Figure 2-1. Four Principal Financial Statements

Department of Defense Agency Financial Report 2008

PRINCIPAL FINANCIAL STATEMENTS AND NOTES

The financial statements of the Department include four principal statements listed in Figure 2-1.

The statements, presented in Section 2, Financial Information, reflect the aggregate financial posture of the Department and include

both the proprietary (federal accounting standards) and budgetary resources of the Department. The Department's financial management environment is large and complex, includes an asset base of $1.7 trillion, and more than 3 million military and civilian employees on installations in every state and around the world.

Figure 2-1. Four Principal Financial Statements

Statement

Balance Sheet

Statement of Net Cost

Statement of Changes in Net Position

Statement of Budgetary Resources

What Information It Provides

Reflects the Department's financial position as of the statement date (September 30, 2008). The assets are the amount of future economic benefits owned or managed by the Department. The liabilities are amounts owed by the Department. The net position is the difference between the assets and liabilities.

Shows separately the components of the net cost of the Department's operations for the period. Net cost is equal to the gross cost incurred by the Department less any exchange revenue earned from its activities.

Presents the sum of the cumulative results of operations since inception and unexpended appropriations provided to the Department that remain unused at the end of the fiscal year. The statement focuses on how the net cost of operations is financed. The resulting financial position represents the difference between assets and liabilities as shown on the consolidated balance sheet.

Provides information about how budgetary resources were made available as well as their status at the end of the period. It is the only financial statement exclusively derived from the Department's budgetary general ledger in accordance with budgetary accounting rules.

SECTION 2

Financial Information 33

Department of Defense Agency Financial Report 2008

Department of Defense Consolidated Balance Sheet Agency Wide

ASSETS (Note 2) Intragovernmental:

Fund Balance with Treasury (Note 3) Investments (Note 4) Accounts Receivable (Note 5) Other Assets (Note 6) Total Intragovernmental Assets Cash and Other Monetary Assets (Note 7) Accounts Receivable, Net (Note 5) Loans Receivable (Note 8) Inventory and Related Property, Net (Note 9) General Property, Plant and Equipment, Net (Note 10) Investments (Note 4) Other Assets (Note 6) Stewardship Property, Plant & Equipment (Note 10) TOTAL ASSETS

2008 Consolidated

$ 468,396.9 394,508.5 1,326.2 1,282.9

$ 865,514.5 2,804.8 7,784.5 236.0

236,027.7 514,876.3

1,861.5 29,005.0

$ 1,658,110.3

Dollars in Millions

Restated 2007 Consolidated

$ 396,530.7 333,711.0 1,412.9 1,212.5

$ 732,867.1 2,591.1 7,451.4 212.2

224,948.7 474,530.5

1,412.3 28,166.9

$ 1,472,180.2

LIABILITIES (Note 11) Intragovernmental:

Accounts Payable (Note 12) Debt (Note 13) Other Liabilities (Note 15) Total Intragovernmental Liabilities Accounts Payable (Note 12) Military Retirement and Other Federal Employment Benefits (Note 17) Environmental and Disposal Liabilities (Note 14) Loan Guarantee Liability (Note 8) Other Liabilities (Note 15) Commitments & Contingencies (Note 16) TOTAL LIABILITIES

1,687.4 262.6

11,709.8 $ 13,659.8 $

32,095.2

1,911.5 307.0

11,420.8 13,639.3 28,695.5

1,984,605.4 70,505.9 24.5 34,107.6

1,874,679.5 72,489.9 25.0 29,286.4

$ 2,134,998.4 $ 2,018,815.6

NET POSITION Unexpended Appropriations - Earmarked Funds (Note 23) Unexpended Appropriations - Other Funds Cumulative Results of Operations - Earmarked Funds Cumulative Results of Operations - Other Funds TOTAL NET POSITION

4.9 446,864.3 (1,345,925.0) 422,167.7 $ (476,888.1)

8.1 378,190.7 (1,280,107.2) 355,273.0 $ (546,635.4)

TOTAL LIABILITIES AND NET POSITION

$ 1,658,110.3 $ 1,472,180.2

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

SECTION 2 34

Financial Information

Department of Defense Agency Financial Report 2008

Department of Defense Consolidated Statement of Net Cost Agency Wide

Dollars in Millions

2008

Restated 2007

Consolidated Consolidated

Program Costs Gross Costs (Less: Earned Revenue) Net Program Costs

Net Cost of Operations

$ 732,319.4 $ (56,272.5)

$ 676,046.9 $ $ 676,046.9 $

646,987.0 (45,575.6) 601,411.4 601,411.4

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

SECTION 2 35

Financial Information

Department of Defense Agency Financial Report 2008

Department of Defense Consolidated Statement of Changes in Net Position Agency Wide

For Periods ended September 30, 2008 and 2007

2008

2008

Earmarked Funds All Other Funds

Cumulative Results Of Operations Beginning Balances Adjustments:

Changes in accounting principles Corrections of errors Beginning balances, as adjusted

Budgetary Financing Sources: Appropriations used Nonexchange revenue Donations and forfeitures of cash and cash equivalents Transfers(in/out without reimbursement)

OOtthheerr Financing Sources (Non-Exchange) Donations and forfeitures of property Transfers(in/out without reimbursement ) Imputed financing

OTothtaelr Financing Sources Net Cost of Operations Net Change Cumulative Results of Operations

Unexpended Appropriations Beginning Balances Adjustments:

Changes in accounting principles Beginning balances, as adjusted

Budgetary Financing Sources: Appropriations received Appropriations transferred (in/out) Other adjustments Appropriations used

Total Budgetary Financing Sources Unexpended Appropriations Net Position

$ (1,211,821.2)

0 0 $ (1,211,821..2)

3.2 3,634.8

34.1 (718.6)

0

0

(436.1)

0

(12.1)

$

2,505.3

50,377.1

$ (47,871.8)

$ (1,259,693.0)

8.1

0

$

8.1

0

0

0

(3.2)

$

(3.2)

$

4.9

$ (1,259,688.1)

$ 285,681.6 0 1,305.4

$ 286,987.0

662,422.0 84.6 0

877.6 (1.0)

1.5 384.9 16,098.1 6,674.0 $ 68663,75,4519.37.0 $ 48,948.7 $ 335,935.7

378,190.7

0 $

378,190.7

742,587.3 (434.4)

(11,057.3) (662,422.0) $ 68,673.6 $ $ 446,864.3 782,800.0

2008 Eliminations

$

0

0

0

$

0

0 0 0 0 0

0

0

11,923.2

0

$

11,923.2

11,923.2

$

0

$

0

0

0

$

0

0

0

0

0

$

0

$

0

$

0

2008 Consolidated

Restated 2007

Earmarked Funds

Restated 2007

All Other Funds

$ (926,139.6)

0 1,305.4 $ (924,834.2)

$ (1,206,769.4)

0 0 $ (1,206,769.4)

$ 306,618.6

(4,230.9) 0

$ 302,387.7

662,425.2 3,719.4 34.1 159.0 (1.0)

1.5

(51.2)

4,174.9

6,661.9

$ 67677,162,034.68.9

$

1,076.9

$ (923,757.3)

3.3 3,076.9

63.8 200.2

0

0

243.3

0

(21.8)

$

3,565.7

8,617.5

$ $ (1(,52,1015,18.281).2)

581,262.3 19.5 0

(78.4) 0

13.8 (230.5) 14,813.4 (8,014.8) $ 58670,738,158.63.0 $ (15,400.7) $ 286,987.0

378,198.8

0

$

$

378,198.8

11.4

307,698.0

0

3,745.5

11.4

$

311,443.5

742,587.3

(434.4)

(11,057.3)

(662,425.2)

$

68,670.4

$

$ 4(44766,8,86898.2.1)

0

0

0

(3.3)

$

(3.3)

$

8.1

$ (1,211,813.1)

653,684.9

(190.2)

(5,485.2)

(581,262.3)

$

66,747.2

$

$ 378,190.7 665,177.7

Restated 2007

Eliminations

Dollars in Millions

Restated 2007

Consolidated

$

0

$ (900,150.8)

0

(4,230.9)

0

0

$

0

$ (904,381.7)

0 0 0 0 0

0

0

10,392.1

0

$

10,392.1

10,392.1

$

0

$

0

581,265.6 3,096.4 63.8 121.8 0

13.8 12.8 4,421.3 (8,036.6) $ 58600,915,481.91.4 $ (20,452.5) $ (924,834.2)

0

307,709.4

0

3,745.5

$

0

$ 311,454.9

0

653,684.9

0

(190.2)

0

(5,485.2)

0

(581,265.6)

$

0

$

66,743.9

$ $

0 0

$ $ 3(57486,1,69385.8.4)

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

SECTION 2 36

Financial Information

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