Replacement, F-15 AEVA Cybersecurity Analysis, among many other programs. DMEA assists the 

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

(continued on next page) 
21 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

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

Defense Logistics Information Research 

Program

●	 3D Technical Data Solutions: Provided alternative of 

solutions to provide access to technical data from multiple 

proprietary sources to increase the ability of industry to 

respond to parts requirements; reviewed 3D technical 

data viewers that provide visibility of technical data from 

multiple proprietary sources to develop standard guidance 

the development of 3D Technical Data Packages across 

DoD.

Additive Manufacturing Program

●	 Creating 3D Technical Data Packages & ANTPQ-36 Fire 

Finder Waveguide: Advanced and demonstrated 3D Model-based technical data use in procurement for hardto-source parts; produced hard-to- source waveguides for 

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

the supply system.

Subsistence Network Program

●	 Horizontal Form Fill Seal Material for Meal, Ready-To-Eat 

(MRE) Bags: Developed improvements to materials and 

manufacturing processes for MRE packaging material and 

overall food quality; developed new MRE meal bags that 

reduces pack- aging waste, reduce MRE weight, volume, 

and cost.

Castings

●	 Automated Image Analysis: Designed a semi-automated 

image analysis using Radiographic Testing (RT) to inspect 

steel castings by improving the robustness of feature 

detection and rating decisions. The software is available 

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

use through the Steel Founders’ Society of America.

Advanced Microcircuit Emulation (AME)

Program

●	 Obsolete Microcircuit Manufacturing Capability: Developed 

and transitioned to production a continuing manufacturing 

source for obsolete microcircuits requiring 20 Volt Analog/

Linear microcircuit technology introduced in the 1990s.

DLA R&D ManTech program AME is a consistent performer of 

providing microcircuits to our Services weapons. With realizing 

contracting and financial efficacy by awarding a 5-year task 

order (D-type) contract, allows rapid project initiation as well 

surge capabilities to support contingency operations.

Verification

Navy Petty Officer 3rd Class Jacob Keeton verifies a 

COVID-19 vaccine card aboard the Wasp-class amphibious 

assault ship USS Kearsarge in the Atlantic Ocean, March 

23, 2022. The Kearsarge Amphibious Ready Group and 

embarked 22nd Marine Expeditionary Unit is on a scheduled deployment in the 2nd Fleet area of operations. Photo 

Credit: Navy Petty Officer 3rd Class Jesse Schwab
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 22

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

The MILCON program provides funds for major construction to 

replace or renovate DoD fuel depots and Industrial Capabilities 

Program facilities around the world. DLA sub-allots MILCON 

funds to USACE and NAVFAC, which are DLA’s primary design 

and construction agents for the MILCON program. Projects 

include fuel hydrant systems encompassing entire aircraft 

parking ramps, numerous operations and HQ facilities, and 

retail gas stations. For fiscal year 2022, NAVFAC was not able 

to provide MILCON data due to a system migration. Therefore, 

the disclosure below is for USACE only.

For fiscal year 2022, the Facilities Modernization Division within 

Installation Management brought 11 USACE MILCON projects 

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

projects was $277.3 million. Projects ranged in scope from 

replacing fuel tanks to improving wharf refueling capability. 

Prices ranged from just over $7.5 million to $71.4 million. The 

following figures summarize completed DLA MILCON projects. 

Military Construction

This performance measure relates to the objectives described above:

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

Campaign Plans and Integrated Contingency Plans in competitive and contested logistics environments.

Figure 7: Completed DLA MILCON Projects by Year

(continued on next page)
23 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

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

Figure 9: Completed DLA MILCON Projects by Location

Figure 8: DLA MILCON Value of Completed Projects by Year

MILCON Projects Completed in FY 2022 (Amounts in $)

FY 

(Authorized) Project Description Installation /

 Location Name Country Quarter Construction Cost

2019 Bulk Diesel System Replacement McAlester, OK USA Q1 $ 7,495,511 

2019 Refueling Facilities Joint Base Lewis-Mchord 

(Gray AFF), WA USA Q1 25,828,674

2016 Replace Pol Pumphouse Hill AFB, UT USA Q2 22,469,238

2019 Main Access Control Point Upgrades DLA Distribution, 

San Joaquin, CA USA Q3 27,546,095

2017 Construct Warehouse & Open Storage 

- Lot 30 and GPW Red River Army Depot USA Q3 54,965,864

2017 Replace Ground Vehicle Fueling Facility FT Belvoir, VA USA Q3 9,292,682

2019 General Purpose Warehouse DLA Distribution, 

Red RIver TX USA Q4 71,357,717

2018 Upgrade Fueling Warf DFSP Yokose, 

Sasebo, Japan JAPAN Q4 30,911,932

2018 Hot Cargo Hydrant System Replacement Joint Base McGuire-DixLakehurt, NJ USA Q4 10,394,652

2019 Fuel Facilities Replacement Joint Base Langley 

Eustis, VA USA Q4 7,628,874

2019 Energy Aerospace Operations Facility Joint Base San Antonio, TX USA Q4 9,421,375

FY 2022 Total $ 277,312.614
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 24

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

The Facilities Modernization Division within Installation Management brought eleven USACE projects to completion; DLA 

considers a MILCON project completed when the Construction 

in Process (CIP) ledger account has been reduced for the first 

time, reflecting the transfer of the asset to the receiving entity. 

Additional costs will continue to accrue in the CIP account after 

beneficial occupancy has occurred, while the construction contract work is being finalized. Once the contractor-submitted 

final invoice is paid and release of all claims has been confirmed, the project is readied for closure by the design and 

construction agent. A final Report of Transfer and Acceptance 

of Real Property (DoD Form DD1354) is produced at project 

closure, documenting all project costs.

Completed DLA MILCON Projects

Top Left: DESC1609 Replace Ground Vehicle Fueling 

Facility, Fort Belvoir, VA • Top Right: DESC1805 

Upgrade Fueling Wharf, DSFP Yokose, Sasebo, JA • 

Middle Right: DESC1905 Refueling Facilities, Joint 

Base Lewis-McChord (Gray AAF), WA • Bottom Right: 

DESC18S2 Bulk Diesel System Replacement, McAlester 

AAP, OK • Bottom left: DDRT1901/DDCX1901 General 

Purpose Warehouse, Red River Army Depot, TX • 

Middle Left: DESC1806 Hot Cargo Hydrant System 

Replacement, JB McGuire-Dix-Lakehurt, NJ
25 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

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

DLA General Fund Performance Measure: 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.

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 10: How often do you telework?

Figure 11: Has DLA provided increased opportunities for Telework?

*2019 survey data is N/A 

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)

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")
Defense Logistics Agency | FY 2022 GENERAL 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 12: 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 GENERAL FUND | Agency Financial Report

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

Currently, DLA GF receives a disclaimer of opinion on its 

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

a disclaimer of opinion each year from FY2017, DLA GF has 

taken a two track approach in resolving major impediments in 

efforts to strive for an unmodified audit opinion: (1) improving 

the reliability and fair presentation of financial data reported in 

the AFR by addressing Notice of Findings and Recommendations (NFRs); and (2) developing, improving, and refining the 

underlying end- to-end processes that support the compilation 

of the AFR by instilling sound fundamental practices in accordance with U.S. GAAP. The following timeline summarizes 

the occurrence of events that propelled DLA into a corrective 

action posture.

Figure 13: DLA Auditability Timeline

This performance measure relates to the objectives described above:

Objective B1: Auditability

DLA Roadmap to Auditability

Pilot Prep

Air Force Staff Sgt. 

Jeremiah Necaise, left, 

helps a Bangladesh air 

force pilot prepare his 

night vision goggles for 

a night sortie during 

Exercise Cope South 

in Bangladesh, Feb. 24, 

2022. Photo Credit:

Air Force Tech. Sgt. 

Christopher Hubenthal

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. 
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 28

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

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

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

Overview of Financial Position

The principal financial statements of DLA GF include the 

Balance Sheets, Statements of Net Cost, Statements of 

Changes in Net Position, and the Combined Statements of 

Budgetary Resources. These principal financial statements 

and accompanying notes are included in the Financial Section 

of this AFR.

Preparing DLA GF financial statements is a vital component 

of sound financial management and is intended to provide 

accurate, accountable, and reliable financial information that is 

useful for assessing performance, allocating resources, and for 

targeting areas for future programmatic emphasis. DLA GF’s 

management is responsible for the integrity and objectivity of 

the financial information presented in the statements. DLA GF 

is dedicated in its pursuit of financial management excellence.

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

FY 2022 and FY 2021 is presented in the following Analysis 

of Key Financial Measures. The table represents assets on 

hand to pay liabilities, and the corresponding net position. 

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

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

less earned revenue. Because of the materiality and nature 

of the program, DLA combines the Family Housing Program 

with MILCON for reporting purposes in the Statements of Net 

Cost. The Financial Results Summary section also includes an 

explanation of significant changes for each DLA GF financial 

statement. 

Antenna Adjustment

Marine Corps Cpls. Santos Perez, left, and Sergio Gonzalez adjust a ground antenna transmit and receive during training 

at Marine Corps Base Camp Pendleton, Calif., March 11, 2022. Photo Credit: Marine Corps Cpl. Alize Sotelo

ANALYSIS OF FINANCIAL STATEMENTS AND STEWARDSHIP INFORMATION
29 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

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

Figure 14: Changes In Key Financial Measures

Changes In Key Financial Measures

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

Condensed Principal Financial Statements

FY 2022

FY 2021

As Restated Increase/Decrease

Financial Condition (Unaudited) (Unaudited) $ %

Fund Balance with Treasury $ 2,406.7 $ 1,928.0 $ 478.7 24.8%

General PP&E, Net 442.4 604.8 (162.4) -26.9%

Inventory and Related Property, Net 29.5 17.4 12.1 69.5%

Advances and Prepayments 7.7 - 7.7 N/A

Accounts Receivable and Other Assets 13.9 13.6 0.3 2.2%

TOTAL ASSETS $ 2,900.2 $ 2,563.8 $ 336.4 13.1%

Accounts Payable $ 78.1 $ 48.9 $29.2 59.7%

Environmental and Disposal Liabilities 83.8 90.5 (6.7) -7.4%

Advances from Others and Deferred Revenue - 0.9 (0.9) N/A

Federal Benefits and Other Liabilities 12.5 19.2 (6.7) -35.9%

TOTAL LIABILITIES 174.4 159.5 $ 14.9 9.3%

TOTAL NET POSITION (ASSETS LESS 

LIABILITIES) $ 2,725.8 $ 2,404.3 $ 321.5 13.4%

Total Gross Cost $ 793.0 $ 861.7 $ (68.7) -8.0%

Less: Total Earned Revenue $ (78.8) $ (74.9) (3.9) 5.2%

NET COST OF OPERATIONS $ 714.2 $ 786.8 $ (72.6) -9.2%

Flight Check

Air Force Staff Sgt. Alex 

Henning conducts post flight 

checks on an F-15EX Eagle at 

Joint Base San Antonio, April 

21, 2022. Photo Credit: Sean 

Worrell, Air Force
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 30

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

Financial Results Summary

Assets – What DLA GF Owns and Manages

Assets represent amounts owned and managed by DLA GF 

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

Combat Logistics Support Agency and consist of: Fund 

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

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

Advances and Prepayments; and Accounts Receivable and 

Other Assets. DLA GF’s largest asset is FBwT, representing 

$2.4 billion or 83.0% of Total Assets as of September 30, 2022. 

The increase in FBwT of $478.7 million or 24.8% was primarily 

due to increases in appropriations received for PDW and 

RDT&E, offset by a decrease for MILCON. DLA GF PP&E represents $442.4 million or 15.2% of Total Assets and is mostly 

comprised of construction-in-progress (CIP). The decrease 

of ($162.4) million or (26.9%) over the September 30, 2021 

balance was due to decreases in CIP projects constructed by 

NAVFAC and USACE. The increase in Advances and Prepayments related to commercial interim financing payments for 

new contracts in PDW.

Figure 15: Total Assets by component as of September 30, 2022 and 2021

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)

$0.0

$500.0

$1,000.0

$1,500.0

$2,000.0

$2,500.0

FBwT General

PP&E, Net

Inv. and

Related

Property, Net

Advances

and

Prepayments

AR, Net &

Other Assets

$2,406.7 

$442.4 

$29.5 

$7.7 

$13.9 

$1,928.0 

$604.8 

$17.4 

$-

$13.6 

FY 2022 Assets FY 2021 Assets

FBwT 

$2,406.7

83.0%

General PP&E, 

Net

$442.4

15.2%

Inv. and Related 

Property, Net

$29.5

1.0%

Advances and 

Prepayments

$7.7

0.3%

AR, Net & Other 

Assets

$13.9 

0.5%

FBwT General PP&E, Net

Inv. and Related Property, Net Advances and Prepayments

AR, Net & Other Assets

Total = $2,900.2M
31 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

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

Liabilities – What DLA GF Owes

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

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

to DLA GF employees for wages and future benefits; (3) for Environmental and Disposal Liabilities (E&DL); and (4) for Other 

Liabilities. The largest is Accounts Payable, which comprises 

$78.1 million or 44.8% of Total Liabilities. The Accounts 

Payable increase of $29.2 million or 59.7% was primarily due

to purchases of PDW communication equipment, O&M Warstopper support and RDT&E microelectronic parts in FY 2022. 

Federal Benefits and Other Liabilities represent $12.5 million 

or 7.2% of Total Liabilities. Total Federal Benefits and Other 

Liabilities decreased ($6.7) million or (34.9%), which was 

primarily attributable to a decrease in Other Liabilities of ($5.1) 

million due to reimbursements to the Treasury Judgment Fund 

for a Contract Disputes Act liability.

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)

Figure 16: Total Liabilities by component as of September 30, 2022 and 2021

Accounts 

Payable

$78.1 

44.8%

Environmental & 

Disposal Liabilities

$83.8 

48.0% 

Federal 

Benefits & 

Other 

Liabilities

$12.5 

7.2%

Accounts Payable

Environmental & Disposal Liabilities

Federal Benefits & Other Liabilities

Total = $174.4M

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

$80.0

$90.0

$100.0

Accounts

Payable

Environmental &

Disposal

Liabilities

Advances from

Others and

Deferred

Revenue

Federal Benefits

& Other

Liabilities

$78.1 

$83.8 

$-

$12.5 

$48.9 

$90.5 

$0.9 

$19.2 

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

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

O&M 

$396.4 

55.5%

RDT&E

$289.7 

40.6%

MILCON & Family 

Housing

$18.2 

2.5%

Procurement

$9.9 

1.4%

O&M RDT&E MILCON & Family Housing Procurement

Total = $714.2M

Net position represents the accumulation of Revenue and 

Expenses, and Unexpended Appropriations and Other 

Financing Sources transferred in/out since inception, as represented in DLA GF balances reflected in the Statements of 

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

$2.7 billion as of September 30, 2022 is made up of:

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

Operations. The net increase of $321.6 million or 13.4% was 

primarily due to increased appropriations received for PDW 

and RDT&E offset by increases in transfers-out of completed 

CIP.

Net Position - What DLA GF Has Done Over Time

Net Cost of Operations - DLA GF Net Operating Results

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

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

major components, combining MILCON and Family Housing 

into one. For the year ended September 30, 2022, O&M represents the largest portion of Net Cost of Operations at $396.4 

million. RDT&E represents the second largest portion of Net 

Cost of Operations at $289.7 million for the year ended September 30, 2022.

Total Net Cost (Unaudited)

As of September 30, 2022 

($ in millions)

Two Year Trend in Net Cost (Unaudited)

As of September 30, 2022 and 2021 

($ in millions)

Figure 17: Comparative Net Cost by Program for years ended September 30, 2022 and 2021

$0.0

$50.0

$100.0

$150.0

$200.0

$250.0

$300.0

$350.0

$400.0

$450.0

$500.0

O&M RDT&E MILCON &

Family

Housing

Procurement

$396.4 

$289.7 

$18.2 $9.9 

$452.3 

$322.0 

$10.3 $2.2 

FY 2022 FY 2021
33 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

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

The recognition of budgetary accounting transactions is 

essential for compliance with legal constraints and controls 

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

for efficiently and effectively achieving the strategic objectives 

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

its operations within the appropriated amounts using budgetary 

controls. Two key components of budgetary activity include 

Budgetary Resources and Obligations. Budgetary resources 

are funds available for DLA GF to incur obligations to pay for 

goods and services prior to the cancellation of funds.

Budgetary Activity - DLA GF Budgetary Resources and Obligations

Obligations are balances for which there has been legally 

binding action during the year.

For the year ended September 30, 2022, DLA GF’s total 

Budgetary Resources were $2.1 billion and incurred a total 

of $1.5 billion in new obligations from salaries and benefits, 

purchase orders placed, contracts awarded, and similar transactions.

Figure 18: Status of Budgetary Resources for the years ended September 30, 2022 and 2021

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

As of September 30, 2022 and 2021 

($ in millions)

 $-

 $500.0

 $1,000.0

 $1,500.0

 $2,000.0

 $2,500.0

Total Budgetary Resources New Obligations

$2,066.4 

$1,450.4 

$1,605.6 

$989.9 

FY 2022 FY 2021

 $-

 $500.0

 $1,000.0

 $1,500.0

 $2,000.0

 $2,500.0

Total Budgetary Resources New Obligations

$2,098.9 

$1,488.4 

$2,066.4 

$1,450.4 

 FY 2022 FY 2021
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 34

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

The DLA GF principal financial statements2 and accompanying 

notes are prepared to report the financial position and results 

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

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

The DLA GF is unable to fully implement all elements of 

U.S. GAAP as promulgated by the Federal Accounting 

Standards Advisory Board (FASAB) and the form and content 

requirements for Federal government entities specified by OMB 

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

financial and nonfinancial management system limitations, as 

well as limitations on the underlying processes that support the 

principal financial statements. DLA GF derives reported values 

and information for major asset and liability categories largely 

from nonfinancial systems. These systems were designed to 

support reporting requirements for maintaining accountability 

over assets and reporting the status of Federal appropriations 

rather than preparing financial statements in accordance with 

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

record financial information on the full accrual accounting 

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

management systems used by DLA GF were designed to 

record information on a budgetary basis.

The DLA continues to address IT and financial audit NFRs 

to strengthen system controls, and financial and regulatory 

compliance with corrective action plans that include developing 

requests for systems changes. DLA has begun planning and 

defining requirements for a major system upgrade to the 4th 

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

processing Enterprise Resource Planning (ERP) Business 

Suite 4 SAP HANA (SAP S/4HANA). 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 GF continues to develop, improve, and refine the 

underlying financial and nonfinancial end-to-end processes 

and systems that support the compilation of the financial 

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

promulgated by FASAB and other Federal regulations. DLA GF 

continues to implement interim mitigation processes to address 

known limitations. 

Additionally, DLA GF is remediating material weaknesses 

to the financial statement preparation process. DLA GF has 

several corrective actions underway intended to improve the 

underlying systems, business processes and internal controls.

The financial statements should be read with the realization 

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

2 Refer to the Financial Section Introduction for definition of principal 

financial statement.

Limitations of the Financial Statements 

Stacking Packs

Marine Corps recruits organize their gear at Marine Corps Recruit Depot San Diego, March 17, 2022. 

Photo Credit: Marine Corps Cpl. Tyler Abbott
35 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

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

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 prescribed by U.S. Government Accountability Office (GAO) 

Green Book, Standards for Internal Control in the Federal 

Government, are met. The appendices referenced within the 

annual Statement of Assurance (SOA) below are OMB Circular 

A-123 appendices and are not included in DLA GF AFR.

ANALYSIS OF SYSTEMS, CONTROLS, AND LEGAL COMPLIANCE

Management Assurances
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 36

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

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

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 Assessment

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 
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 38

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

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 FY 2024. 

● 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;

● Performing regular reviews of ERM and A-123 

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

Senior Management Council (SMC) to identify, 

escalate, and respond to risks in a methodical way 

and implement internal controls in the high priority 

areas;

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

weaknesses are presented in the OI section of this report.

Effectiveness of Internal Control over Operations (FMFIA § 2)

Material Weaknesses Corrective Action Summary

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.

Message Relay

Marine Corps 2nd Lt. William Mathis relays a command during training at Marine Corps Air Ground Combat Center 

Twentynine Palms, Calif., April 10, 2022. Photo Credit: Marine Corps Lance Cpl. Brayden Daniel
39 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

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

FFMSRs:

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 non-compliance 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.

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 (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.

Globemaster 

Boarding

Soldiers board an 

Air Force C-17 

Globemaster III 

during Operation 

Agile Spartan II at 

Ali Al Salem Air 

Base, Kuwait, March 

16, 2022. Photo 

Credit: Air Force 

Tech. Sgt. Patrick 

Evenson

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

Departures from U.S. GAAP.
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 40

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

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
41 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

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

Anti-Deficiency Act

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

Federal employees from obligating funds in excess of an appropriation or before funds are available, or from accepting 

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

all appropriate authorities of any potential ADA violations. At 

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

DLA GF.

The DLA GF has funds control policies to monitor and track 

commitments, expenditures, and obligations to ensure amounts 

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

DLA GF is continuously evaluating the existing processes and 

controls to identify areas of improvement.

Digital Accountability and Transparency Act 

of 2014

The Digital Accountability and Transparency Act of 2014 (DATA 

Act) expands the Federal Funding Accountability and Transparency Act of 2006 to increase accountability and transparency in Federal spending, making Federal expenditure information more accessible to the public. It directs the Federal 

Government to use government-wide data standards for developing and publishing reports and to make more information, 

including award-related data, available on USASpending.gov. 

The standards and data allow stakeholders to track Federal 

spending more effectively.

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 currently 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 to notify the Secretary of the Treasury 

of receivables due from the public aged more than 120 days.

In FY 2022, DLA GF had no delinquent debt to report to 

Treasury and noted no instances of noncompliance with the 

Debt Collections Improvement Act.

Prompt Payment Act, 31 U.S.C. §§ 

3901–3907

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

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

pay interest penalties when payments are made late, and to 

take discounts only when payments are made by the discount 

date.

The DLA is unable to provide assurance over compliance with 

the PPA.

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.

Compliance with Laws and Regulations
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 42

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-toend 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 GF. The core of EBS is Systems Applications 

and Product’s (SAP) Enterprise Resource Planning Central 

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. Major Subordinate Command (MSC) 

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

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

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

corrective action assigned as appropriate.

Daily, management approves all requirements before the cardholder makes the purchase. A/BOs approve the use of the 

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

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

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

corrective action and provide results to the CPM for review. 

The A/OPCs and CPMs also review all monthly statement 

approval and certifications to identify any A/BO violations of 

segregation of duty policies.

CPM also conducts an annual comprehensive program review 

of each DLA GPC Activity, which includes a random sampling 

of cardholder transactions, appointment and training documentation, and overall program oversight responsibilities. The 

CPM assigns corrective actions as appropriate and provides 

results to senior leadership.

During FY 2022, there were no instances of fraud identified as 

a result of reviews or audits.
43 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

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

Component (ECC) version 6.0. This is a cloud-based, commercial off-the-shelf (COTS) software which has been configured to meet DLA’s business requirements. However, due to 

system limitations, accurate data is not always produced, and 

DLA is unable to provide assurance that the financial systems 

are in compliance with Federal system security and accounting 

requirements. There are numerous systems which interface 

with EBS. These include, but are not limited to, inventory and 

customer ordering systems including the Distribution Standard 

System (DSS), a legacy inventory warehouse management 

system and multiple DFAS systems, including the Defense 

Departmental Reporting System, for the creation of financial 

statements, reports, and Treasury cash management. DLA 

EBS has a single, enterprise general ledger which resides in 

SAP ECC 6.0 and is used for all funds.

Future Financial Management Systems 

Framework

The DLA 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 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 – SAP S/4HANA in SAP's SHC. 

Phase 2 has four sub-phases: Business Transformation Study 

(BTS), Business Process Engineering/Laws Regulations and 

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

Execution.

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

will conduct BPR/LRP analysis to identify and challenge DoD 

LRPs that impede the ability to adopt standard capability. DLA 

will consider BPR to use standard capability to the maximum 

extent possible to reduce cost, streamline business processes 

to adopt industry best practices, and allow for better innovation going forward. Phase 2 is scheduled to be completed by 

the fourth quarter of FY 2027.

The DLA will also be implementing system changes to meet 

the requirements of Treasury’s G-Invoicing system. G-Invoicing will help address government-wide accounting elimination 

problems by ensuring trading partners have the same information for intragovernmental transactions. Federal Program 

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

process intragovernmental buy/sell transactions. This process 

will remove the seller side over-write requirements and 

require trading partners to reconcile variances. The G-Invoicing mandated implementation deadline is October 2022 for 

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 endto-end funds traceability and eliminations reporting to enable 

successful audits in DoD.

Replenishment at Sea

The USS Harry S. Truman 

conducts a replenishment with the 

USNS Supply in the Ionian Sea, 

May 6, 2022. Photo Credit: Navy 

Petty Officer 3rd Class Theoplis 

Stewart II
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 44

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 

GF’s goals and missions.

An Ever-Changing Workforce

 

The DLA is a high-performing organization, and DLA’s workforce is its greatest asset. We must attract, develop, and retain 

a diverse, skilled and agile workforce. The 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 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, 

2022, the Consolidated Department of Defense CoronaviFORWARD-LOOKING INFORMATION
45 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

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

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 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 and 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.

The DLA faces current and future cyber threats that must be 

countered in a sustained effort to secure and defend the 

rus 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 Climite-Related Risk relatives 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 
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 46

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

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.

Finally, DLA provides Congressionally appropriated funding 

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

The DAI mission is to deliver auditable, CFO Act compliant 

business environments for Defense Agencies. The goal is to 

provide accurate, timely, and authoritative financial data in 

support of DoD goals to standardize financial management 

practices, improve financial decision support, and support 

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

the Defense Agencies’ financial management capabilities.

Frigid Refueling

An Air Force F-16 Fighting Falcon 

flies into position to be refueled by 

a KC-135 Stratotanker during the 

U.S. Northern Command exercise 

Arctic Edge, March 15, 2022. The 

biennial exercise brings together 

Northern Command and Canadian 

armed forces to train on rapid deployment and joint operations in 

the Arctic. Photo Credit: Air Force 

Staff Sgt. Taylor Crul

Financial Section

SECTION 2

48

Page no. 

UNAUDITED

DEFENSE LOGISTICS AGENCY FY 2022 | General Fund

A Marine scans for simulated targets during an exercise in Setermoen, 

Norway, March 7, 2022, as part of Cold Response, a readiness and 

defense exercise.

◄ SETERMOEN SCAN - SETERMOEN, NORWAY

PHOTO BY: MARINE CORPS SGT. WILLIAM CHOCKEY
SECTION 2 Financial Section

UNAUDITED

FY 2022 | General Fund

Chemical Reaction

A Marine with the Chemical Biological Incident Response Force is sprayed with oleoresin capsaicin during 

training at Naval Support Facility Indian Head, Md., March 10, 2022. Photo Credit: Marine Corps Pfc. 

Angel Ponce

IN THIS SECTION:

50 Message from the Chief Financial Officer

51 Audit Reports

84 Management’s Response to Audit Reports

85 Introduction to the Principal Financial Statements

86 Principal Financial Statements (Unaudited)

90 Notes to the Principal Financial Statements (Unaudited)

121 Required Supplementary Information

Balance Sheets Statements of Net Cost

Statements of Changes 

in Net Position

Combined Statements 

of Budgetary Resources

86 87

88 89
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 50

Financial Section (Unaudited) | SECTION 2

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 General Fund (GF). The FY 2022 DLA GF 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 GF 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 GF financial statements, 

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

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

continued efforts 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.

NOVEMBER 2022
51 Defense Logistics Agency | FY 2022 GENERAL 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 General Fund Financial Statements and Related Notes for FY 2022 and 

FY 2021 (Project No. D2022-D000FE-0059.000, Report No. DODIG-2023-023)

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

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

related notes as of and for the fiscal years ended September 30, 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 General

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

statements and related notes were presented fairly in accordance with Generally 

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

General Fund FY 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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Financial Section (Unaudited) | SECTION 2

controls over financial reporting.* Specifically, EY’s report stated that the DLA did not 

design or implement internal controls to:

• support the existence, completeness, rights, and valuation of its Property, Plant,

and Equipment;

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

all collections and disbursements;

• record and support Accounts Receivable and revenue transactions properly and 

identify valid unfilled customer orders;

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

budgetary balances;

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

reconcile budgetary accounts 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 General

Fund FY 2022 and FY 2021 Financial Statements and related notes. Furthermore, we do 

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

 

* 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.
53 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

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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
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 54

Financial Section (Unaudited) | SECTION 2

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 General Fund (GF) 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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1775 Tysons Blvd

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Fax: +1 703 747 0100

ey.com
55 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

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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
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 56

Financial Section (Unaudited) | SECTION 2

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



A member firm of Ernst & Young Global Limited
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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 General 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

ey.com
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 58

Financial Section (Unaudited) | SECTION 2

corrected on a timely basis. We consider the deficiencies described below and in Appendix A as 

items I through VII to be material weaknesses.

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

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

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

II to be significant deficiencies.

Material Weaknesses

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

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

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

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

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

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

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

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

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

completeness, rights and valuation of its PP&E. The combination of deficienciesin aggregate 

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

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

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

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

from the general ledger directly to U.S. Treasury. 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 Reconciliation and Reporting

Tool (DRRT) processes as mechanisms to reconcile DLA’s general ledger to U.S. Treasury.

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

DLA does not have sufficient policies, procedures and internal controls in place for the 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 providing services to other federal agencies. Revenue is earned when DLA 

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

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

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

A member firm of Ernst & Young Global Limited
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procedures and controls to record AR and revenue transactions in the proper period and

accurately in accordance with U.S. generally accepted accounting principles (GAAP). The 

combination of these deficiencies in aggregate results in a material weakness in internal 

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

further described in Appendix A.

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

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

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

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

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

including the process to create and approve obligations and the process to review, record and 

pay invoices. Furthermore, DLA lacked adequate procedures to record obligations and 

accrue for liabilities incurred but not paid; to review and close invalid obligations; and it 

recorded transactions in the procure to pay process in incorrect periods. The combination of

these deficiencies in aggregate results in a material weakness in internal control related to 

AP and expense. The matters identified related to AP and expense are further described in 

Appendix A. 

V. Financial Reporting – Financial reporting encompasses all aspects of operations affecting 

DLA’s ability to produce reliable financial statements and disclosures in accordance with 

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

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

inaccurate footnote disclosures. In addition, DLA lacks policies and procedures to validate 

account balances and monitor reporting variances between source systems, resulting in DLA 

recording unsupported journal vouchers (JV) to correct the variances. Furthermore, DLA is 

unable to provide detailed listings for budgetary accounts that reconcile to the general ledger. 

The combination of these deficiencies in aggregate results in a material weakness in internal 

control related to financial reporting. The matters identified related to financial reporting are 

further described in Appendix A.

VI. Oversight and Monitoring – Oversight and monitoring relate to DLA’s lack of establishment 

and implementation of a sufficient enterprise-wide control environment as required by OMB 

Circular A-123, Management’s Responsibility for Enterprise Risk Management Internal 

Control. DLA does not have an effective OMB Circular A-123 program, which impacted 

DLA’s ability to appropriately identify and address significant risks for all key business 

processes. DLA has not implemented appropriate internal controls, including the 

documentation of policies and procedures that describe DLA’s environment related to endto-end business processes, monitoring of service providers, sub allottees, related parties, 

systems, risks, controls and remediation of audit findings. In addition, DLA does not perform 

proper review of data/reports used in the execution of key controls. The combination of these

deficiencies in aggregate resultsin a material weaknessin internal control related to oversight 

A member firm of Ernst & Young Global Limited
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 60

Financial Section (Unaudited) | SECTION 2

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. 

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. Environmental Liabilities (EL) – ELs are comprised of cleanup costs associated with the 

restoration of sites on real property that DLA manages. DLA lacks adequate policies, 

procedures and controls to validate its estimation methodology. The matters identified related 

to EL are further described in Appendix B.

II. Accounting for Long-Term Production Contracts – A long-term production contract is an 

agreement between two or more parties to produce goods, which is expected to be performed 

over a period of more than 12 months. The progress payment clause of the Federal 

Acquisition Regulation (FAR) allows the government to make payments to the contractor as 

work is performed. DLA lacks adequate policies, procedures and controls to record progress 

payments in accordance with U.S. GAAP. The matters identified related to accounting for 

long-term production contracts 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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Financial Section (Unaudited) | SECTION 2

Appendix A – Material Weaknesses

I. Property, Plant and Equipment

Property, Plant and Equipment (PP&E) is comprised of internal use software (IUS) and 

construction-in-progress (CIP). In accordance with FMFIA, management is responsible for 

establishing and maintaining effective controls to achieve proper accountability for property and 

other assets for which the agency is responsible. However, DLA was not able to support the 

existence, completeness, rights and obligations, or valuation of its PP&E. 

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

Controls. PP&E process documentation, policy memoranda and standard operating 

procedures fail to document the end-to-end processing of PP&E transactions and related 

internal control activities. Specifically, a complete inventory of IUS and a reconciliation of 

CIP has not been performed. DLA is in the process of establishing or revising its policies and 

procedures for performing the inventories and reconciliations on an ongoing basis and 

transferring of CIP and IUS assets upon completion. 

B. Lack of or Inadequate Documentation to Substantiate PP&E and PP&E-Related 

Transactions. DLA was unable to provide documentation that PP&E balances exist, that 

transactions occurred or that DLA has rights to the PP&E recorded in the financial statements. 

Specifically, documentation was not available to support:

• IUS. The existence and rights of completed IUS assets recorded on the financial statements. 

• CIP. The existence and completeness of CIP assets. 

C. Lack of or Inadequate Policies, Procedures and Controls Over PP&E Processes. DLA 

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

the following:

• Inadequately Designed Controls Over PP&E Processes. Controls that have been 

implemented are not designed adequately. For example, the information used in the control 

activity is not assessed for completeness and accuracy. In addition, sufficient 

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

result, DLA is unable to demonstrate that the control is operating effectively. 

• CIP. Controls that have been designed to reconcile transactional data from construction 

agents to CIP balances on the financial statements were not executed.

• IUS. DLA policy states that IUS assets are recorded as in-service PP&E upon the 

completion of the asset. However, IUS activity is not evaluated to determine whether the 

activity should be capitalized or expensed and to identify when assets are completed and 

should be placed in service. 

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

Standards. DLA does not have policies, procedures and controls to effectively implement 

accounting standards, causing inaccurate presentation of PP&E on the balance sheet and in the 

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

accounting and valuation methodologies set forth by Statement of Federal Financial 

Accounting Standards (SFFAS) No. 5, Accounting for Liabilities of the Government; SFFAS 
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No. 6, Accounting for Property, Plant and Equipment; SFFAS No. 10, Accounting for Internal 

Use Software; and SFFAS No. 50, Establishing Opening Balances for Property, Plant and 

Equipment. For example:

• DLA is unable to support the values assigned to IUS in accordance with SFFAS No.10. 

• DLA has not established a policy to account for its leasing arrangements, nor assessed 

whether the leasing arrangements should be accounted for as a capital or an operating lease. 

As a result, the financial statements do not include disclosures for DLA’s policy to account 

for lease arrangements, any operating lease commitments and future minimum payments 

due. 

Recommendations

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

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

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

the end-to-end processes and controls for PP&E, including the transfer of CIP assets to the 

military services when they are placed into service. Complete the inventory of IUS and CIP to 

verify the existence and completeness of the accounting records. 

B. Lack of or Inadequate Documentation to Substantiate PP&E and PP&E-related 

Transactions.

• IUS. Develop documentation to substantiate that all of DLA’s IUS assets exist and that 

DLA has the rights to the assets. 

• CIP. Develop documentation to substantiate that all of DLA’s CIP assets exist and are 

recorded completely and accurately. 

C. Lack of or Inadequate Policies, Procedures and Controls Over PP&E Processes.

• Inadequately Designed Controls Over PP&E Processes. Design and implement internal 

control activities that include criteria, analyses, reviews and supporting thresholds used in 

the execution of all relevant internal controls. Specifically, evidential matter should be 

available to demonstrate that the control activity was performed; the scope of the review 

should be sufficient to identify and correct errors in the procedures performed; and the 

assessment of any variances should be performed appropriately. 

• CIP. Execute internal controls to ensure DLA has appropriate oversight, review and 

monitoring of CIP assets and related balances recorded on the financial statements. 

• 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 control to implement the appropriate accounting 

standards, specifically SFFAS No. 5, SFFAS No. 6, SFFAS No. 10 and SFFAS No. 50. The 

policies, procedures and controls should include:

• Assessing whether the values assigned to IUS assets are in accordance with SFFAS No. 

10. In addition, evaluate alternative valuation methodologies available under SFFAS No. 
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Financial Section (Unaudited) | SECTION 2

50. SFFAS No. 50 permits the exclusion of IUS and IUS under development from the 

opening balance as of the opening balance date. 

• Establishing an accounting policy to identify and account for leasing arrangements, 

including whether the leases should be accounted for and reported as capital or operating 

leases in accordance with SFFAS No. 5 and SFFAS No. 6. In addition, include the required 

disclosures for capital and operating leases in the financial statements in accordance with 

OMB Circular A-136.

II. Fund Balance with Treasury 

Fund Balance with Treasury (FBwT) represents the aggregate amount of funds in DLA’s account 

with U.S. Treasury. Treasury’s Financial Manual (TFM) Chapter 5100, Sections 5125 and 5130 

requires agencies to implement effective and efficient reconciliation processes and perform timely 

reconciliations. However, deficiencies exist related to DLA’s processes of recording and 

reconciling transactions involving FBwT. 

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

Controls. DLA has not documented the end-to-end process to account for, monitor and report 

FBwT and FBwT-related transactions.

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

resolve the amounts recorded in suspense accounts.

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

correct and review undistributed transactions identified in the Department 97 Report 

Reconciliation Tool (DRRT) report in a timely manner.

• 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. Lack of Controls for the Reconciliation of FBwT Between the General Ledger and the 

U.S. Treasury. DLA, in conjunction with DFAS, has implemented the CMR and DRRT 

processes as mechanisms to attempt to tie the general ledger to U.S. Treasury. However, the 

CMR and DRRT processes are not sufficient to produce a complete and accurate reconciliation 

of DLA’s general ledger to U.S. Treasury. As a result, DLA is unable to accurately reconcile 

to U.S. Treasury.

C. 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. 
65 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

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Recommendations

Consider the following corrective actions related to the conditions described above:

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

Controls. Finalize the documentation of the end-to-end process for FBwT. The documentation 

should include the process to perform regular and recurring reconciliations of the suspense 

account data and the process to research and resolve differences between U.S. Treasury, 

disbursing system records and accounting system records within a timely basis.

B. Lack of Controls for the Reconciliation of FBwT Between the General Ledger and the 

U.S. Treasury. In coordination with DFAS, obtain a system and organization controls (SOC) 

report for the CMR and DRRT and reconcile the transactions recorded in the general ledger to 

the transactions sent to the U.S. Treasury systems in order to verify that the data was processed 

correctly. 

C. 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 

provides services to the public or other federal entities. Unfilled Customer Orders (UCOs) 

represent the amount of goods and/or services to be furnished to other federal government entities 

and for the public. AR, revenue and UCOs 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 and budgetary transactions applicable to 

the agency’s operations are properly recorded and accounted for to permit the preparation of 

reliable financial reports and maintain accountability of assets. DLA has a significant volume of 

intra-governmental transactions in the order-to-cash process, which represent reimbursable 

agreements to provide services to its ultimate consumers. The volume of these transactions makes 

it critical for DLA to properly record and reconcile these transactions to ensure timely, appropriate 

recognition of costs to the end users. However, DLA is unable to support the existence of accounts 

receivable and unfilled customer orders and the occurrence of revenue and related budgetary

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 

UCOs. 

• 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. 
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Financial Section (Unaudited) | SECTION 2

B. Lack of or Inadequate Documentation to Substantiate UCOs, AR and Revenue 

Transactions. DLA was unable to provide documentation that UCO and AR balances exist

and are accurate, revenue and corresponding budgetary balances occurred and that transactions 

were recorded in the proper period. Specifically, documentation was not available to support:

• UCOs. The balance of UCO transactions is complete and accurate and reconciles to the 

general ledger. As a result, two out of seven samples tested were not appropriately 

supported. 

• Revenue. Revenue transactions occurred, were matched with related expenses and were

recorded accurately and in the proper period. As a result, five out of eleven samples tested 

were not appropriately supported. 

• AR. Receivable balances are valid and have not been collected (i.e., existence and 

completeness).

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

Standards. DLA does not have policies, procedures and controls to effectively implement 

accounting standards, causing inaccurate presentation of revenue on the statement of net cost 

and in the related footnote disclosure. Specifically, DLA does not assess the proper revenue 

recognition for services produced to order in accordance with SFFAS No. 7, Accounting for 

Revenue and Other Financing Sources and Concepts for Reconciling Budgetary and Financial 

Accounting. 

Recommendations

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

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

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

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

review the aged UCO balances for validity. 

B. Lack of or Inadequate Documentation to Substantiate UCOs, AR and Revenue 

Transactions. Develop documentation, including detailed listings of account balances, to 

substantiate that the balance of UCO, AR (federal and with the public), revenue and 

corresponding budgetary transactions are complete, accurate, and recorded and matched with 

related expenses in the proper period, and that the balances exist or have occurred. The listing 

should be reconciled to the general ledger. 

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

Standards. Design policies, procedures and control to implement the appropriate accounting 

standards, specifically SFFAS No. 7. The policies, procedures and controls should include 

assessing the method used to recognize revenue for specific services produced to order. 

Specifically, DLA should assess whether the percentage-of-completion method should be 

used, as prescribed by SFFAS No. 7. 
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IV. Accounts Payable and Expenses

Accounts payable (AP) consists of amounts owed to vendors. Expenses are incurred and 

recognized when DLA obtains goods and services from the public or other federal entities. 

Undelivered Orders (UDOs) represent the amount of goods and/or services ordered which have 

not been received. AP, expenses and UDOs fall within the scope of DLA’s procure-to-pay process. 

In accordance with FMFIA, management is responsible for establishing and maintaining internal 

controls that provide reasonable assurance that expenses and budgetary transactions applicable to 

the agency’s operations are properly recorded and accounted for to permit the preparation of 

reliable financial reports. Because of the nature of the operations, DLA has a significant volume 

of transactions to procure goods and services. Deficiencies exist in DLA’s processes for recording 

and supporting the accounts payable and accruals, expenses and related budgetary balances; 

recording obligations and accounts payable in the proper period; documenting policies, procedures 

and controls; and designing and executing controls over the processes to create and approve 

obligations and to review, record and pay invoices. 

A. Lack of or Inadequate Documentation of UDO, AP, Unliquidated Obligation (ULO) and 

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

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

significantly aged UDO and UDO funded by expired and cancelling authority.

• AP. The documentation does not include the process to evaluate the validity of AP, 

including significantly aged AP, negative payables and AP from canceled appropriations; 

the process to record invoices in the general ledger and submit to DFAS for payment 

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

in accordance with the Prompt Payment Act. 

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

significantly aged ULO.

B. Lack of or Inadequate Controls over UDO, AP, Expenses and Cash Disbursement 

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

following:

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

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

to review and close invalid UDO in a timely manner. For example, one of our six samples 

lacked evidence to support that UDOs were reviewed after 90 days of inactivity.

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

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

Indefinite Quantity Contracts (IQC). For example, IQCs awarded did not have an 
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Financial Section (Unaudited) | SECTION 2

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

minimum at the contract award date.

• AP and Cash Disbursements. DLA lacks controls to post goods receipts and the related 

AP in a timely manner; review invoices prior to payment and review payments that fail to 

post systematically in a timely manner. 

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

transactions appropriately and accurately in the period that the transactions occurred. 

• Transactions Recorded at the Detailed Level. DLA lacks controls to comply with the 

Federal Financial Management Improvement Act (FFMIA), which requires transactions to 

be recorded at the detailed transaction level. DLA recorded transactions at a summary level 

for certain budgetary and proprietary accounts. As a result, each summary-level record 

contained multiple individual transactions. A reconciliation is not performed between 

detailed transactions posted to the proprietary accounts and the summarized postings to the 

corresponding budgetary accounts. 

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

DLA was unable to provide documentation to support the existence of accounts payable 

balances, or expense transactions that occurred are accurately recorded in the financial 

statements. Specifically, documentation was not available to support the transactions and 

balances for various accounts, such as accounts payable, accounts payable from canceled 

appropriations, negative payables, expenses, UDO (paid and unpaid), and upward and 

downward adjustments to delivered and undelivered orders. For example, DLA was unable to 

support three samples of eight to test the upward and downward adjustments.

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

Standards. DLA does not have policies, procedures and controls to effectively implement 

accounting standards. Specifically, DLA has not implemented or applied the accounting set 

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

Accounting Standards and Concepts and No. 5, Accounting for Liabilities of the Federal 

Government. For example:

• DLA processes allow for payment without receipt, thus resulting in a negative payable 

balance. This occurs when payment is made prior to the goods receipts being posted in the 

general ledger, and it results in an understatement of expenses and payables and a 

misstatement of UDO. The quarterly adjustment to offset the negative payable balances 

recorded results in an overstatement of Accounts Payable.

• Accounts payable and accrued liabilities are not recorded appropriately. For example, DLA 

applied the straight-line method to calculate the accrual amount but did not perform any 

assessment to determine whether this is an appropriate methodology. Particularly, for 

agreements that do not have a fixed monthly cost, the straight-line method is not 

appropriate. 
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Recommendations

Consider the following corrective actions related to the conditions described above:

A. Lack of or Inadequate Documentation of UDO, AP, ULO and Expenses Accounting 

Policies, Procedures and Controls. Update and finalize the PCMs that document the end-toend processes for UDO, AP, ULO and expenses. 

• UDO. The documentation should include the processes to review the validity of 

significantly aged UDO and UDOs funded by expired and cancelling authority and include

a process to write off residual UDO for completed transactions. 

• AP. The documentation should include the process to evaluate the validity of accounts 

payable, including significantly aged AP, negative payables and AP from canceled 

appropriations; the process to record invoices in the general ledger and submit to DFAS 

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

late payment in accordance with the Prompt Payment Act. 

• ULO. The documentation should include the process to review the validity of significantly 

aged ULO, including the process to write off residual ULO for completed transactions. 

B. Lack of or Inadequate Controls over UDO, AP, Expenses and Cash Disbursement 

Process

• UDO. Design and implement controls to approve and record obligations in a timely 

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

timely; and controls to review and close invalid UDOs in a timely manner. 

• Vendor Contracts. Design and implement controls to execute contracts in accordance 

with the FAR and record obligations timely for contracts, including IQCs. For example, 

controls that prevent contracts from being completed and executed without the appropriate 

terms and conditions required by the FAR.

• AP and Cash Disbursements. Design and implement controls to post goods receipts and 

the related AP in a timely manner; review invoices prior to payment; and review payments, 

including payments that fail to post systematically, and ensure that they are posted in a 

timely manner. 

• Expenses Recorded in the Appropriate Period. Design and implement controls to record 

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

occurred, and controls to monitor expense transactions at or near period-end. 

• Transactions Recorded at the Detailed Level. Design and implement controls to comply 

with the FFMIA and reconcile the transaction-level detail to the summarized postings in 

each account. 

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

Develop documentation to support that AP and corresponding budgetary balances exist, or that 

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

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

Standards. Design and implement policies and procedures to record expenses incurred in the 

proper period and classify costs and payables in accordance with SFFAS No. 1, No. 4 and 

No. 5. 
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Financial Section (Unaudited) | SECTION 2

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. This process starts 

with establishing an effective governance structure to identify and assess risk and continues with 

developing a control environment that is effective and efficient to manage identified risks. In 

accordance with FMFIA, management is responsible for establishing and maintaining internal 

controls to achieve reliable financial reporting. However, deficiencies exist in DLA’s processes 

related to the accumulation and presentation of financial position and results of operations. 

A. Lack of or Inadequate Documentation of Financial Reporting and Budgetary Policies, 

Procedures, and Controls. DLA has not completely 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 which impact opening balances. 

• 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 does it have 

controls to link business events to the correct posting logic. As a result, transactions are not 

recorded appropriately. For example, DLA inappropriately uses a general ledger account 

(negative payables) to track payments made without goods received and inappropriately 

combines entries to record the movement of budgetary funds through the apportionment and 

allotment process, which should be recorded separately. Additionally, DLA did not implement 

the TFM update to add USSGL accounts 310710 – Unexpended Appropriations – Used –

Disbursed and 570010 – Expended Appropriations – Disbursed. 

C. Lack of or Inadequate Controls Over Financial Reporting Processes. DLA lacks or has 

inadequate controls, including the design of controls, over the following:

• Beginning Balances for Budgetary Accounts. DLA does not have controls to verify the 

accuracy of the beginning balances for budgetary accounts, such as Total Actual Resources 

Collected. As a result, DLA is unable to substantiate beginning balances recorded on the 

financial statements. 

• Trading Partner Transactions. DLA does not have controls in place to validate and 

reconcile trading partner eliminations. Adjustments made to accounts receivable, accounts 

payable, revenue, expenses and undisbursed funds are not appropriately supported. A 

complete reconciliation is not performed at the agreement level to the trading partner 

adjustments that are being made. As a result, trading partner adjustments are recorded in 

the Defense Departmental Reporting System (DDRS) as “top-side” adjustments and are 

identified as “unsupported” by DFAS.

• Contingent Liabilities. DLA does not have adequate controls to identify and account for 

contingent legal liabilities that should be recorded or disclosed in the financial statements. 

• Financial Statement Close Process. DLA does not have adequately designed controls 

around the annual close and reconciliation processes, such as the following: the monthly 
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or quarterly reconciliation between the unadjusted trial balance (UTB) and the adjusted 

trial balance (ATB), including sub allottee balances, is not performed sufficiently and 

timely; the information used in the reconciliation of UTB to ATB is not complete and 

accurate; and the review of the procedures performed during the financial statement close 

process is not adequate. 

• Budgetary to Proprietary Tie Points. DLA does not have adequately designed controls 

around the tie-point process. There are reconciliation issues between the budgetary and 

proprietary tie points. As a result, DFAS records unsupported monthly and quarterly JV in 

the general ledger and DDRS to reconcile DLA’s budgetary accounts to the proprietary 

accounts.

• Monthly or Quarterly JV Adjustments. DLA does not have controls to review and 

approve JV adjustments recorded in the general ledger and DDRS by DLA and DFAS for 

completeness, accuracy and validity. As a result, a comprehensive listing of adjustments 

made is not maintained to allow DLA to determine the appropriateness of each JV 

adjustment, including those recorded by their service provider. 

• Financial Statement Review Process. The level of review of the financial statements and 

footnote disclosures was insufficient to detect and correct misstatements in the financial 

statements and related disclosures. As a result, inaccurate balances and disclosures were 

reported in the financial statements and notes. For example, line items are not appropriately 

classified between federal and with the public; supporting documentation did not support 

the balances recorded in the notes; and the financial statements are not prepared in 

conformity with U.S. GAAP as described in Note 1, Significant Accounting Policies, 

which did not sufficiently describe changes or noncompliance in U.S. GAAP reporting. In 

addition, DLA has not designed processes or controls to implement new accounting 

standards. As a result, DLA has not implemented accounting standards such as SFFAS No. 

47 Reporting Entity and SFFAS No. 49 Public-Private Partnerships: Disclosure 

Requirements.

• Transactions Recorded Using Elevated Privileges. DLA does not have adequately 

designed controls to review and approve transactions recorded with elevated access 

privileges. 

• Receipt of Budgetary Funding. DLA does not have adequate controls to identify 

variances in the reconciliation of budgetary funding, including the reconciliation to the 

public law. 

• Proper Classification of Costs Incurred. DLA does not have adequately designed 

controls to assess whether costs incurred to develop software are properly classified. For 

example, in FY 2022, DLA was unable to demonstrate that costs incurred for software

development recorded as EL are appropriately classified. 

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.
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Financial Section (Unaudited) | SECTION 2

Recommendations

Consider the following corrective actions related to the conditions described above:

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 to reconcile 

prior year activity to opening balances. 

• 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 USSGL. Design and implement controls 

to configure posting logic to be compliant with the USSGL; apply TFM updates in a timely 

manner; link business events to the correct posting logic; and post transactions as intended. 

C. Lack of or Inadequate Controls Over Financial Reporting Processes.

• Beginning Balances for Budgetary Accounts. Design and implement control activities to 

accurately state the beginning balance for carryforward budgetary accounts.

• Trading Partner Transactions. Design and implement controls to perform a 

reconciliation at the agreement level to validate trading partner eliminations, which 

includes identifying, researching and resolving variances between DLA general ledger data 

and trading partners.

• Contingent Liabilities. Design and implement controls related to claims and litigation to 

identify, estimate, record and disclose contingent liabilities in the financial statements.

• Financial Statement Close Process. Develop and implement controls around the annual 

close and reconciliation process, which includes a complete, accurate and timely 

reconciliation of the UTB to the ATB, including sub allottee balances.

• 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; and to design processes and controls to analyze 

the impact of and implement new accounting standards, as appropriate. 

• Transactions Recorded Using Elevated Privileges. Design and implement controls to 

review and approve transactions recorded with elevated access privileges to assess for 

completeness, accuracy and validity. The review and approval should be performed by 

authorized individuals, such as financial management.

• Receipt of Budgetary Funding. Design and implement controls to perform an adequate 

reconciliation of the amounts recorded in the general ledger to the Consolidated 

Appropriations Act and the final report on budget execution and budgetary resources. 
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• Proper Classification of Costs Incurred. Design and implement controls to assess the 

costs incurred related to software development are properly classified. 

D. Lack of or Inadequate Documentation to Substantiate Budgetary Execution. Develop and 

implement procedures to generate complete and accurate listings of budgetary accounts at the 

purchase order and sales order level that reconcile to the general ledger. 

VI. Oversight and Monitoring

Oversight and monitoring relate to DLA’s lack of establishment and implementation of a sufficient 

enterprise-wide control environment as required by OMB Circular A-123, Management’s 

Responsibility for Enterprise Risk Management Internal Control. 

A. Lack of or Inadequate Documentation Around the OMB A-123 Program. DLA has not 

documented the end-to-end process to oversee and monitor the enterprise-level risks and 

controls, including the OMB A-123 program. Specifically, DLA has not performed and 

documented a sufficient risk assessment at the enterprise and business process level to assess 

and document reporting matters, such as the complexity of programs, accounting estimates, 

related-party transactions and the extent of manual processes; a complete and accurate 

population of its assessable units, business processes and relevant controls that are responsive 

to and mitigate risks, including fraud risks; and an assessment and plan for timely remediation 

of audit findings. 

B. Lack of or Inadequate Controls Around System-Generated Reports. DLA lacks or has 

inadequate controls to verify the accuracy and completeness of system-generated reports 

required in the execution of controls. 

C. Insufficient Oversight and Monitoring of Third-Party Service Providers. Service 

organizations undergo examinations of internal controls over systems and processes supporting 

their customers. The results of these examinations are documented in SOC 1 reports and 

include the independent service auditor’s report, the service organization’s management 

assertions and identified Complementary User Entity Controls (CUECs) that users of the 

service organization (e.g., DLA and its sub allottees) should have in place to supplement the 

service organization’s internal controls. DLA does not perform sufficient oversight and 

monitoring of SOC 1 reports and does not sufficiently design, implement or monitor CUECs 

over its service providers. 

D. Insufficient Oversight and Monitoring of Funding and Transactions Executed by Others. 

Review controls are not designed effectively to monitor funding and report transactions 

executed by suballotees. Specifically, DLA does not perform a sufficient review of transactions 

that are recorded on their financial statements to prevent or detect misstatements. For example, 

the execution of funding awarded to grantees for the Procurement Technical Assistance Center 

(PTAC) program is not adequately monitored and inventory procured by Defense 

Microelectronic Activity (DMEA) with funding sub allotted from DLA is not properly 

reported. 
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Financial Section (Unaudited) | SECTION 2

Recommendations

Consider the following corrective actions related to the conditions described above:

A. Lack of or Inadequate Documentation Around the OMB A-123 Program. Document the 

end-to-end process to oversee and monitor the enterprise-level risks and controls, including the 

OMB A-123 program. Perform and document a sufficient risk assessment at the enterprise and 

business process level to assess and document reporting matters. Document a complete and 

accurate population of its assessable units and business processes. Identify and assess the risks 

in each business process and design and implement relevant controls that are responsive to and 

mitigate these risks, including fraud risks. Perform an assessment of audit findings and 

establish and execute the plan to remediate the audit findings timely. 

B. Lack of or Inadequate Controls Around System-Generated Reports. Design and 

implement controls to verify the accuracy and completeness around system-generated reports 

used in the execution of controls. For example, the procedures should include footing system 

generated reports; performing a tie-out of system generated reports to the general ledger 

system; verifying that the parameters used to generate the reports or data are appropriate; 

selecting a sample of transactions or balances in the report; and validating that the transactions 

are accurate. 

C. Insufficient Oversight and Monitoring of Third-Party Service Providers. Design and 

implement controls around the SOC 1 review process and validate that CUECs are properly 

identified, designed and operating effectively. 

D. Insufficient Oversight and Monitoring of Funding and Transactions Executed by Others. 

Design and implement internal controls to review transactions executed by others, but recorded 

in DLA’s financial statements, are complete and accurate, and are supported by appropriate 

documentation. 

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. 
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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 

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 one financially significant application, 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 
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Financial Section (Unaudited) | SECTION 2

configurations and monitoring changes to these configurations. Weaknesses in such controls can 

compromise the integrity of sensitive data and increase the risk that such data may be 

inappropriately used and disclosed.

The identified configuration management and change control weaknesses in aggregate represent a 

significant risk to the DLA financial statements, IT environment, and financial applications. 

Absent or ineffective controls expose financial systems and financial data to unexpected impact 

from changes, inappropriate or unauthorized changes, and application errors in production. 

The identified change control weaknesses that represent a significant risk to the DLA financial 

management information systems environment include the following:

• For a selection of changes to one financially significant application, both routine and 

emergency changes are not reviewed, approved, and tested in a non-production environment 

prior to release. The impact and functionality of configuration changes are not assessed prior 

to implementation. 

• For two 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. 
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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. 

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.

• 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. 
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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. 

• 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. 
79 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

SECTION 2 | Financial Section (Unaudited)

Appendix B – Significant Deficiencies

I. Environmental Liabilities 

ELs are comprised of cleanup costs associated with the restoration of sites that DLA manages. In 

accordance with FMFIA, management is responsible for establishing and maintaining internal 

controls to achieve reliable financial reporting. However, we identified the following deficiency 

in internal controls, which, when aggregated, we consider to be a significant deficiency. 

A. Inadequate Controls Over Estimation Processes. DLA does not have adequately designed 

controls around their analysis to retrospectively review the estimate, which includes comparing 

actual costs to estimates to validate the estimation methodology. 

Recommendations

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

A. Inadequate Controls Over Estimation Processes. Design and implement adequate controls 

to compare actual costs to estimates to see if any changes to the estimation methodology are 

necessary. 

II. Accounting for Long-Term Production Contracts

Long-term production contracts consist of agreements between DLA and outside vendors to 

procure goods or services. In accordance with FMFIA, management is responsible for establishing 

and maintaining internal controls that provide reasonable assurance that significant classes of 

transactions, such as long-term production contracts, are properly recorded and accounted for to 

permit the preparation of reliable financial statements. However, we identified the following 

deficiency in internal controls, which we consider to be a significant deficiency.

A. Inadequate Controls Over Long-Term Production Contract. DLA does not have adequate 

controls to review payments made under long-term production contracts and assess the 

underlying business event to determine the proper accounting. As a result, transactions are not

recorded in accordance with U.S. GAAP. For example, DLA misclassified an advance 

payment totaling $6.2 million as inventory work-in-process and did not record $12.1 million

of finished goods inventory related to the procurement of goods for resale.

Recommendations

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

A. Inadequate Controls Over Long-Term Production Contracts. Design and implement 

controls to review the payments made under long-term production contracts and assess the 

underlying business event to determine that the accounting for these transactions is in 

accordance with U.S. GAAP. 
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 80

Financial Section (Unaudited) | SECTION 2

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 General 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 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.

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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81 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

SECTION 2 | Financial Section (Unaudited)

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

EY also identified noncompliance with USSGL posting logic during our testing, which was

included in our Report on Internal Control Over Financial Reporting.

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Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 82

Financial Section (Unaudited) | SECTION 2

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 

Standards in considering the entity’s compliance. Accordingly, this communication is not suitable 

for any other purpose.

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83 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

SECTION 2 | Financial Section (Unaudited)

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



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Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 84

Financial Section (Unaudited) | SECTION 2

MANAGEMENT’S RESPONSE TO AUDIT REPORTS
85 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

SECTION 2 | Financial Section (Unaudited)

The principal financial statements and the accompanying notes 

(financial statements) included in this report are prepared 

pursuant to the requirements of the CFO Act of 1990 (Pub. L. 

101-576) and expanded by GMRA (Pub. L. 103-356) and other 

applicable legislation. Other reporting requirements include the 

OMB Circular A-136, as amended. The responsibility for the 

integrity of the financial information included in these financial

 statements rests with the management of DLA GF. The IPA was 

engaged to perform the audit of DLA GF’s financial statements 

and disclaimed an opinion on these financial statements. The 

Audit Reports, and Management’s Response to the Audit 

Reports, accompany the unaudited financial statements.

INTRODUCTION TO THE PRINCIPAL FINANCIAL STATEMENTS

Daisy Award

Navy Medicine Readiness 

and Training Command 

San Diego’s Intensive Care 

Unit staff and command 

leadership pose for a photo 

during a DAISY Award 

for Extraordinary Nurses 

ceremony at a hospital in San 

Diego, April 13, 2022. Photo 

by: Navy Petty Officer 3rd 

Class Mariterese Merrique

The Balance Sheets present those resources owned 

or managed by DLA GF that represent future economic 

benefits (assets), amounts owed by DLA GF that will require payments from those resources or future resources 

(liabilities), and residual amounts retained by DLA GF 

comprising the difference (net position) as of September 

30, 2022 and 2021.

The Statements of Net Cost present the net cost of 

DLA GF operations for the years ended September 30, 

2022 and 2021. DLA GF’s net cost of operations is the 

gross cost incurred by DLA GF activities, less any exchange revenue earned and inter-entity eliminations 

from DLA GF activities.

The DLA GF financial statements consist of the following:

The Statements of Changes in Net Position present the change in DLA GF’s net position resulting from 

the net cost of DLA GF’s operations, budgetary financing 

sources, and other financing sources for the years ended 

September 30, 2022 and 2021.

The Statements of Budgetary Resources present 

how and in what amounts budgetary resources were made 

available to DLA GF, the status of these resources, and 

the net outlays of budgetary resources for the years ended 

September 30, 2022 and 2021.

The Notes to the Principal Financial Statements

provide detail and clarification for amounts in the principal financial statements.
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 86

Financial Section (Unaudited) | SECTION 2

Unaudited

FY 2022

Unaudited 

FY 2021

 As Restated

ASSETS 

Intragovernmental

Fund Balance with Treasury (Note 2) $ 2,406,663 $ 1,927,978 

Accounts Receivable, Net (Note 3) 13,779 13,554 

Total Intragovernmental Assets 2,420,442 1,941,532 

Other than Intragovernmental

Accounts Receivable (Note 3) 15 20 

Inventory and Related Property, Net (Note 4) 29,486 17,434 

General Property, Plant and Equipment (Note 5) 442,378 604,790 

Advances and Prepayments 7,741 -

Other Assets 88 88 

Total Other than Intragovernmental Assets 479,708 622,332 

TOTAL ASSETS $ 2,900,150 $ 2,563,864 

LIABILITIES (Note 6)

Intragovernmental

Accounts Payable $ 21,418 $ 33,540 

Other Liabilities

Other Current Liabilities - Benefit Program Contributions Payable (Note 7) 1,306 2,214 

Other Liabilities (Note 9) - 4,214 

Total Intragovernmental Other Liabilities 1,306 6,428 

Total Intragovernmental Liabilities 22,724 39,968 

Other than Intragovernmental

Accounts Payable 56,668 15,384 

Environmental and Disposal Liabilities (Note 8) 83,777 90,547 

Federal Employee Benefits Payable (Note 7) 8,041 9,017 

Advances from Others and Deferred Revenue 24 877 

Other Liabilities (Note 9) 3,102 3,733 

Total Other than Intragovernmental Liabilities 151,612 119,558 

TOTAL LIABILITIES 174,336 159,526 

Commitments and Contingencies

NET POSITION

Unexpended Appropriations - Funds from Other than Dedicated Collections 2,344,480 1,883,232

Cumulative Results of Operations - Funds from Other than Dedicated Collections 381,334 521,106

TOTAL NET POSITION 2,725,814 2,404,338 

TOTAL LIABILITIES AND NET POSITION $ 2,900,150 $ 2,563,864 

The accompanying notes are an integral part of these statements. 

Balance Sheets

As of September 30, 2022 and 2021 (dollars in thousands)
87 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

SECTION 2 | Financial Section (Unaudited)

Unaudited

FY 2022

Unaudited 

FY 2021 

Operation and Maintenance

Gross Cost $ 425,837 $ 475,734 

Less: Earned Revenue (29,470) (23,453)

Net Cost 396,367 452,281 

Procurement Defense-Wide

Gross Cost 9,902 2,263 

Less: Earned Revenue - - 

Net Cost 9,902 2,263 

Research, Development, Test & Evaluation

Gross Cost 339,043 373,452 

Less: Earned Revenue (49,328) (51,441)

Net Cost 289,715 322,011 

Family Housing and Military Construction

Gross Cost 18,200 10,273 

Less: Earned Revenue - - 

Net Cost 18,200 10,273 

Gross Cost 792,982 861,722 

Less: Earned Revenue (78,798) (74,894)

NET COST OF OPERATIONS $ 714,184 $ 786,828 

The accompanying notes are an integral part of these statements. 

Statements of Net Cost

For the Years Ended September 30, 2022 and 2021 (dollars in thousands)
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 88

Financial Section (Unaudited) | SECTION 2

The accompanying notes are an integral part of these statements. 

Unaudited

FY 2022

Unaudited 

FY 2021

As Restated 

Unexpended Appropriations

Beginning Balances $ 1,883,232 $ 1,563,503 

Correction of Errors - (5,113)

Beginning Balances, as Adjusted 1,883,232 1,558,390

Appropriations Received 1,419,418 1,334,937 

Appropriations Transferred-in/out 1,779 8,561 

Other Adjustments (29,861) (45,433)

Appropriations Used (930,088) (973,223)

Change in Unexpended Appropriations 461,248 324,842 

Total Unexpended Appropriations: Ending Balance 2,344,480 1,883,232 

Cumulative Results of Operations

Beginning Balances 521,106 523,356 

Correction of Errors - 5,113

Beginning Balances, as Adjusted 521,106 528,469

Other Adjustments (447) (544)

Appropriations Used 930,088 973,223 

Transfers-in/out Without Reimbursement (358,018) (195,928)

Imputed Financing 2,789 2,714 

Net Cost of Operations 714,184 786,828 

Net Change in Cumulative Results of Operations (139,772) (7,363)

Cumulative Results of Operations: Ending Balance 381,334 521,106 

TOTAL NET POSITION $ 2,725,814 $ 2,404,338 

Statements of Changes in Net Position

For the Years Ended September 30, 2022 and 2021 (dollars in thousands)
89 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

SECTION 2 | Financial Section (Unaudited)

The accompanying notes are an integral part of these statements. 

Unaudited

FY 2022

Unaudited 

FY 2021

As Restated

BUDGETARY RESOURCES

Unobligated Balance From Prior Year Budget Authority, Net $ 611,700 $ 618,105 

Appropriations 1,425,260 1,343,188 

Spending Authority From Offsetting Collections 61,934 105,115 

TOTAL BUDGETARY RESOURCES $ 2,098,894 $ 2,066,408 

STATUS OF BUDGETARY RESOURCES

Total New Obligations and Upward Adjustments $ 1,488,374 $ 1,450,417 

Unobligated Balance, End of Year:

Apportioned, Unexpired Accounts 567,259 548,000 

Unexpired Unobligated Balance, End of Year 567,259 548,000 

Expired Unobligated Balance, End of Year 43,261 67,991 

Total Unobligated Balance, End of Year 610,520 615,991 

TOTAL BUDGETARY RESOURCES $ 2,098,894 $ 2,066,408 

OUTLAYS, NET

Outlays, Net $ 912,204 $ 970,299 

AGENCY OUTLAYS, NET $ 912,204 $ 970,299 

Combined Statements of Budgetary Resources

For the Years Ended September 30, 2022 and 2021 (dollars in thousands)
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 90

Financial Section (Unaudited) | SECTION 2

A. Reporting Entity

Created in 1961, DLA is a component of the U.S. DoD and 

reports to the Office of the Under Secretary of Defense for Acquisition and Sustainment through the Assistant Secretary of 

Defense for Sustainment. DLA provides materials and services 

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

Air Force, 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 GF.

Congress annually appropriates DLA GF amounts to DLA, 

which also grants authority to the OUSD and its Components 

to obligate those funds to support mission requirements. In 

FY 2022 and FY 2021, DLA GF received four appropriations, 

which include O&M; RDT&E; PDW; and MILCON.

B. Basis of Presentation and Accounting

Basis of Presentation and Accounting: The DLA 

GF fiscal year ends September 30. The accompanying financial 

statements account for all resources for which DLA GF is responsible. These financial statements present the financial 

position, results of operations, changes in net position, and the 

combined budgetary resources of DLA GF, as required by the 

CFO Act of 1990, expanded by the GMRA of 1994, and other 

applicable legislation. The financial statements are prepared 

from the books and records of DLA GF activities in accordance 

with U.S. GAAP promulgated by the 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 GF financial statements reflect both accrual and 

budgetary accounting transactions, except as identified in 

Note 1.C., Departures from U.S. GAAP. Under the accrual 

method of accounting, revenues are recognized when earned 

and expenses are recognized when incurred, without regard 

to the receipt or payment of cash. Budgetary accounting is 

based on concepts set forth by OMB Circular A-11, Preparation, Submission, and Execution of the Budget, as amended 

which provides instructions on budget execution. Budgetary 

accounting is designed to recognize the budgetary resources 

and the related status of those budgetary resources, including 

the obligation and outlay of funds according to legal requirements, which in many cases is made prior to the occurrence 

of an accrual- based transaction. Budgetary accounting is 

essential for compliance with legal constraints and controls 

over the use of Federal funds.

However, DLA GF is unable to fully prepare financial statements in conformity with and implement all elements of U.S. 

GAAP (refer to Note 1.C., Departures from U.S. GAAP), the 

form and content requirements for Federal government entities 

specified by OMB Circular A-136, due to limitations of financial 

and nonfinancial management processes and systems that 

support the financial statements. In addition, the financial management systems used by DLA GF are unable to meet all full 

accrual and budgetary accounting requirements as many of 

the financial and nonfinancial feeder systems and processes 

were not designed to collect and record financial information 

on the full accrual accounting basis as required by U.S. GAAP. 

These systems were designed to support reporting requirements for maintaining accountability over assets, reporting the 

status of Federal appropriations, and recording information on 

a budgetary basis, rather than preparing financial statements 

in accordance with U.S. GAAP.

Therefore, DLA GF is continuing the necessary actions 

required to bring its financial and nonfinancial systems and 

processes to generate financial statements and the accompanying notes in accordance with U.S. GAAP and in compliance with the reporting requirements of OMB Circular A-136. 

DLA is assessing financial feeder systems and processes and 

their conformance to existence, completeness, and accuracy 

requirements as required by U.S. GAAP and OMB Circular 

A-136. As DLA GF identifies non-conforming data issues, the 

Agency will continue to implement interim mitigation processes 

to address these limitations. In addition, DLA GF is remediating material weaknesses found in all end-to-end business 

process cycles pertaining to reconciliations and adequacy of 

the supporting documentation identified through audits and 

other compliance reporting.

4 FASAB is the official body for setting accounting standards of the U.S. 

government

NOTES TO THE PRINCIPAL FINANCIAL STATEMENTS (UNAUDITED)

Note 1: Summary of Significant Accounting Policies(Unaudited) 
91 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

SECTION 2 | Financial Section (Unaudited)

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) Outlays7, Net for the fiscal 

year, which is comprised of Outlays less Offsetting Receipts 

(cash transactions). DLA GF’s budgetary resources8 include 

unobligated balances of resources from prior years and new 

resources, consisting of appropriations and spending authority 

from offsetting collections.

Intragovernmental and Other than Intragovernmental Transactions: Statement of Federal 

Financial Accounting Standards (SFFAS) 1, Accounting for 

Selected Assets and Liabilities, distinguishes between Intragovernmental and Other than Intragovernmental assets and 

liabilities. Intragovernmental assets and liabilities arise from 

transactions among Federal entities. Intragovernmental assets 

are claims other Federal entities owe to DLA GF. Intragovernmental liabilities are claims DLA GF owes to other Federal 

entities. Whereas Other than Intragovernmental assets and 

liabilities arise from transactions with public entities. The term 

public entities encompass domestic and foreign persons and 

organizations outside the U.S. Government. Other than Intragovernmental assets are claims of DLA GF against public 

entities. Other than Intragovernmental liabilities are amounts 

that DLA GF owes to public entities. Currently, DLA GF is 

unable to accurately map its trading partners to separate Intragovernmental and Other than Intragovernmental transactions in accordance with Treasury Financial Manual (TFM), 

Volume I, Part 2, Central Accounting and Reporting, Chapter 

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."

Helicopter Hover

Marines fast-rope from a UH-1Y Venom helicopter onto an Army landing craft off the coast of Naval Base White Beach, 

Okinawa, Japan, Dec. 2, 2021. Photo By: Navy Petty Officer 2nd Class Jessica Ann Hattell
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 92

Financial Section (Unaudited) | SECTION 2

4700, Federal Entity Reporting Requirements for the Financial 

Report of the United States Government.

The DLA GF engages in transactions with other DoD and 

Federal entities that generate inter-DoD and intragovernmental 

balances; however, DLA GF is unable to reconcile and resolve 

differences between balances and transactions with other DoD 

and Federal entities in accordance with OMB Circular A-136 

requirements and TFM 4700 guidance. The reconciliation 

process is not fully implemented.

(Refer to Note 1.C., Departures from U.S. GAAP, related to Intragovernmental/Intra-departmental and Other than Intragovernmental Transactions.)

Intra-departmental Transactions: DoD reporting entities 

reconcile with their trading partners at the detail transaction 

level. Detail transactions provide support for reported balances 

requiring elimination with trading partners. DLA GF is ultimately responsible for the accuracy of its trading partner data and 

initiating actions to reconcile balances with its trading partners; 

however, DLA GF is unable to resolve the reconciling differences in amounts reported for the buyer/seller transactions 

reciprocal category with ODOs. A DoD reporting entity unable 

to provide detail transactions at the appropriate time of the 

financial statement reporting cycle must adjust its balance to 

match the seller’s or buyer’s supportable data (refer to Note 

1.C., Departures from U.S. GAAP, related to Intragovernmental/Intra-departmental and Other than Intragovernmental 

Transactions).

Inter-fund Transactions: Inter-fund transactions and 

balances among DLA GF appropriations are eliminated from 

the Balance Sheets, the Statements of Net Cost, and the Statements of Changes in Net Position. The Combined Statements 

of Budgetary Resources is presented on a combined basis 

in accordance with OMB Circular A-136; therefore, inter-fund 

transactions have not been eliminated from this statement. 

DLA GF presents the Statements of Net Cost based on appropriations rather than program costs, which is not in accordance 

with OMB Circular A-136 (refer to Note 1.C., Departures from 

U.S. GAAP, related to Intragovernmental/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.

C. Departures from U.S. GAAP

Financial management systems and operations continue to 

be evaluated and modified as DLA GF strives to remediate its 

material weaknesses and record and report its financial activity 

in accordance with U.S. GAAP. Therefore, DLA GF is determining the actions required to bring its financial and nonfinancial feeder systems and processes into compliance with U.S. 

GAAP. However, due to the financial management systems 

and operational limitations, the known departures from U.S. 

GAAP described below have been identified that impact DLA 

GF financial statements although other departures from U.S. 

GAAP may exist that have not been identified.

Definition of Reporting Entity: The DLA GF has 

not completed analyzing material applicable business relationships with other organizations to identify consolidation entities, 

disclosure entities, or related parties in accordance with SFFAS 

47, Reporting Entity (effective FY 2018). As a result, DLA GF is 

unable to determine if there are consolidation entities that are 

required to be consolidated and disclosed in DLA GF financial 

statements or disclosure entities and related parties, where 

the nature and magnitude of such relationships, are required to 

be disclosed in a Disclosure Entities and Related Parties note 

to the financial statements.

Statements of Net Cost: The DLA GF does not have 

policies and compliant processes in place to present its major 

program costs aligned with DLA GF mission and goals by 

responsibility segments in accordance with SFFAS 4, Managerial Cost Accounting Concepts and Standards, and OMB 

Circular A-136.

Use of Estimates: The DLA GF management has made 

certain estimates and assumptions when reporting assets, liabilities, revenue, and expenses and disclosures in the notes. 

Uncertainties associated with these estimates exist and actual 

results may differ from these estimates; however, DLA GF’s 

estimates are based on historical experience, current events 

and other assumptions that are believed to be reasonable 

under the circumstances. Significant estimates reported in the 

financial statements include: (1) E&DL; (2) accounts payable 

accrual; (3) undelivered orders; and (4) Federal Employees’ 

Compensation Act (FECA) actuarial liability as of the date of 

these financial statements.
93 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

SECTION 2 | Financial Section (Unaudited)

Intragovernmental/Intra-departmental and 

Other than Intragovernmental Transactions 

(Note 1.B.): The DLA GF does not have compliant 

processes in place to properly report and distinguish between 

intragovernmental, intra- departmental, and Other than Intragovernmental transactions in accordance with SFFAS 1, Accounting for Selected Assets and Liabilities.

Inter-Entity Cost (Note 1.R.): The DLA GF does 

not have compliant processes in place to recognize all significant inter-entity costs related to inputs of its goods or services 

provided to entities for a fee or user charge in accordance with 

SFFAS 55, Amending Inter-Entity Cost Provisions (effective 

FY2019). Generally, the fees and user charges should recover 

the full costs of those goods and services. Thus, the cost of 

inter-entity goods or services needs to be recognized by the 

receiving entity in order to determine fees or user charges for 

goods and services sold.

Fund Balance with Treasury (Note 1.F. and 

Note 2): The DLA GF is not able to account for Fund 

Balance with Treasury in accordance with SFFAS 1, Accounting for Selected Assets and Liabilities, due to its inability to 

identify and reconcile the reported differences between DLA 

GF’s accounting system and Treasury. Monthly unsupported 

journal vouchers are made to adjust the Fund Balance with 

Treasury balances in DLA GF financial statements to match 

U.S. Treasury records.

Accounts Receivable, Revenue, and Unfilled 

Customer Orders (Notes 1.G., 1.R. and Note 

3): The DLA GF does not have policies and compliant 

processes in place to: (1) recognize revenue and record the 

related accounts receivable, net and unfilled customer order 

(UCO) balances from goods sold and services provided in 

the proper period; (2) identify, evaluate, record, and report an 

allowance for doubtful accounts related to intragovernmental 

receivables in accordance with SFFAS 1 and Technical Bulletin 

2020-1, Loss Allowance for Intragovernmental Receivables; 

and (3) adjust revenue to the extent that realization of the 

full amount is not probable in accordance with SFFAS 1, Accounting for Selected Assets and Liabilities, and/or SFFAS 7, 

Accounting for Revenue and Other Financing Sources and 

Concepts for Reconciling Budgetary and Financial Accounting.

Inventory and Related Property, Net (Note 

1.H. and Note 4): The DLA GF does not have policies 

and compliant processes in place to properly evaluate, record, 

and report Inventory and Related Property, Net in accordance 

with SFFAS 3, Accounting for Inventory and Related Property. 

More specifically DLA GF does not have proper policies and 

compliant processes: 1) to support the valuation of inventory; 

2) to support when goods/services are received; and 3) to 

determine the category of inventory in accordance with SFFAS 

3, Accounting for Inventory and Related Property.

General Property, Plant and Equipment, Net 

(Note 1.I. and Note 5): The DLA GF does not have 

policies and compliant processes in place to account for 

general property, plant and equipment (PP&E) at historical 

cost, in accordance with SFFAS 6, Accounting for Property, 

Plant, and Equipment, and SFFAS 10, Accounting for Internal 

Use Software. Supportable general PP&E beginning balances 

have not been established for Construction-in-Progress (CIP) 

and Internal Use Software (IUS) in Development using the 

alternative valuation methods permitted by SFFAS 50, Establishing Opening Balances for General Property, Plant, and 

Equipment (effective FY 2017). In addition, DLA GF does not 

have compliant processes in place to account for impairment 

of facilities and equipment in accordance with SFFAS 44, 

Accounting for Impairment of General Property, Plant, and 

Equipment Remaining in Use. More specifically

Construction-in-Progress Balances: The DLA GF does 

not have the proper policies and compliant processes to 

identify aged CIP balances in accordance with SFFAS 6, Accounting for Property, Plant, and Equipment. In addition, DLA 

GF does not have policies and compliant processes in place to 

properly monitor and reconcile CIP transactions in accordance 

with SFFAS 6, Accounting for Property, Plant, and Equipment, 

as a result of a system migration.

Internal-Use Software in Development: The DLA GF 

does not have the proper policies and compliant processes 

to identify IUS in Development balances in accordance with 

SFFAS 10, Accounting for Internal Use Software.

Capitalization Thresholds: The DLA GF does not have 

policies and procedures to implement and consistently apply 

capitalization thresholds in accordance with SFFAS 6, Accounting for Property, Plant, and Equipment, and SFFAS 10, 

Accounting for Internal Use Software. 

Depreciation: The DLA GF 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. 
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 94

Financial Section (Unaudited) | SECTION 2

Environmental and Disposal Liabilities (Note 

1.M. and Note 8): The DLA GF does not have policies 

and compliant processes in place to reconcile asset listings 

for costs related to cleanup, asset closure, and asbestos associated with general PP&E, in accordance with SFFAS 5, Accounting for Liabilities of the Federal Government; SFFAS 6, 

Accounting for Property, Plant, and Equipment; and Federal 

Financial Accounting and Auditing Technical Release 2, Determining Probable and Reasonably Estimable for Environmental 

Liabilities in the Federal Government. In addition, DLA GF does 

not have policies and compliant processes in place to properly 

recognize and support the classification of environmental and 

disposal liabilities in accordance with SFFAS 5, Accounting for 

Liabilities of the Federal Government. More specifically, DLA 

GF has not completed an analysis to support the classification 

of software costs included in the environmental and disposal liabilities in accordance with SFFAS 5, Accounting for Liabilities 

of the Federal Government.

Commitments and Contingencies (Note 1.K. 

and Note 8): The DLA GF did not complete its assessment 

of commitments and contingencies in accordance with SFFAS 

5, Accounting for Liabilities of The Federal Government, and 

SFFAS 12, Recognition of Contingent Liabilities Arising from 

Litigation: An Amendment of SFFAS 5, Accounting for Liabilities of the Federal Government.

Reconciliation of Net Cost to Net Outlays 

(Note 11): The DLA GF does not have an established 

policy for the reconciliation of net cost to net outlays in accordance with SFFAS 53, Budget and Accrual Reconciliation. 

DLA GF is also unable to fully prepare reconciliation of net 

cost to net outlays in conformity with U.S. GAAP due to limitations of financial and nonfinancial management processes and 

systems that support the underlying financial information.

Public-Private Partnerships: The DLA GF has not 

completed analyzing all the applicable business relationships 

to determine if these arrangements or transactions indicate the 

existence of Public-Private Partnerships (P3) relationships, 

risk-sharing arrangements or transactions lasting more than 

five years between public and private sector entities, in accordance with SFFAS 49, Public-Private Partnerships: Disclosure Requirements (effective FY 2019). As a result, DLA GF 

is unable to determine the nature of such partnerships, if applicable, and related Federal funding amounts required to be 

disclosed in a P3 note to the financial statements.

Rights and Obligations: The DLA GF 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.

Leases (Note 1.J. and Note 5): The DLA GF does not 

have policies and compliant processes in place and has not 

performed an analysis to identify, evaluate, record, and report 

capital and operating leases in accordance with SFFAS 5, Accounting for Liabilities of the Federal Government, SFFAS 6, 

Accounting for Property, Plant, and Equipment, and SFFAS 10, 

Accounting for Internal Use Software. As such, DLA GF does 

not have any capital or operating leases reported or disclosed 

as of September 30, 2022 and 2021.

Accounts Payable, Expenses, and Undelivered Orders (UDO) (Notes 1.L. and 1.S.; 

Notes 6; Note 9; and Note 10):

The DLA GF does not have policies and compliant processes in 

place to account for accounts payable, expense accruals, and 

the related UDOs in accordance with SFFAS 1, Accounting for 

Selected Assets and Liabilities, and SFFAS 5, Accounting for 

Liabilities of The Federal Government. More specifically:

Negative payable: The DLA GF processes allow for payment 

without receipt, thus resulting in a negative payable. This 

occurs when a payment is made prior to the goods receipts 

being posted in DLA GF’s accounting system. This results in 

a misstatement of current year expenses and payables, and a 

corresponding misstatement of UDOs;

Undelivered Orders: The DLA GF does not have sufficient 

policies and procedures in place to record obligations at the 

time contracts are awarded in accordance with SFFAS 5, Accounting for Liabilities of the Federal Government. In addition, 

DLA GF is unable to support the UDO balance in the accounting system; and

Right of Offsets: The DLA GF does not have policies and 

compliant procedures in place to evaluate whether a right of 

offsets exist within the contract agreements that will allow DLA 

to properly recognize assets and liabilities in accordance with 

Financial Accounting Standards Board Accounting Standards 

Codification 210.20, Balance Sheet-Off Setting, as prescribed 

by SFFAS 34, The Hierarchy of Generally Accepted Accounting Principles, Including the Application of Standards Issued 

by the Financial Accounting Standards Board.
95 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

SECTION 2 | Financial Section (Unaudited)

E. Appropriations and Funding

The DLA GF receives allotted funding through the annual 

appropriations received by the OUSD(C). DoD’s annual appropriations are apportioned by OMB. Apportionment is part 

of the government-wide system for the administrative control 

of funds. Unless expressly exempted or automatically apportioned by OMB, all DoD appropriated, collected, and recovered 

resources require OMB approval through the apportionment/ 

reapportionment process before they are available for distribution and legal obligation by OUSD(C). Following the approval 

of apportionment/reapportionment requests by OMB, OUSD(C) 

allocates funds to the Military Services and ODOs. Funds 

distributed by OUSD(C) may be further subdivided through 

sub-allocation and sub-allotment to lower levels within the organizations or across organizations for execution.

The DLA GF receives its budgetary resources through sub-allotments from OUSD(C). These sub-allotments received by the 

DLA GF annually are reported in the Statements of Budgetary 

Resources and included in the appropriations line as part of 

DLA GF’s budgetary resources. These budgetary resources 

provide the funding necessary to incur obligations, pay for 

goods and services, and are available for obligations based 

on the period of availability as described below. Any budgetary 

resources remaining at the end of the period of availability are 

held in ‘an expired status’ for five years. Existing obligated 

balances can be used to make payments, but unobligated 

balances are not available for new obligations. Budgetary 

resources, including any related obligations and payables, are 

cancelled at the end of the five-year expiration period.

O&M appropriation (funds available year(s): 

1 year) funds Administration and Service-Wide Activities 

such as DoD programs, DoD EBS, DLA HQ programs, and 

Environmental Programs. These programs are associated with 

DLA logistics mission as well as programs assigned to DLA 

GF from DoD for budget administration purposes. DLA GF 

functions as either the executive agent responsible for program 

oversight and policy guidance or the budget administrator responsible for administrative support for these programs.

D. Pronouncements Recently Issued but 

Not Yet Effective

FASAB has issued the following pronouncements that may 

affect future financial presentation, as well as financial management practices and operations of DLA GF upon implementation. DLA GF has not completed the process of evaluating the effects of 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
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 96

Financial Section (Unaudited) | SECTION 2

Procurement Defense-Wide appropriation 

(funds available year (s): 3 years) funds mission 

essential equipment, including automated data processing, telecommunications equipment, and passenger carrying 

vehicles that afford a high degree of efficiency, effectiveness, 

and productivity in the accomplishment of DLA GF’s logistics 

mission.

RDT&E appropriation (funds available year 

(s): 2 years) funds the development of major upgrades to 

increase the performance of existing systems, the purchase of 

test articles, and the developmental testing and/or initial operational testing and evaluation prior to system acceptance. 

In addition, the RDT&E appropriation develops, manages, and 

implements innovative microelectronic solutions to enhance 

DoD mission capabilities. These capabilities are leveraged to 

develop low-volume, high mix fabrication processes for stateof-the-art technologies that meet DoD’s performance and 

reliability needs for legacy microelectronics that are unavailable from commercial foundries. RDT&E also helps ensure 

that advanced logistics concepts and business processes are 

used to accomplish the Agency’s mission. The Logistics R&D 

program identifies the best commercial business practices and 

tailors them, as necessary, into the most effective business 

processes for DLA. The ManTech R&D program provides the 

critical link between invention and application. DLA sub-allots 

RDT&E authority to the DMEA.

Family Housing and Military Construction

Family Housing O&M appropriation (funds 

available year(s): 1 year) funds the routine O&M of 24 

MFH units. Routine operation and maintenance include management costs, utility costs and cyclical maintenance such as 

painting and renovations. Allocated funding for Family Housing 

ended in FY 2019, all remaining obligated and unobligated 

balances will be cancelled by FY 2025.

MILCON appropriation (funds available year 

(s): 5 years) funds the construction of facilities that support 

DLA’s mission. These include DoD fuel infrastructure projects, 

and distribution and disposition facilities. DLA GF sub-allots 

MILCON authority to USACE and NAVFAC, which are DLA’s 

primary design and construction agents for the MILCON 

program.

F. Fund Balance with Treasury

The DLA GF does not maintain cash in a commercial bank, 

but rather in the U.S. Treasury. DLA GF’s FBwT includes the 

amount available for DLA GF to pay current liabilities and 

finance authorized purchases, except as restricted by law. The 

disbursing offices of DFAS, USACE, GSA, and the Department 

of State’s financial service centers process DLA GF’s cash collections, disbursements, and adjustments.

In recent years, DLA GF implemented U.S. Treasury Direct 

Disbursing (TDD), which provides DLA GF the capability to 

transmit directly from the accounting system to Treasury for 

disbursements. With the implementation of TDD, DLA GF has 

a unique accounting code, which allows DLA GF to properly 

identify the transactions.

On a monthly basis, DLA GF adjusts the FBwT account 

balance to bring the cash balance to be in agreement with the 

U.S. Treasury cash balance reported on the Central Accounting and Reporting System using the Cash Management Report 

(CMR). The CMR provides a summary cash position for each 

ODO’s FBwT account by fiscal year and appropriation at the 

limit level. The adjustments represent the undistributed disbursements and collections amounts that have been reported 

to U.S. Treasury, but have not yet been posted to DLA GF’s 

accounting system. Undistributed amounts can be a result of 

timing, invalid line of accounting, invalid TAS information, and 

unsupported and unreconciled differences.

The DLA GF’s accounting service provider, DFAS, uses U.S. 

Treasury suspense accounts to hold transactions temporarily 

prior to identifying the correct appropriation. Suspense account 

items represent the amounts that are reported to Treasury at 

the Treasury Index (TI) Level (TI-17, TI-21, TI-57, TI-97), but 

have not yet been classified to a DLA GF TAS. The transactions in suspense accounts include unidentified collections, 

disbursements, and Intragovernmental Payment and Collection transactions at month end. DFAS research suspense 

transactions in each TI to post them against the appropriate 

line of accounting. The current balances for DLA GF suspense 

transactions are derived from the DFAS Suspense Account 

Universe of Transactions (UoT).

U.S. Treasury also compares DoD’s FBwT reported by DFAS 

with comparable data submitted by financial institutions and 

Treasury Regional Financial Centers and notifies DoD of differences in collection and disbursement data on the Statement 
97 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

SECTION 2 | Financial Section (Unaudited)

of Differences (SOD) report. DFAS reviews the SOD report to 

research and resolve differences. The current balances for 

DLA GF SOD transactions are derived from DFAS management analysis and the SOD UoT.

(Refer to Note 1.C., Departures from U.S. GAAP, related to 

Fund Balance with Treasury, and Note 2, Fund Balance with 

Treasury.)

G. Accounts Receivable

Accounts receivable represents amounts due to DLA GF by 

other Federal Agencies (intragovernmental) and the public 

(other than intragovernmental). DLA GF’s accounts receivable 

arises from sales of materials and services.

The DLA GF presents its intragovernmental accounts receivable net of an allowance for doubtful accounts, which is 

based on a systematic methodology of grouped aged Federal 

accounts receivables. DLA GF evaluates the allowance methodology and estimates allowance percentages quarterly 

based on historical average collections on aged Federal 

accounts receivables. The allowance for doubtful accounts is 

calculated based on the aged accounts receivable balances 

from the preceding month. 

The DLA GF does not currently have material other than intragovernmental receivables and does not recognize a corresponding allowance for doubtful accounts.

(Refer to Note 1.C., Departures from U.S. GAAP, related to 

Accounts Receivable, Net, Revenue, and Unfilled Customer 

Orders.)

H. Inventory and Related Property, Net

Inventory and Related Property, Net consist of the inventory 

held-for-sale and work-in-process related to the acquisition of 

equipment to support the PDW program. 

(Refer to Note 1.C., Departures from U.S. GAAP, related to 

Note 4, Inventory and Related Property.)

Emerald Warrior

Air Force Staff Sgt. Caleb Nicola and Senior Airman Albert Washington prepare for a static-line jump mission over the 

Gulf of Mexico, May 4, 2022, during Emerald Warrior, a special operations exercise. Photo By: Air Force Senior Airman 

Harrison Winchell
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 98

Financial Section (Unaudited) | SECTION 2

J. Leases

As of the date of these financial statements, DLA GF has not 

completed the process of developing policies and procedures 

to identify, calculate, record and report capital and operating 

leases in accordance with SFFAS 5, Accounting for Liabilities 

of The Federal Government, and SFFAS 6, Accounting for 

Property, Plant, and Equipment (refer to Note 1.C., Departures 

from U.S. GAAP, related to Leases).

K. Commitments and Contingencies

In accordance with SFFAS 5, Accounting for Liabilities of the 

Federal Government, as amended by SFFAS 12, Recognition 

of Contingent Liabilities Arising from Litigation: An Amendment 

of SFFAS 5, Accounting for Liabilities of the Federal Government, DLA GF evaluates all contingent liabilities based on three 

criteria: probable, reasonably possible, and remote. DLA GF 

recognizes contingent liabilities in DLA GF’s Balance Sheets 

and Statements of Net Cost when the loss is determined to be 

probable and reasonably estimable. DLA GF discloses those 

contingencies that are reasonably possible. DLA GF does not 

disclose or record contingent liabilities when the loss is considered remote.

I. General Property, Plant and Equipment, 

Net

The DLA GF PP&E primarily consists of Real Property CIP 

and IUS under development. These PP&E categories are not 

subject to amortization or depreciation. DLA GF PP&E also 

consists of General Equipment. 

The DLA GF transfers the amounts in the CIP account to 

the DLA WCF upon project completion. DLA WCF will place 

assets in the appropriate PP&E account and transfer the 

asset to the military services. Due to identified deficiencies in 

policies and procedures related to CIP, DLA GF is not able to 

reconcile the recorded CIP balances.

Capitalization Threshold: The DLA GF 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.

The DLA GF 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.”

The DLA GF has not yet finalized the valuation process for 

PP&E. Accordingly, DLA GF has not made an unreserved 

assertion that the opening balances of PP&E for FY 2022 

are presented fairly in accordance with SFFAS 50, Establishing Opening Balances for General Property, Plant, and 

Equipment.

(Refer to Note 1.C., Departures from U.S. GAAP, related 

to General Property, Plant and Equipment, Net, and Note 5, 

General Property, Plant and Equipment.)

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
99 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

SECTION 2 | Financial Section (Unaudited)

The DLA GF recognizes that the estimated liability may be a 

specific amount or a range of amounts. If some amount within 

the range is a better estimate than any other amount within 

the range, that amount is recorded. If no amount within the 

range is a better estimate than any other amount, the minimum 

amount of the range is recorded and the range and a description of the nature of the contingency are disclosed.

In the event of an adverse judgment against the Government, 

some of the legal contingent 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 liability 

cannot be made, the total amount claimed against the government is classified as “Reasonably Possible” and disclosed if 

available. As of the date of these financial statements, DLA GF 

had no legal contingencies that were probable or reasonably 

possible and no matters identified as remote. 

The DLA GF records an accrual for and discloses probable 

E&DL contingencies in Note 8, Environmental and Disposal Liabilities, as of September 30, 2022 and 2021.

(Refer to Note 1.C., Departures from U.S. GAAP, related to 

Environmental and Disposal Liabilities and Commitments and 

Contingencies, and Note 8, Environmental and Disposal Liabilities.)

L. Liabilities

Liabilities represent probable and measurable future outflows 

of resources as a result of past transactions or events and are 

recognized when incurred, regardless of whether there are 

budgetary resources available to pay the liabilities. However, 

liabilities cannot be liquidated without legislation providing 

resources and legal authority.

Liabilities Covered and Not Covered by 

Budgetary Resources: Liabilities covered by budgetary 

resources include those liabilities for which Congress appropriated funds and are otherwise available to pay amounts 

due as of the Balance Sheet dates. Liabilities Not Covered by 

Budgetary Resources are liabilities that will require budgetary 

resources and are amounts owed in excess of available, congressionally appropriated funds. Therefore, no budgetary 

resources are available to pay amounts due as of the Balance 

Sheet dates but will require future funding to liquidate the obligation (refer to Note 6, Liabilities Not Covered by Budgetary 

Resources).

Current and Noncurrent Liabilities: The DLA GF 

discloses its other liabilities between current and noncurrent 

liabilities in accordance with SFFAS 1, Accounting for Selected 

Assets and Liabilities. Current liabilities represent liabilities 

that DLA GF expects to settle within 12 months of the Balance 

Sheet dates. Noncurrent liabilities represent liabilities that 

DLA GF does not expect to be settled within 12 months of the 

Balance Sheet dates (refer to Note 9, Other Liabilities).

Accounts Payable: Accounts Payable includes amounts 

owed but not yet paid to Intragovernmental and Other than 

Intragovernmental entities for goods and services received 

by DLA GF. DLA GF estimates and records accruals when 

services and goods are performed or received (i.e., Mechanization of Contract Administration Services (MOCAS) accrual 

related to contract financing and Negative Payable Accrual to 

adjust the timing issues that exist within EBS when an invoice 

is received and posted without a goods receipt). DLA GF also 

accrues liabilities incurred at month-end but not yet recorded 

using data from Third Party Payment Systems, GPC, various 

feeder systems, and estimates of costs incurred when goods 

or services received but not invoiced. For Accounts Payable 

associated with cancelling appropriations, the cancelled 

payable is re-established after funding expired and are no 

longer available to liquidate obligations. The payments for the 

cancelled payable will be disbursed using current available 

funding (refer to Note 6, Liabilities Not Covered by Budgetary 

Resources).

Advances from Others and Deferred Revenue: 

Advances from Others and Deferred Revenue are cash 

received in advance of goods or services that have not been 

fully rendered.

(Refer to Note 1.C., Departures from U.S. GAAP, related to 

Accounts Payable, Expenses and Undelivered Orders).

M. Environmental and Disposal Liabilities

E&DL are a probable and reasonably estimable future outflow 

or expenditure of resources that exists as of the financial 

reporting date for environmental cleanup costs resulting from 

past transactions or events.

The DLA GF is responsible for accurate reporting of the E&DL 

and expense for the real property and/or equipment that it 

records and reports in its financial statements as assets, regardless of ownership by any Federal Agency. DLA GF iden-
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 100

Financial Section (Unaudited) | SECTION 2

tifies and estimates accrued E&DL through its annual costto-complete (CTC) process. DLA GF 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 appropriated funds to execute and manage. 

These environmental sites may include, but are not limited to, 

decontamination, decommissioning, site restoration, site monitoring, clean closure of assets, and post-closure costs related 

to the Agency’s operations that result in hazardous waste. 

Due to noted deficiencies, DLA GF is not able to reconcile the 

population of real property assets that encompass the environmental sites closure and asbestos liabilities.

(Refer to Note 1.C., Departures from U.S. GAAP, related to 

Environmental and Disposal Liabilities and Commitments and 

Contingencies, and Note 8, Environmental and Disposal Liabilities.)

N. Payroll and Leave Accruals

Accrued payroll consists of salaries, wages, and other compensation earned by employees, but have not yet been 

disbursed as of the Balance Sheets dates. DLA GF accrues 

the cost of unused annual leave, including restored leave, 

compensatory time, and credit hours as earned and reduces 

the accrual when leave is taken. The payroll and annual leave 

accrual liability is accrued based on the latest pay period data 

for reporting purposes (refer to Note 9, Other Liabilities).

O. Federal Employee Benefits Payable

The FECA (Public Law 103-3) provides income and medical 

cost protection to covered Federal civilian employees injured 

on the job, to employees who have incurred work-related occupational diseases, and to beneficiaries of employees whose 

deaths are attributable to job-related injuries or occupational diseases. The FECA program is administered by the Department of Labor (DOL), which pays valid claims and subsequently seeks reimbursement from DLA GF for these paid 

claims. The FECA liability consists of two elements.

The first element, accrued FECA liability, is based on actual 

future payments for claims paid by DOL but not yet reimbursed 

by DLA GF. DLA GF reimburses DOL for claims as funds are 

appropriated for this purpose. In general, there is a one to 

two-year period between payment by DOL and reimbursement 

to DOL by DLA GF. As a result, DLA GF recognizes an intragovernmental liability, not covered by budgetary resources, 

for the claims paid by DOL that will be reimbursed by DLA 

GF (refer to Note 6, Liabilities Not Covered by Budgetary 

Resources, and Note 7, 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: (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 6, Liabilities 

Not Covered by Budgetary Resources, and Note 7, Federal 

Employee Benefits Payable and Related Other Liabilities).

P. Pension Benefits

Based on the effective Federal government start date, the 

DLA GF’s civilian employees participate in either the Civil 

Service Retirement System (CSRS), a defined benefit plan, or 

the Federal Employees Retirement System (FERS), a defined 

benefit plan and contribution plan. The employee pension 

benefit is managed at the OUSD level. The measurement of 

the service cost requires the use of an actuarial cost method 

and assumptions. The Office of Personnel Management 

(OPM) administers these benefits and provides the factors 

that DLA GF applies to calculate and recognize imputed 

costs, as reported in its Statements of Net Cost, and a corresponding imputed revenue in the Statements of Changes 

in Net Position. DLA GF is not responsible for and does not 

report CSRS or FERS assets, accumulated plan benefits, or 

liabilities applicable to its employees. OPM is responsible for 

and reports these amounts.
101 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

SECTION 2 | Financial Section (Unaudited)

Q. Net Position

Net position is the residual difference between assets and liabilities and consists of unexpended appropriations and cumulative results of operations.

Unexpended Appropriations: Unexpended appropriations consist of unobligated and undelivered order 

balances. Unobligated balances are amounts of budgetary 

resources available for obligation, which have not been 

rescinded or withdrawn. Undelivered orders are the amount 

of obligations incurred for goods and/or services ordered, 

but not yet received. DLA GF unexpended appropriations 

primarily consist of direct appropriations.

Cumulative Results of Operations: Cumulative results of operations includes the net difference since 

inception between: (1) expenses and losses; (2) revenue, 

gains; and (3) other financing sources.

(Refer to Note 1.C., Departures from U.S. GAAP, related to 

Accounts Receivable, Revenue, and Unfilled Customer Orders 

and Accounts Payable, Expenses, and Undelivered Orders, 

Note 10, Undelivered Orders; and Note 12, Restatements.)

R. Revenue and Other Financing Sources

Exchange and Non-exchange Revenue: The DLA 

GF classifies revenue as either exchange revenue or non-exchange revenue. Exchange revenue arises when DLA GF 

provides goods or services to intragovernmental or Other 

than Intragovernmental entities in exchange for inflows of 

resources. Exchange revenue is presented in the Statements 

of Net Cost and serves to offset the costs of these goods and 

services. Exchange revenue from services in the O&M appropriation include support for Continuity of Operations; Law 

Enforcement Support Office; Morale, Welfare and Recreation; 

and Defense Travel System Support. Exchange revenue from 

services in the RDT&E appropriation include support for the 

Next Generation Resource Management System; Mapping 

EBS; and Defense Information System Security.

Non-exchange revenue is derived from the government’s 

sovereign right to demand payment, such as specifically identifiable, legally enforceable claims. Non-exchange revenue is 

considered to impact the cost of DLA GF’s operations and is 

reported in the Statements of Changes in Net Position as a 

financing source.

Other Financing Sources: Other financing sources, 

other than exchange and non-exchange revenue, include additional inflows of resources that increase results of operations 

during the reporting period. DLA GF’s other financing sources 

come from unexpended appropriation transfers and non-expenditure transfers-in initiated by OUSD and recognized as 

financing sources when used. Other financing sources also 

include: (1) transfers-in/out without reimbursement, and (2) 

imputed financing with respect to costs subsidized by another 

Federal entity.

Transfers-in/out without Reimbursement: Transfers-in/out without reimbursement include intragovernmental 

transfers of capitalized assets. The amount of the transfer is 

the book value of the transferring entity and if the book value 

is not known, the amount should be the estimated fair value at 

the date of transfer.

Imputed Financing and Imputed Cost: In certain 

cases, DLA GF receives goods and services from other 

Federal entities at no cost or at a cost less than the full cost 

to the providing entity. Consistent with accounting standards, 

certain costs of the providing entity that are not fully reimbursed by DLA GF are recognized as imputed cost in the 

Statements of Net Cost and are offset by imputed financing in 

the Statements of Changes in Net Position. DLA GF recognizes the following imputed cost and related imputed financing: 

(1) employee benefits administered by the OPM (i.e., retirement, health, life insurance benefits); and (2) claims settled by 

the Treasury Judgment Fund. In accordance with SFFAS 55, 

Amending Inter-Entity Costs Provisions, unreimbursed costs 

of goods and services other than those identified above are 

not included in DLA GF financial statements.

(Refer to Note 1.C., Departures from U.S. GAAP, related 

to Accounts Receivable, Revenue, and Unfilled Customer 

Orders).

S. Expenses

Expenses are recognized when there are outflows, usage of 

assets, or incurrences of liabilities (or a combination) from 

carrying out activities related to DLA GF appropriations and 

missions, for which benefits do not extend beyond the present 

operating period. For financial reporting purposes, operating 

expenses are recognized in the period incurred (refer to 

Note 1.C., Departures from U.S. GAAP, related to Accounts 

Payable, Expenses, and Undelivered Orders).
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 102

Financial Section (Unaudited) | SECTION 2

T. 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, Liabilities Not 

Covered by Budgetary Resources; Note 7, Other Liabilities; 

and Note 9, Reconciliation of Net Cost to Net Outlays. The 

reclassifications had no effect on total assets, liabilities, or 

net position.

Marine Patrol

Air Force Airman 1st Class Samari Rivera-Rodriguez scans the coastline surrounding MacDill Air Force Base, Fla., July 10, 

2022. Last month, airmen on marine patrol rescued eight people who were stranded on top of a capsized vessel in Tampa 

Bay. Photo by: Air Force Staff Sgt. Alexander Cook
103 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

SECTION 2 | Financial Section (Unaudited)

Status of Fund Balance with Treasury presents 

the budgetary and proprietary balances that constitute DLA 

GF FBwT. It consists of unobligated and obligated balances. 

The balances reflect the budgetary authority remaining for 

disbursement against current or future obligations. Unobligated and obligated balances differ from the related amounts 

reported in the Combined Statements of Budgetary Resources 

because budgetary balances are supported by amounts other 

than FBwT (e.g., budgetary receivables).

Unobligated Balance – Available includes the cumulative amount of budgetary authority that has not been set 

aside to cover outstanding obligations and can be used for 

future obligations.

Unobligated Balance – Unavailable includes the 

cumulative amount of budget authority and funds not available 

for obligation from offsetting collections.

Obligated Balance Not Yet Disbursed includes 

funds that have been obligated for goods and services not 

received, as well as those received but not paid.

Non-budgetary FBwT consists of FBwT in unavailable 

receipt accounts and clearing accounts that do not have budget authority and non-budgetary FBwT such as non-fiduciary 

deposit funds. As of September 30, 2022, and 2021, DLA GF 

does not have balances for non-budgetary FBwT.

Other Information includes the following tables summarizing the undistributed collections and disbursements between U.S. Treasury and DLA GF as of September 30, 2022 

and 2021, respectively.

Note 2: Fund Balance with Treasury (Unaudited)

FY 2022 FY 2021

Status of Fund Balance Treasury

Unobligated Balance:

Available $ 567,259 $ 548,000 

Unavailable 43,261 67,991 

Obligated Balance not yet Disbursed 1,796,143 1,311,987 

Total Fund Balance with Treasury $ 2,406,663 $ 1,927,978 

Fund Balance with Treasury as of September 30, 2022 and 2021, respectively, consist of the following (dollars in thousands):

FY 2021 Adjustments of Undistributed Collections and Disbursements (dollars in thousands)

Transaction Type Treasury 

Balance based on CMR DLA GF Trial Balance

Balances Not Yet Recorded in DLA 

Accounting System - 

Undistributed

Collections $ 313,589 $ 318,521 $ (4,932)

Disbursements $ 3,545,384 $ 3,535,425 $ 9,959

(Refer to Note 1.C., Departures from U.S. GAAP, related to Fund Balance with Treasury.)

FY 2022 Adjustments of Undistributed Collections and Disbursements (dollars in thousands)

Transaction Type Treasury 

Balance based on CMR DLA GF Trial Balance

Balances Not Yet Recorded in DLA 

Accounting System - 

Undistributed

Collections $ 370,111 $ 376,662 $ (6,551)

Disbursements $ 3,663,688 $ 3,246,180 $ 417,508
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 104

Financial Section (Unaudited) | SECTION 2

Note 3: Accounts Receivable, Net (Unaudited)

Accounts Receivable, Net as of September 30, 2022 and 2021, respectively, consist of the following (dollars in thousands):

FY 2022

Accounts 

Receivable

(Less: Allowance 

for Doubtful 

Accounts)

Accounts 

Receivable, Net

Intragovernmental Accounts Receivable, Net

Operations and Maintenance $ 4,420 $ (45) $ 4,375 

Research, Development, Test & Evaluation 9,404 - 9,404 

Total Intragovernmental Accounts Receivable, Net $ 13,824 $ (45) $ 13,779 

Other than Intragovernmental Accounts 

Receivable

Operations and Maintenance $ 14 $ - $ 14 

Research, Development, Test & Evaluation 1 - 1 

Total Other than Intragovernmental Accounts Receivable $ 15 $ - $ 15 

In FY 2022, DLA GF implemented Technical Bulletin 

2020-1, Loss Allowance for Intragovernmental Receivables, 

and recognized an allowance for doubtful accounts for its intragovernmental accounts receivable. As of September 30, 

2022, DLA GF reported $45.4 thousand in intragovernmental 

allowance for doubtful accounts.

(Refer to Note 1.C., Departures from U.S. GAAP, related 

to Accounts Receivable, Revenue, and Unfilled Customer 

Orders.)

FY 2021

Accounts 

Receivable

(Less: Allowance 

for Doubtful 

Accounts)

Accounts 

Receivable, Net

Intragovernmental Accounts Receivable, Net

Operations and Maintenance $ 4,232 $ - $ 4,232 

Research, Development, Test & Evaluation 9,322 - 9,322 

Total Intragovernmental Accounts Receivable, Net $ 13,554 $ - $ 13,554 

Other than Intragovernmental Accounts 

Receivable

Operations and Maintenance $ 15 $ - $ 15 

Research, Development, Test & Evaluation 5 - 5 

Total Other than Intragovernmental Accounts Receivable $ 20 $ - $ 20 
105 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

SECTION 2 | Financial Section (Unaudited)

Note 4: 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 $ 12,052 $ - 

Inventory Work-In-Process MAC 17,434 17,434

Total Inventory and Related Property, Net $ 29,486 $ 17,434

MAC = Moving Average Cost

Replenishment at Sea

The USS Harry S. Truman conducts a replenishment with the USNS Supply in the Ionian Sea, May 6, 2022.

Photo By: Navy Petty Officer 3rd Class Theoplis Stewart II

The DLA GF inventory is comprised of military equipment for PDW of $12.1 million in Held for Sale as of September 30, 2022.

The DLA GF Inventory Work-in-Process is $17.4 million as of September 30, 2022 and 2021.

(Refer to Note 1.C., Departures from U.S. GAAP, related to Inter-Entity Cost and Inventory and Related Property, Net.) 
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 106

Financial Section (Unaudited) | SECTION 2

Note 5: General Property, Plant and Equipment (Unaudited)

General Property, Plant and Equipment as of September 30, 2022 and 2021, respectively, consist of the following (dollars in 

thousands):

FY 2022

Acquisition Value

Accumulated 

Depreciation/ 

Amortization

Net Book Value

Major Asset Classes

General Equipment $ 435 $ (49) $ 386 

Construction-in-Progress 370,720 - 370,720 

Internal-Use Software in Development 71,272 - 71,272 

Total General Property, Plant and Equipment, Net $ 442,427 $ (49) $ 442,378 

FY 2021

Acquisition Value

Accumulated 

Depreciation/

Amortization

Net Book Value

Major Asset Classes

General Equipment $ - $ - $ - 

Construction-in-Progress $ 528,858 $ - $ 528,858 

Internal-Use Software in Development 75,932 - 75,932 

Total General Property, Plant and Equipment, Net $ 604,790 $ - $ 604,790 

The DLA GF maintains CIP, Internal-Use Software in Development, and General Equipment. The CIP mainly consists of 

projects from USACE and NAVFAC. The accumulated CIP 

balances will be transferred to WCF upon completion of the 

project and removed from DLA GF accounting records. As 

of September 30, 2022, DLA GF continues to review the CIP 

balance reported by the construction agents to DFAS and adjustments are made as applicable by DLA GF and DFAS.

The Internal-Use Software in Development mainly consists of 

projects related to DAI systems.

General Equipment consists of equipment managed by DMEA.

The table below discloses activity for General Property, Plant 

and Equipment as of September 30, 2022, and 2021, respectively (dollars in thousands):

(Refer to Note 1.C., Departures from U.S. GAAP, related to General Property, Plant and Equipment, Net, and Leases.)

FY 2022 FY 2021 

General Property, Plant and Equipment - Beginning Balances $ 604,790 $ 611,132

Capitalized Acquisitions 195,661 189,594

Depreciation Expense (49) -

Transfers in/out without reimbursements (358,024) (195,936)

General Property, Plant and Equipment - Ending Balances $ 442,378 $ 604,790
107 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

SECTION 2 | Financial Section (Unaudited)

Note 6: 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):

FY 2022 FY 2021 

Intragovernmental Liabilities

Other Current Liabilities - Benefits Program Contributions Payable $ 913 $ 1,444 

Other Liabilities - 4,214

Total Intragovernmental Liabilities 913 5,658 

Other than Intragovernmental Liabilities

Accounts Payable 7,758 7,559 

Environmental and Disposal Liabilities 74,114 79,504 

Federal Employee Benefits Payable 7,496 8,215 

Total Other than Intragovernmental Liabilities 89,368 95,278 

Total Liabilities Not Covered by Budgetary Resources 90,281 100,936 

Total Liabilities Covered by Budgetary Resources 84,055 58,590 

Total Liabilities $ 174,336 $ 159,526 

Other Current Liabilities – Benefits Program 

Contributions Payable (Intragovernmental)

primarily consist of intragovernmental liabilities for unemployment compensation and the 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).

Accounts Payable (Other than Intragovernmental) include amounts owed but not yet paid to the public 

for goods and services received by DLA GF. It is classified as 

Liabilities Not Covered by Budgetary Resources because the 

revenues or other sources of funds necessary to pay the liabilities that have not been made available through congressional 

appropriations or current earnings of DLA.

Environmental and Disposal Liabilities (Other 

than Intragovernmental) consist of probable and reasonably estimable future outflow or expenditure of resources 

that exist as of the financial reporting date for environmental 

cleanup costs resulting from past transactions or events. As of 

September 30, 2022, and 2021, the total liabilities covered by 

budgetary resources for the E&DL consists of $9.7 million and 

$11.0 million, respectively.

Federal Employee Benefits Payable (Other 

than Intragovernmental) are primarily comprised of 

the current year: (1) FECA actuarial liability based on DOL 

records and (2) unfunded annual leave earned by civilian 

employees but not yet paid. Unfunded annual leave includes 

restored leave, compensatory time, and credit hours as earned.

(Refer to Note 1.C., Departures from U.S. GAAP, related to 

Accounts Payable, Expenses, and Undelivered Orders; Note 

7, Federal Employee Benefits Payable and Related Other 

Liabilities; and Note 8, Environmental and Disposal Liabilities.)
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 108

Financial Section (Unaudited) | SECTION 2

Unfunded FECA Liability (Intragovernmental)

include the accrued FECA liability paid by DOL but not yet 

reimbursed by DLA GF.

Note 7: Federal Employee Benefits Payable and Related 

Other Liabilities (Unaudited)

Federal Employment Benefits Payable and Related Other Liabilities as of September 30, 2022 and 2021, respectively, consist 

of the following (dollars in thousands):

Employer Contributions and Payroll Taxes 

Payable (Intragovernmental) are the employer 

portion of payroll taxes and benefit contributions for health 

benefits, retirement, life insurance and voluntary separation 

incentive payments.

FY 2022

Liabilities

(Less: 

Assets 

Available 

to Pay 

Benefits)

Unfunded 

Liabilities

Intragovernmental Other Liabilities

Employer Contribution and Payroll Taxes Payable $ 393 $ (393) $ - 

Unfunded FECA Liability 290 - 290 

Other Unfunded Employment Related Liability 623 - 623 

Total Intragovernmental Other Liabilities $ 1,306 $ (393) $ 913 

Other than Intragovernmental Federal Employee Benefits Payable

Actuarial FECA Liability $ 2,137 $ - $ 2,137 

Accrued Unfunded Annual Leave 5,359 - 5,359 

Employer Contributions and Payroll Taxes Payable 545 (545) - 

Total Other than Intragovernmental Federal Employee Benefits Payable $ 8,041 $ (545) $ 7,496 

FY 2021

Liabilities

(Less: 

Assets 

Available 

to Pay 

Benefits)

Unfunded 

Liabilities

Intragovernmental Other Liabilities

Employer Contribution and Payroll Taxes Payable $ 770 $ (770) $ - 

Unfunded FECA Liability 313 - 313 

Other Unfunded Employment Related Liability 1,131 - 1,131 

Total Intragovernmental Other Liabilities $ 2,214 $ (770) $ 1,444 

Other than Intragovernmental Federal Employee Benefits Payable

Actuarial FECA Liability $ 2,520 $ - $ 2,520 

Accrued Unfunded Annual Leave 5,695 - 5,695 

Employer Contributions and Payroll Taxes Payable 802 (802) - 

Total Other than Intragovernmental Federal Employee Benefits Payable $ 9,017 $ (802) $ 8,215 
109 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

SECTION 2 | Financial Section (Unaudited)

Other Unfunded Employment Related 

Liability (Intragovernmental) consist of intragovernmental liabilities for unemployment compensation.

Actuarial FECA Liability (Other than 

intragovernmental) are workers’ compensation benefits 

developed by the DOL’s Office of Worker’s Compensation 

Programs (OWCP) and provided to DLA GF at the end of each 

FY. The liability includes the expected liability for death, disability, medical and miscellaneous costs for approved compensation cases. The liability is determined using a method 

that utilizes historical benefit payment patterns to predict the 

ultimate payments. The projected annual benefit payments are 

then discounted to the present value using the OMB economic 

assumptions for 10-year U.S. Treasury notes and bonds. Cost 

of living adjustments (COLAs) and medical inflation factors are 

also applied to the calculation of projected future benefits.

Accrued Unfunded Annual Leave (Other than 

intragovernmental) includes restored leave, compensatory time, and credit hours earned.

(Refer to Note Note 6, Liabilities Not Covered by Budgetary 

Resources.)

Ocean Ops

Sailors conduct small boat operations aboard the USS Gerald R. Ford in the Atlantic Ocean, April 11, 2022.

Photo By: Navy Seaman Apprentice Trenton Edly
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 110

Financial Section (Unaudited) | SECTION 2

Note 8: 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

Accrued Environmental Restoration Liabilities:

Active Installations - Installation Restoration Program 

and Building Demolition and Debris Removal $ 83,777 $ 90,547 

Total Environmental and Disposal Liabilities $ 83,777 $ 90,547 

The DLA GF E&DL are comprised of two primary elements: 

(1) existing obligations supporting the Defense Environmental Restoration Account (DERA) and Base Realignment and 

Closure (BRAC) funded environmental restoration programs, 

and (2) the Cost to Complete (CTC) which includes anticipated 

future cost necessary to complete environmental restoration 

sites. While DLA GF is responsible for recording BRAC Installations – Installation Restoration Program (IRP) E&DL, associated costs are reported on the DoD Component Level Statements under Consolidated ODO GF.

In FY 2022 and FY 2021, DLA GF utilized the Remedial Action 

Cost Engineering & Requirements (RACER) software to 

generate the CTC estimates of anticipated future costs.

In FY 2022, cost estimates were generated for 79 Accrued 

Environmental Restoration Liabilities Active Installations –IRP 

E&DL sites and one BRAC Installations – IRP site. In FY 2022 

and FY 2021, there were no PP&E transfers impacting the 

E&DL balance for GF.

Types of Environmental and Disposal Liabilities: The DLA GF is responsible for cleanup requirements of 

Defense Environmental Restoration Program (DERP) eligible 

sites managed under Active IRP and BRAC IRP. Costs under 

the Accrued Environmental Restoration Liabilities and BRAC 

Installations line items represent the cost to correct past environmental problems that are funded from the Environmental 

Restoration and BRAC Accounts in accordance with the DoD 

Manual (DoDM) 4715.20 – DERP Management (March 2012) 

and the DoD 7000.14-R Financial Management Regulation 

(FMR) Volume 4, Chapter 13 – Environmental and Disposal 

Liabilities (March 2022). All clean-up is conducted in coordination with regulatory Agencies, other responsible parties, and 

current property owners.

The DLA GF reportable E&DL is under Accrued Environmental 

Restoration Liabilities and BRAC Installations and includes the 

following line items:

Accrued Environmental Restoration Liabilities: Includes 

Active Installations – IRP E&DL associated with remedial 

actions eligible for funding under the DERP. These remedial 

actions may address hazardous substances, pollutants, and 

contaminants as defined in the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA); 

hazardous waste or hazardous constituents addressed under 

the Resource Conservation and Recovery Act (RCRA) corrective action process or other Federal or state statutes and 

regulations; and military munitions or Waste Military Munitions, 

chemical residues from military munitions, and munitions scrap 

at locations other than operational ranges associated with an 

active installation, when the environmental restoration activity 

is incidental to the IRP environmental restoration activity.

BRAC Installations: Includes IRP E&DL associated with 

the costs to address environmental cleanup at bases that are 

realigning or closing resulting from past activities which are 

part of DERP. While DLA GF is responsible for recording BRAC 

Installations – IRP E&DL, it is reported in the DoD Component 

Level Statements under Consolidated ODO GFs.

The DLA assessed its PP&E inventory and does not currently 

have reportable GF E&DL for Environmental Closure, 

Asbestos, or General Equipment. 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).
111 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

SECTION 2 | Financial Section (Unaudited)

Applicable Laws and Regulations for Cleanup 

Requirements: The DLA GF is required to clean up contamination resulting from past waste disposal practices, leaks, 

spills, and other prior activities, which may have created a 

public health or environmental risk. DLA GF is required to 

comply with the following laws and regulations where applicable: CERCLA; 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 GF is named as a potentially responsible party by a regulatory Agency. DLA GF reports 

E&DL in accordance with SFFAS 5, Accounting for Liabilities 

of the Federal Government, and Federal Financial Accounting 

Technical Release 2, Determining Probable and Reasonably 

Estimable for Environmental Liabilities in the Federal Government.

Methods for Assigning Estimated Total 

Cleanup Costs to Current Operating Periods:

To estimate future environmental costs, the DLA GF utilizes 

a combination of historical or pre-negotiated contract costs, 

proposal costs, engineering estimates, and in the absence 

of other detailed information, parametric estimates created 

using the RACER software. Any historical costs used in the 

creation of the estimates for DLA 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 (VV&A) in accordance with 

DoD Instruction 5000.61. The DoD is working with the RACER 

Steering Committee and stakeholders to identify improvements to RACER functionality, auditability, and documentation. 

Detailed information on estimating methodologies is provided 

in the DLA Environmental Liabilities Management (ELM) SOPs.

Nature of Estimates and the Disclosure of Information Regarding Possible Changes Due 

to Inflation, Deflation, Technology, or Applicable Laws and Regulations: The DLA 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 E&DL potentiality 

to determine the annual CTC inventory. The DLA GF 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 DLA ELM SOPs; 

DoDM 4715.20 – DERP Management (March 2012) and 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, no material changes 

in the total estimated cleanup costs were identified through 

the Roll Forward review due to changes in laws, technology, 

or plans. In addition, DLA is not aware of any changes to GF 

E&DL estimates that would result from inflation, deflation, 

technology, plans, and or pending changes to applicable laws 

and regulation. 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 will be reevaluated each year and 

may change in the future due to changes in laws and regulations, changes in agreements with regulatory Agencies, and 

advances in technology.

Uncertainty Regarding the Accounting 

Estimates Used to Calculate the Reported Environmental and Disposal Liabilities: The stated 

total DLA GF E&DL includes prior year obligations and the 

estimate of future costs necessary to complete requirements. 

DLA GF has instituted extensive controls to ensure that these 

estimates are accurate and reproducible. The cost estimates 

produced through the E&DL process are considered accounting estimates, which require certain judgments and assumptions that are reasonable based upon information available at 

the time the estimates are calculated. Actual cost may materially vary from the accounting estimates if agreements with regulatory agencies require remediation to a different degree than 

anticipated when calculating the estimates. DLA GF E&DL can 

be further affected if investigation of the environmental sites 

reveals contamination levels that differ from the estimated parameters.

The DLA utilizes a formalized Site ID process to identify, track, 

and evaluate environmental events where the potential for an 

out-year E&DL exists but the E&DL is not probable and measurable. These environmental events are tracked and will be 

re-evaluated in the following fiscal year to determine if any 

changes have taken place and sufficient information, or data 

is available to create an estimate of future costs that would be 

included in the GF E&DL balance.
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 112

Financial Section (Unaudited) | SECTION 2

FY 2022

Accrued 

Liabilities

Estimated Range of Loss

 Lower End Upper End

Environmental Contingencies

Probable $ 83,777 $ - $ -

Reasonably Possible $ - $ -

FY 2021

Accrued 

Liabilities

Estimated Range of Loss

 Lower End Upper End

Environmental Contingencies

Probable $ 90,547 $ - $ -

Reasonably Possible $ - $ -

(Refer to Note 1.C., Departures from U.S. GAAP, related to Environmental and Disposal Liabilities and Commitments and 

Contingencies.)

On the Horizon

Marine Corps F/A-18 Hornet aircraft sit on the tarmac at Hyakuri Air Base, Japan, Dec. 14, 2021.

Photo By: Courtesy Photo
113 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

SECTION 2 | Financial Section (Unaudited)

Note 9: 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 $ - $ - $ - 

Total Intragovernmental $ - $ - $ - 

Other than Intragovernmental Other Liabilities

Accrued Funded Payroll and Benefits $ 1,757 $ - $ 1,757 

Contract Holdbacks 1,345 - 1,345 

Total Other than Intragovernmental Other Liabilities $ 3,102 $ - $ 3,102 

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, and other compensation earned by employees but not 

yet disbursed.

FY 2021

Current Non-Current Total

Intragovernmental

Other Liabilities $ 4,214 $ - $ 4,214 

Total Intragovernmental $ 4,214 $ - $ 4,214 

Other than Intragovernmental Other Liabilities

Accrued Funded Payroll and Benefits $ 2,563 $ - $ 2,563 

Contract Holdbacks 1,170 - 1,170 

Total Other than Intragovernmental Other Liabilities $ 3,733 $ - $ 3,733 

Contract Holdbacks (Other than 

Intragovernmental) are amounts earned by contractors 

or suppliers during the production period but not yet paid to the 

contractor/supplier to ensure future performance.

(Refer to Note 1.C., Departures from U.S. GAAP, related to 

Accounts Payable, Expenses, and Undelivered Orders.)
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 114

Financial Section (Unaudited) | SECTION 2

FY 2022 FY 2021

Intragovernmental Undelivered Orders

Unpaid $ 572,679 $ 1,369,254 

Total Intragovernmental Undelivered Orders 572,679 1,369,254

Other than Intragovernmental Undelivered Orders

Unpaid 1,201,952 (35,338)

Paid 7,741 -

Total Other than Intragovernmental Undelivered Orders 1,209,693 (35,338)

Total Undelivered Orders $ 1,782,372 $ 1,333,916 

UDOs represent the amount of goods and/or services ordered 

to perform DLA GF’s mission objectives that have not been 

received. Unpaid UDOs represent obligations for goods and 

services that have not been received or paid. Whereas, paid 

UDOs represent obligations for goods and services that have 

been paid for in advance of receipt. 

Due to system limitations, DLA GF is unable to determine the 

Intragovernmental and Other than Intragovernmental allocation of UDOs. DLA GF estimates the allocation of Intragovernmental and Other than Intragovernmental unpaid UDOs based 

on funded liabilities, excluding payroll and employee benefit liabilities, and paid UDOs based on advances and prepayments 

reported on the Balance Sheets. For FY 2021, the abnormal 

balance of Other than Intragovernmental Unpaid UDOs was 

due to trading partner eliminations.

(Refer to Note 1.C., Departures from U.S. GAAP, related to 

Intragovernmental/Intra-departmental and Other than Intragovernmental Transactions, and Accounts Payable, Expenses, 

and Undelivered Orders.)

Note 10: Undelivered Orders (Unaudited)

Undelivered Orders (UDOs) for the years ended September 30, 2022 and 2021, respectively, consist of the following (dollars in 

thousands):

Giving Instructions

Army Spc. Ali Nasser, 

Apache helicopter repairer, 

assigned to Alpha Company, 1-3rd Attack Battalion, 

12th Combat Aviation Brigade, communicates with 

Army 1st Lt. Jacob Kelley 

and Chief Warrant Officer 

4 Joe Lorman, Apache helicopter pilots assigned to 

12 CAB during pre-flight 

checks at Lielvardes Air 

Base, Latvia, April 3, 2022.

Photo By: Army Sgt. 

Preston Malizia
115 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

SECTION 2 | Financial Section (Unaudited)

Note 11: Reconciliation of Net Cost to Net Outlays (Unaudited)

Reconciliation of Net Cost to Net Outlays for the years ended September 30, 2022 and 2021, respectively, consist of the 

following (dollars in thousands):

FY 2022

Intragovernmental Other than 

Intragovernmental Total

NET COST $ 187,967 $ 526,217 $ 714,184 

Components of Net Cost That 

are Not Part of Net Outlays

General Property, Plant, and Equipment Depreciation - (49) (49)

Increase/(Decrease) in Assets

Accounts Receivable, Net 225 (5) 220 

Advances and Prepayments 7,741 7,741

(Increase)/Decrease in Liabilities

Accounts Payable 12,122 (41,284) (29,162)

Environmental and Disposal Liabilities - 6,770 6,770 

Federal Employee Benefits Payable - 976 976 

Advances from Others and Deferred Revenue - 853 853 

Other Liabilities 5,122 631 5,753 

Other Financing Sources

Imputed Financing (2,789) - (2,789)

Total Components of Net Cost That are Not Part 

of Net Outlays 14,680 (24,367) (9,687)

Components of Net Outlays That are Not Part of 

Net Cost

Acquisition of PP&E - 195,661 195,661 

Acquisition of Inventory and Related Property - 12,052 12,052 

Financing Sources:

Transfers out (in) without reimbursements (6) - (6)

Total Components of Net Outlays That are Not 

Part of Net Cost (6) 207,713 207,707 

NET OUTLAYS $ 202,641 $ 709,563 $ 912,204 

Outlays, Net, Statements of Budgetary Resources 912,204 

Reconciling Difference $ - 
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 116

Financial Section (Unaudited) | SECTION 2

The Net Cost to Net Outlays Reconciliation schedule reconciles 

the Net Cost (reported in the Statements of Net Cost) to the Net 

Outlays (reported in the Statements of Budgetary Resources). 

The reconciliation clarifies the relationship between budgetary 

and proprietary accounting information. Examples of the 

reconciling items identified are: (1) Transactions which did 

not result in an outlay but did result in a cost; and (2) Unpaid 

expenses included in the net cost in this reporting period but 

not yet included in outlays. Components of net cost that are 

not part of net outlays are most commonly: (1) the result of 

allocating assets to expenses over more than one reporting 

period (e.g., depreciation) and the write-down of assets (due 

to revaluations); (2) the temporary timing differences between 

outlays/receipts and the operating expense/revenue during the 

period; and (3) costs financed by other entities (imputed interentity cost).

For FY 2022, the key reconciling differences between the net 

cost and net outlays for DLA GF include: (1) Accounts Payable

increased due to purchases of PDW communication equipment; 

(2) Advances and Prepayments related to commercial interim 

financing payments for PDW; (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 net outlays for DLA GF include: (1) Accounts Receivable 

decreased due to increased collections in the reimbursement 

program; (2) Environmental Liabilities increased due to a surge 

FY 2021

Intragovernmental Other than 

Intragovernmental Total

NET COST $ 161,997 $ 624,831 $ 786,828 

Components of Net Cost That 

are Not Part of Net Outlays

Increase/(Decrease) in Assets

Accounts Receivable, Net (10,267) 5 (10,262)

Advanced Prepayments - - -

(Increase)/Decrease in Liabilities

Accounts Payable (12,382) 18,796 6,414 

Environmental and Disposal Liabilities - (12,840) (12,840)

Federal Employee Benefits Payable - 86 86 

Advances from Others and Deferred Revenue - 238 238 

Other Liabilities (3,361) (1,109) (4,470)

Other Financing Sources

Imputed Financing (2,714) - (2,714)

Total Components of Net Cost That are Not Part 

of Net Outlays (28,724) 5,176 (23,548) 

Components of Net Outlays That are Not Part of 

Net Cost

Acquisition of PP&E - 189,594 189,594 

Acquisition of Inventory and Related Property - 17,434 17,434

Other (9) - (9)

Total Components of Net Outlays That are Not 

Part of Net Cost (9) 207,028 207,019

NET OUTLAYS $ 133,264 $ 837,035 $ 970,299 

Outlays, Net, Statements of Budgetary Resources 970,299 

Reconciling Difference $ - 
117 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

SECTION 2 | Financial Section (Unaudited)

in program cost related to the development of a new E&DL cost 

estimating software; and (3) the acquisition of capital assets 

that have no impact on net cost.

Any reconciling difference would be attributable to limitations 

of financial and nonfinancial management processes and 

systems that support the financial statements, as disclosed in 

Note 1.B., Basis of Presentation and Accounting. In addition, 

DLA GF does not have an established policy to identify and 

reconcile net cost to net outlays and/or identify components of 

net cost or net outlays that have not been properly accounted 

for. As such, DLA GF will continue to investigate and resolve 

the causes of any reconciling differences.

(Refer to Note 1.C., Departures from U.S. GAAP, related 

to Accounts Receivable, Revenue, and Gains, Inventory 

and Related Property, Net, General Property, Plant and 

Equipment, Net, Intragovernmental/Intra-departmental and 

Other than Intragovernmental Transactions, Accounts Payable, 

Undelivered Orders, and the Reconciliation of Net Cost to Net 

Outlays.)

Color Run Fun

Airmen and their families participate in a color run to celebrate Month of the Military Child at Sumpter Smith Joint Air 

National Guard Base in Birmingham, Ala., April 9, 2022. Photo By: Air Force Staff Sgt. Wesley Jones
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 118

Financial Section (Unaudited) | SECTION 2

Note 12: Restatement (Unaudited)

In FY 2022, DLA GF restated its FY 2021 financial statements 

to correct an error in the Balance Sheet and Statement of 

Changes in Net Position. In prior fiscal years, DLA GF made an 

adjustment to reclassify a Non-Expenditure Financing Source 

Transfer–In to Unexpended Appropriations Transfer-In for 

funding received in FY 2014. The impact of this error resulted 

in DLA GF’s Cumulative Results of Operations to be understated by $5.1 million and Unexpended Appropriations to be 

overstated by $5.1 million in the financial statements. As the 

funding source for the transfer-in originated from excess cash 

balances, DLA GF made adjustments to correct the FY 2021 

Balance Sheet and Statements of Changes in Net Position by 

decreasing Unexpended Appropriations and increasing Cumulative Results of Operations by $5.1 million, resulting in no 

overall impact to DLA GF's Net Position. 

(Refer to Note 1.Q., Net Position.)

Drop Duo

Airmen observe the landing site from an MC-130J Commando II during a simulated supply drop in Thailand, Feb. 25, 

2022, as part of Cobra Gold, an international training exercise. Photo By: Air Force Staff Sgt. Rito Smith
119 Defense Logistics Agency | FY 2022 GENERAL 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 

Intragovernmental

Fund Balance with Treasury (Note 2) $ 1,927,978 $ - $ 1,927,978 

Accounts Receivable (Note 3) 13,554 - 13,554 

Total Intragovernmental Assets 1,941,532 - 1,941,532 

Other than Intragovernmental

Accounts Receivable (Note 3) 20 - 20 

Inventory and Related Property, Net (Note 4) 17,434 - 17,434 

General Property, Plant and Equipment, Net (Note 5) 604,790 - 604,790 

Other Assets 88 - 88 

Total Other than Intragovernmental Assets 622,332 - 622,332 

TOTAL ASSETS $ 2,563,864 $ - $ 2,563,864 

LIABILITIES (Note 6)

Intragovernmental

Accounts Payable $ 33,540 $ - $ 33,540 

Other Liabilities;

Other Current Liabilties-Benefits Program 

Contributions Payable (Note 7) 2,214 - 2,214

Other Liabilities 4,214 - 4,214

Total Intragovernmental Other Liabilities 6,428 - 6,428

Total Intragovernmental 39,968 - 39,968 

Other than Intragovernmental

Accounts Payable 15,384 - 15,384 

Environmental and Disposal Liabilities (Note 8) 90,547 - 90,547 

Federal Employee Benefits Payable (Note 7) 9,017 - 9,017 

Advances from Others and Deferred Revenue 877 - 877 

Other Liabilities (Note 9) 3,733 - 3,733 

Total Other than Intragovernmental 119,558 - 119,558 

TOTAL LIABILITIES 159,526 - 159,526 

Commitments and Contingencies

NET POSITION

Unexpended Appropriations-Funds from Other than 

Dedicated Collections 1,888,345 (5,113) 1,883,232 

Cumulative Results of Operations-Funds from Other 

than Dedicated Collections 515,993 5,113 521,106 

TOTAL NET POSITION 2,404,338 - 2,404,338 

TOTAL LIABILITIES AND NET POSITION $ 2,563,864 $ - $ 2,563,864 

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.
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 120

Financial Section (Unaudited) | SECTION 2

Statement of Changes in Net Position 

For the Year Ended September 30, 2021 

(dollars in thousands)

Unaudited

FY 2021 

As Previously 

Reported

Unaudited

FY 2021 

Adjustments

Unaudited

FY 2021 

As Restated

Unexpended Appropriations

Beginning Balances $ 1,563,503 $ (5,113) $ 1,558,390 

Appropriations Received 1,334,937 - 1,334,937 

Appropriations Transferred-in/out 8,561 - 8,561 

Other Adjustments (45,433) - (45,433)

Appropriations Used (973,223) - (973,223)

Change in Unexpended Appropriations 324,842 - 324,842 

Total Unexpended Appropriations: Ending Balance 1,888,345 (5,113) 1,883,232 

Cumulative Results of Operations

Beginning Balances 523,356 5,113 528,469 

Other Adjustments (544) - (544)

Appropriations Used 973,223 - 973,223 

Transfers-in/out Without Reimbursement (195,928) - (195,928)

Imputed Financing 2,714 - 2,714 

Other - - - 

Net Cost of Operations 786,828 - 786,828 

Net Change in Cumulative Results of Operations (7,363) - (7,363)

Cumulative Results of Operations: Ending Balance 515,993 5,113 521,106 

TOTAL NET POSITION $ 2,404,338 $ - $ 2,404,338 
121 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

SECTION 2 | Financial Section (Unaudited)

Combining Statements of Budgetary Resources

The Combining Statements of Budgetary Resources combines 

the availability, status, and outlays of DLA GF budgetary 

resources. The below tables provide the Combining Statements of the Budgetary Resources disaggregated by DLA GF 

programs for the years ended September 30, 2022 and 2021, 

respectively. As the Combining Statements of the Budgetary 

Resources are prepared at the appropriation level, DLA 

GF presented the programs by appropriation. However, for 

reporting purposes, due to the materiality and size of Family 

Housing, DLA GF combined the Family Housing Program 

with MILCON in its Statements of Net Cost for presentation 

purposes.

Operation

and 

Maintenance

Procurement 

Defense-Wide

Research, 

Development, 

Test 

& Evaluation

Family 

Housing

Military 

Construction

FY 2022 

Total

BUDGETARY RESOURCES 

Unobligated Balance From 

Prior Year Budget Authority, 

Net $ 22,688 $ 7,606 $ 85,131 $ 337 $ 495,938 $ 611,700 

Appropriations 426,830 510,896 350,004 - 137,530 1,425,260 

Spending Authority From 

Offsetting Collections 32,466 - 29,468 - - 61,934 

TOTAL BUDGETARY 

RESOURCES $ 481,984 $ 518,502 $ 464,603 $ 337 $ 633,468 $ 2,098,894 

STATUS OF BUDGETARY 

RESOURCES 

New Obligations and Upward 

Adjustments $ 461,506 $ 502,829 $ 354,728 $ - $ 169,311 $ 1,488,374 

Unobligated Balance, 

End of Year:

Apportioned, Unexpired 

Accounts 694 15,420 99,769 - 451,376 567,259 

Unexpired Unobligated 

Balance, End of Year 694 15,420 99,769 - 451,376 567,259 

Expired Unobligated Balance, 

End of Year 19,784 253 10,106 337 12,781 43,261 

Total Unobligated Balance, 

End of Year 20,478 15,673 109,875 337 464,157 610,520 

TOTAL BUDGETARY 

RESOURCES $ 481,984 $ 518,502 $ 464,603 $ 337 $ 633,468 $ 2,098,894 

OUTLAYS, NET

Outlays, Net $ 396,773 $ 14,814 $ 279,349 $ 271 $ 220,997 $ 912,204 

AGENCY OUTLAYS, NET $ 396,773 $ 14,814 $ 279,349 $ 271 $ 220,997 $ 912,204 

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

Combining Statement of Budgetary Resources

For the Year Ended September 30, 2022 (dollars in thousands)
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 122

Financial Section (Unaudited) | SECTION 2

Operation

and 

Maintenance

Procurement

Defense-Wide

Research, 

Development, 

Test 

& Evaluation

Family 

Housing

Military 

Construction

FY 2021 

Total

BUDGETARY RESOURCES 

Unobligated Balance From 

Prior Year Budget Authority, 

Net $ 66,210 $ 1,398 $ 59,331 $ 549 $ 490,617 $ 618,105 

Appropriations 395,017 390,459 252,947 - 304,765 1,343,188 

Spending Authority From 

Offsetting Collections 24,015 - 81,100 - - 105,115 

TOTAL BUDGETARY 

RESOURCES $ 485,242 $ 391,857 $ 393,378 $ 549 $ 795,382 $ 2,066,408 

STATUS OF BUDGETARY 

RESOURCES 

New Obligations and Upward 

Adjustments $ 445,879 $ 384,170 $ 323,207 $ - $ 297,161 $ 1,450,417 

Unobligated Balance, 

End of Year:

Apportioned, Unexpired 

Accounts 1,360 7,357 60,818 - 478,465 548,000 

Unexpired Unobligated 

Balance, End of Year 1,360 7,357 60,818 - 478,465 548,000 

Expired Unobligated Balance, 

End of Year 38,003 330 9,353 549 19,756 67,991 

Total Unobligated Balance, 

End of Year 39,363 7,687 70,171 549 498,221 615,991 

TOTAL BUDGETARY 

RESOURCES $ 485,242 $ 391,857 $ 393,378 $ 549 $ 795,382 $ 2,066,408 

OUTLAYS, NET

Outlays, Net $ 424,537 $ 19,918 $ 293,100 $ 692 $ 232,052 $ 970,299 

AGENCY OUTLAYS, NET $ 424,537 $ 19,918 $ 293,100 $ 692 $ 232,052 $ 970,299 

Combining Statement of Budgetary Resources 

For the Year Ended September 30, 2021 (dollars in thousands)

Sea Ops

Marine Corps Staff Sgt. 

Austin McHenory and 

Sgt. Liam Moore prepare 

a volumetric charge 

during an explosive 

ordnance disposal 

training event aboard 

the USS Essex in the 

Philippine Sea, Feb. 9, 

2022. Photo By: Marine 

Corps Sgt. Israel Chincio
123 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

SECTION 2 | Financial Section (Unaudited)

Hawaii Formation

Sailors man the rails as the USS Abraham Lincoln pulls into Joint Base Pearl Harbor-Hickam, Hawaii, June 26, 2022, 

during Rim of the Pacific, the world’s largest international maritime exercise. Photo By: Navy Seaman Kassandra Alanis
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 124

Financial Section (Unaudited) | SECTION 2

THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY 

Idaho National Guardsmen conduct medevac training at the Orchard 

Combat Training Center in Boise, Idaho, March 30, 2022.

Other Information

SECTION 3

◄ PURPLE HAZE - BOISE, IDAHO

126

Page no. 

PHOTO BY:

IDAHO NATIONAL GUARD MASTER SGT. BECKY VANSHUR

UNAUDITED

DEFENSE LOGISTICS AGENCY FY 2022 | General Fund
IN THIS SECTION:

128 Summary of Financial Statement Audit 

and Management Assurances

132 Management Challenges

136 Payment Integrity

136 Grants Program

SECTION 3 Other Information

UNAUDITED

FY 2022 | General Fund

Recovery Ready

Sailors and Marines prepare to conduct launch and recovery training using combat rubber raiding craft 

from the ballistic missile submarine USS Georgia near Souda Bay, Greece, March 27, 2022. 

Photo Credit: Marine Corps Sgt. Dylan Chagnon
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 128

Other Information (Unaudited) | SECTION 3

The audit reports on the FY 2022 and FY 2021 DLA GF financial 

statements identified seven material weaknesses or DLA GF. 

Table 1 below provides a summary of the financial statement 

audit results for FY 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 nonconformances 

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.

Table 1: FY 2022 Summary of the Financial Statement Audit

Audit Opinion Disclaimer

Restatement Yes

Material Weaknesses Beginning 

Balance New Resolved Consolidated Ending Balance

Property, Plant & Equipment 1 - - - 1

Fund Balance with Treasury 1 - - - 1

Accounts Receivable and Revenue 1 - - - 1

Accounts Payable and Expenses 1 - - - 1

Financial Reporting 1 - - - 1

Oversight and Monitoring 1 - - - 1

Information Systems 1 - - - 1

Total Material Weaknesses 7 - - - 7

SUMMARY OF FINANCIAL STATEMENT AUDIT 

AND MANAGEMENT ASSURANCES

Deck Duty

Sailors participate in a 

replenishment aboard 

the USS Dewey in the 

Philippine Sea, March 18, 

2022. Photo By: Navy Petty 

Officer 1st Class Benjamin 

A. Lewis
129 Defense Logistics Agency | FY 2022 GENERAL 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

Acquire-to-Retire: 

Property, Plant and 

Equipment

1 - - - - 1

Oversight and 

Monitoring 1 - - - - 1

Financial Reporting 1 - - - - 1

Fund Balance with 

Treasury 1 - - - - 1

Order-to-Cash:

Accounts Receivable 

and Revenue

1 - - - - 1

Procure-to-Pay: 

Accounts Payable 

and Expenses

1 - - - - 1

Total Material

 Weaknesses 6 - - - - 6

Table 2 summarizes DLA’s FY 2022 material weaknesses associated with GF.

Gathering Supplies

Army Pfc. Matthew Hopkins, a 

Test, Measurement and Diagnostic 

Equipment maintenance support 

specialist, checks the settings on a 

piece of test equipment in Zutendaal, 

Belgium, March 23, 2022. Hopkins is 

assigned to Company B, 87th Combat 

Sustainment Support Battalion, 

3rd Infantry Division Sustainment 

Brigade, and deployed to Europe 

with about 130 other soldiers from 

Fort Stewart, Georgia, providing 

support to the 405th Army Field 

Support Brigade, Army Field Support 

Battalion-Benelux, and the Army 

Prepositioned Stocks-2 worksite in 

Zutendaal, Belgium. Photo By: A 

Cameron Porter, Army
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 130

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 oversite 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
131 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

SECTION 3 | Other Information (Unaudited)

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 

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

Showing Appreciation

Erie County Medical Center’s staff shows appreciation to the Navy medical team supporting the COVID-19 response operations in Buffalo, New York, March 11, 2022. Northern Command through Army North remains committed to providing 

flexible Defense Department support to the government's COVID-19 response. Photo By: Army Spc. Khalan Moore

Section 803(a) requirements across all funds summarized in 

the table below. 
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 132

Other Information (Unaudited) | SECTION 3

MANAGEMENT CHALLENGES

(continued on next page)
133 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

SECTION 3 | Other Information (Unaudited)
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 134

Other Information (Unaudited) | SECTION 3
135 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

SECTION 3 | Other Information (Unaudited)

Scout Operations

Soldiers assigned to the 3rd Armored Brigade Combat Team, 4th Infantry Division conduct scout operations in Drawsko 

Pomorskie, Poland, April 29, 2022. The unit is assigned to V Corps, America’s forward-deployed corps in Europe that 

works alongside NATO allies in joint, bilateral and multinational training exercises. Photo by: Army Sgt. Andrew 

Greenwood
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 136

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 

(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 

Report (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 DLA GF provides cooperative agreements through the 

PTAP and strives to perform timely close out of awards for 

which the period of performance has expired. DLA GF has zero 

remaining awards that need to be closed out. 

Table 3 below summarizes the total number of Federal grant 

and cooperative agreement awards (amounts in quantity) and 

the balances (amounts in dollars) for which closeout has not 

yet occurred, but the period of performance has elapsed by 

more than two years or more prior to September 30, 2022.

Table 3: Cooperative Agreements

Risk Category 2-3 Years 3-5 Years More than 5 Years

Number of Grants/Cooperative Agreements with 

Zero Dollar Balances 0 0 0

Number of Grants/Cooperative Agreements with 

Undisbursed Balances 0 0 0

Total Amount of Undisbursed Balances 0 0 0

The DLA GF is unable to validate the completeness and accuracy of the cooperative agreements disclosed above due to limitations 

of financial and nonfinancial management processes and systems that support the financial statements, as disclosed in Note 1.B., 

Basis of Presentation and Accounting.

PAYMENT INTEGRITY

GRANTS PROGRAM

Air Force F-15C/D Eagles line up in formation behind an HH-60 Pave 

Hawk during a routine wing readiness exercise at Kadena Air Base, 

Japan, March 2, 2022.

APPENDIX

138

Page no. 

PHOTO BY: AIR FORCE AIRMAN 1ST CLASS STEPHEN PULTER

DEFENSE LOGISTICS AGENCY FY 2022 | General Fund

◄ EAGLE FORMATION - KADENA AIR BASE, JAPAN
139 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

APPENDIX A: SUMMARY OF FMFIA DEFINITIONS AND REPORTING

Category Definition Reporting

Control Deficiency

A. Exists when the design, implementation, or operation of 

a control does not allow management or personnel, in 

the normal course of performing their assigned functions, 

to achieve control objectives and address related risks.

B. Deficiency in Design: A deficiency in design exists 

when:

(1) a control necessary to meet a control objective is 

missing; 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 GENERAL FUND | Agency Financial Report 140

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

Summary of FMFIA Definitions and Reporting | APPENDIX A 
141 Defense Logistics Agency | FY 2022 GENERAL 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 GENERAL FUND | Agency Financial Report 142

J/D Codes, DLA HQ Program Support Structure, Roles and Responsibilities | APPENDIX B 

Pilot Prep

Air Force Staff Sgt. Jeremiah Necaise, left, helps a Bangladesh air force pilot prepare his night vision goggles for a 

night sortie during Exercise Cope South in Bangladesh, Feb. 24, 2022. Photo Credit: Air Force Tech. Sgt. Christopher 

Hubenthal

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.
143 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

APPENDIX C | Abbreviations & Acronyms

A&FP Accounting & Finance Policy Directorate

A/BO Approving/Billing Officials

A/OPC Agency/Organization Program Coordinators

AU/SAU Assessable and Sub Assessable Unit

ADA Anti-Deficiency Act

AFR Agency Financial Report

AMDPCS Air and Missile Defense Planning and Control System 

APR Annual Performance Report 

ARP American Rescue Plan 

ATP Authorization to Proceed 

BRP/LRP Business Process Engineering/Laws Regulation and Policy

BRAC Base Realignment and Closure

BTS Business Transformation Study 

CAC Common Access Card

CAPs Corrective Action Plans

CCMD Combatant Command

CCs Critical Capabilities

CCT COVID-19 Coordination Team

CFO Chief Financial Officers

Charge Card Act Charge Card Abuse Prevention Act

CIO Chief Information Officer

CIP Construction-in-Progress

CMR Cash Management Report

COLA Cost-of-Living Adjustments

COTS Commercial Off-the-Shelf

COVID-19 Coronavirus-19

CPM Component Program Manager 

CSRS Civil Service Retirement System

CTC Cost To Complete 

DATA Act Digital Accountability and Transparency Act of 2014

DCAS Defense Contract Administration Services

DFAS Defense Financial and Accounting Service

DAI Defense Agencies Initiative

DERA Defense Environmental Restoration Program

DIB Defense Industrial Base

DISA Defense Information System Agency 

DLA Defense Logistics Agency

DoD Department of Defense

DoDM DoD Manual

DOL Department of Labor

ODCFO Deputy Chief Financial Officer

DQP Data Quality Plan

DSA Defense Supply Agency

DSS Distribution Standard System

EBS Enterprise Business System

ECC Resource Planning Central Component

E&DL Environmental and Disposal Liabilities 

ELM Envoirmental Liabilities Management

ERM Enterprise Risk Management

ERP Enterprise Resource Planning

FASAB Federal Accounting Standards Advisory

FBwT Fund Balance with Treasury

FECA Federal Employees’ Compensation Act

FEMA Federal Emergency Management Agency

FERS Federal Employees Retirement System

FFMIA Federal Financial Management Improvement Act 

FFMSR Federal Financial Management System Requirements

FMFIA Federal Managers’ Financial Integrity Act

FMR Financial Management Regulations

FMS Foreign Military Sales

FPAs Federal Program Agencies

FY Fiscal Year

GAAP Generally Accepted Accounting Principles

GAO Government Accountability Office

GBADC2 Allied Ground Based Air Defense Command and Control 

GF General Fund

GMRA Government Management Reform Act

GPC Government Purchase Card 

GPRA Government Performance and Results Act

GSA General Services Administration

APPENDIX C: ABBREVIATIONS & ACRONYMS
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 144

Abbreviations & Acronyms | APPENDIX C 

HHS Health and Human Services

HPCON Health Protection Condition Level Framework & Authority

HQ Headquarter 

ICOFS Internal Controls Over Financial Systems

ICOR Internal Control over Reporting

ICOR-FR Internal controls over Reporting- Financial Reporting

ICOR-O Internal Control over Operations

ID Identification

IOD Insight on Demand

IPA Independent Public Accounting

IPs Improper Payments

IRP Installation Restoration Program

IT Information Technology

IUS Internal Use Software

LOEs Lines of Effort

MILCON Military Construction 

MOCAS Mechanization of Contract Administration Service 

MRE Meal, Ready-To-Eat

MSC Major Subordinate Command

NAVFAC U.S. Naval Facilities Engineering Command

NDAA The National Defense Authorization Act

NDS National Defense Strategy

NFR Notice of Findings and Recommendations

NSW Naval Special Warfare

O&M Operation and Maintence 

OCONUS Outside the Continental United States

ODCFO Office of the Deputy Chief Financial Officer

ODOs Other Defense Organizations

OI Other Information

OIG Office of the Inspector General

OMB Office of Management and Budget

OPM Office of Personnel Management 

OSHA Occupational Safety and Health Administration

OUSD Office of the Under Secretary of Defense

OUSD(C) Office of the Under Secretary of Defense (Comptroller)

OWCP Office of Workers’ Compensation Programs 

P3 Public-Private Partnerships

PACU Preprocessor Avionics Control Unit

PAR Performance and Accountability Report

PDW Procurement Defense-Wide

PMO Program Management Office

PP&E General Property, Plant and Equipment

PPA Prompt Payment Act

PPE Personal Protective Equipment 

PTACs Procurement Technical Assistance Centers

PTAP Procurement Technical Assistance Program

R&D Research & Development

RACER Remedial Action Cost Engineering and Requirements

RCRA Resource Conservation and Recovery Act

RDT&E Research,Devlopment,Test and Evualtion 

RSI Required Supplementary Information

RT Radiographic Technology

SAP Systems Applications and Product

SAP S/4HANA Business Suit 4 SAP HANA

SCH SAP’s Secure HANA Cloud Platform

SFFAS Statement of Federal Financial Accounting Standards 

SFIS Standard Financial Information Structure 

SLOA Standard Line of Accounting 

SOA Statement of Assurance

SMC Senior Management Council

TAS Treasury Account Symbol 

TDD Treasury Direct Disbursing

TF Transaction Fund

TFM Treasury Financial Manual

TI Treasury Index

U.S. United States 

UCO Unfilled Customer Orders

UDO Undelivered Orders 

UoT Universe of Transactions

USACE U.S. Army of Corps of Engineers

USMC United States Marine Corps

USSGL U.S. Standard General Ledger

VV&A Validated, Verified, and Accredited

WCF Working Capital Fund
145 Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report

APPENDIX | Acknowledgments

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.

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. 

Icons created by Sahab Uddin, Gregor Cresnar, 

Made x Made and Vectors Point and from Noun Project.
Defense Logistics Agency | FY 2022 GENERAL FUND | Agency Financial Report 146

Other Information (Unaudited) | APPENDIX 

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