DoD Financial Management Regulation Volume 6B, Chapter

DoD Financial Management RegulationVolume 6B, Chapter 13January 2002StepsRequired Action5. The DoD accounting centers identifythe elimination amounts required for theeliminations column of theconsolidating DoD Agency-widefinancial statements.Using the DDRS-AFS trail balancedatabase with trading partnerattributes, prepare entity statementsincluding level 2 elimination data.6. The DoD accounting centers useDDRS-AFS management reportsmodule to prepare schedules ofintragovernmental balances for theRequired Supplementary InformationSection.Prepare the schedules withintragovernmental balances for theRequired SupplementaryInformation Section. Includeseparate schedules for levels 1 and 2eliminations in the DoD stand-aloneand Agency-wide financialstatement reports.7. Federal Agencies' Centralized TrialBalance System (FACTS) I Reporting.Ensure trading partner attributes (e.g.,Government, Treasury Index) arecorrectly reconciled and submitted.Prepare DoD FACTS I trial balancewith notes from the same trialbalance used to prepare DoDfinancial statements. Identificationof Budget Function Codes in trialbalance submission is required.Presentation. Where Data isDisplayedElimination amounts are displayedin the eliminations columns of theConsolidating Balance Sheet,Consolidating Statement of NetCost, and the ConsolidatingStatement of Changes in NetPosition.The schedules will be included inthe Required SupplementaryInformation Section of annualfinancial statements. See Chapter12 of this volume.Level 3 eliminations schedules arenot published in the annual financialstatements. Level 3 schedules aremaintained as supporting documentsto the DoD stand-alone statements.Transmitted to Department of theTreasury, Financial ManagementService.Reference document: TreasuryFinancial Manual, Volume 1, Chapter4000 FACTS I(Website address at:http://www.fms.treas.gov/tfm)Table 13-1 (Continued)1303 LEVELS OF INTRAGOVNERMENTAL TRADING PARTNERSWith regard to sales of goods or services between federal entities, there are three levelsof intragovernmental trading partners for which intragovernmental transactions must beidentified.130301.Level 1 Trading Partners. Level 1 trading partners are non-DoD federalagencies. Level 1 transactions are between the Department and other federal agencies, e.g.,between the Department of the Air Force and the Department of Commerce. Level 1 transactionbalances are identified by Treasury Index (TI) codes and are eliminated to prepare the “FinancialReport of the U.S. Government” (FRUSG), formerly called the “Consolidated FinancialStatement of the United States.” The Department of the Treasury prepares the FRUSG from thetrial balances reported by federal agencies via the FACTS I. Level 1 transactions include salesof goods and services, and specialized transactions, such as loans, interest receivable, other postemployment benefits, or civil service retirement benefit payments. The DoD reporting entitiesare to document the procedures the entity used to identify and verify the accuracy of its13-6

DoD Financial Management RegulationVolume 6B, Chapter 13January 2002intragovernmental assets, liabilities, and revenue balances. Guidance on level 1 trading partnertransactions is provided in sections 1307 and 1311 of this volume.130302.Level 2 Trading Partners. Level 2 trading partners are other DoDreporting entities. Level 2 balances result from transactions between the DoD reporting entities,e.g., between the Department of the Army Working Capital Funds (WCF) and the Department ofthe Navy General Funds. The DoD reporting entities are identified in Chapter 1, section 0106 ofthis volume. Level 2 transactions are identified by TI codes and supplemental internal DoDcodes. The elimination of these asset, liability and revenue balances is necessary for thepreparation of the DoD Agency-wide Consolidated Annual Financial Statements. Guidance onlevel 2 trading partner transactions is provided in sections 1304 through 1306 of this volume.130303.Level 3 Trading Partners. Level 3 trading partners are within a DoDreporting entity. Level 3 transactions are between Components of the DoD audited financialstatement reporting entities, i.e., Army WCF, Supply Management and Army WCF, DepotMaintenance, Other; and Department of the Navy General Fund, Operations and Maintenanceand Department of the Navy General Fund, Research Development, Test, and Evaluation. Thereare up to four sub-levels of eliminations. The elimination totals are shown on the DoD reportingentity’s supporting consolidating statements. For example, the Navy General Funds level 3eliminations would be between: (A) Navy and Marine Corps, (B) Navy Military Personnel andNavy Procurement, (C) Navy Military Personnel trial balance AT17AA1 1453 and NavyMilitary Personnel trial balance AT17AA1 1405, and (D) internally within Navy MilitaryPersonnel trial balance AT17AA1 1453. Guidance on level 3 trading partner transactions isspecified in sections 1304 through 1306 of this volume.1304 AGGREGATION AND EXCHANGE OF INTRA-DOD TRADING PARTNER DATAON THE SALE OF GOODS AND SERVICES130401.In the majority of DoD systems, at the present time, seller-sideinformation is more complete or determinable than buyer-side information because more detailedinformation has been required to support programs with reimburseable authority. In many cases,systems limitations do not enable the DoD accounting centers to break out the buyer’s sidegovernmental accounts payable, costs, and advances by specific trading partner without anunreasonable amount of effort by the DoD accounting centers and the DoD Components.Furthermore, the time frames involved in the transmission of transaction data from sellers tobuyers cause delayed receipt and recording of transactions in the buyer’s account. In otherwords, the buying activity may not have: (A) recorded expenses equal to the earnings reportedby the performer, (B) recorded accounts payable equal to the accounts receivable reported by theperformer, and (C) recorded all of the changes in the status of advances provided to theperformer.For the reasons stated above, the Department will base its FY 2001intragovernmental reporting for sales and services primarily on seller-side data.13-7

DoD Financial Management RegulationVolume 6B, Chapter 13January 2002Therefore, even more emphasis must be placed on ensuring the completeness andaccuracy of data provided by the sellers for accounts receivable, earned revenue, and advancesfrom others (unearned revenue). All DoD accounting centers and DoD Components must workjointly to extract seller-side information for their intragovernmental trading partners. Seller-sideintragovernmental balances must be accumulated at the buyer-side entity code trial balance level(see Appendix A). The accounting centers then compare these balances to summary buyer-sidedata at the entity code trial balance level. Based on these comparisons, the amount ofunrecorded intragovernmental transactions on the buyer-side can be calculated and theapplicable accrual entries recorded. Seller-side information must be distributed at the entitycode trial balance level. Any allocation method used must be documented and appropriatedocumentation must be maintained. Personnel at the operating locations, the budget offices, orthe customer’s financial management offices should be contacted, as they may be able to assistwith this effort. Each accounting center shall formulate its plan to identify both buyer-and sellerside trading partner data and submit it to DFAS-Arlington.130402.The DoD accounting centers, in conjunction with the supported DoDComponents, will accumulate seller-side data at the buyer entity code trial balance level and useit to adjust buyer side accounts at the reporting entity level. See Chapter 2, Table 2-4 of thisvolume for milestones related to exchange of data with trading partners.A.Step 1. The DoD accounting centers shall work with their customers toaggregate the seller-side balances at the buyer’s entity code trial balance level. These balanceswill include all level 2 and 3 accounts receivable, earned revenue, and advances from others(unearned revenue) amounts for the entity code trial balance levels they service. Eachaccounting center shall input the seller-side totals into the DDRS-AFS.B.Step 2. After the seller-side balances are input into DDRS-AFS, theaccounting center maintaining the departmental level general ledger accounts for the buyerreporting entity makes departmental level adjusting entries to balance the appropriate accountbalances with the seller-side records in DDRS-AFS. The adjusting entries shall be reversed atthe beginning of the next fiscal year.C.Step 3. The level 2 and level 3 eliminations shall be computed as part ofthe process of preparing the entity and supporting schedule level financial statements. The DoDaccounting centers must ensure that the buyer-side and seller-side data are in balance before theelimination entries are prepared.130403.Waiver from Elimination Adjustments. In some instances, a DoDreporting entity may believe that its buyer-side data is more complete, accurate, and supportedthan is the associated seller-side data. The DoD reporting entity with the supported buyer-sidedata must contact the DFAS-Arlington and the Office of the Deputy Chief Financial Officer,Director for Accounting Policy (ODCFO(AP)) to obtain a waiver from elimination adjustments.This waiver must be obtained by October 1st following fiscal year end. The DoD reportingentity should have discussed with its auditors the supportability of their buyer-side balances, aswell as the impact of the buyer-side adjustment on any anticipated audit opinion. If the buyerside adjustment waiver is obtained, the DoD accounting center supporting the reporting entity13-8

DoD Financial Management RegulationVolume 6B, Chapter 13January 2002will identify both seller-side and buyer-side balances into DDRS-AFS by the 18th work day ofOctober. The buyer-side balances supplied by any waived activity will be used to populate theseller-side balances of the trading partner. Therefore, the seller-side records will need to beadjusted to agree with the buyer-side records.A.If the seller-side DoD accounting center disagrees with the buyer-sidebalances, the DoD accounting center that is processing the buyer-side data must includedocumentation to support the buyer-side data. If both the DoD accounting centers agree that thebuyer-side data is more accurate and supported, the DoD accounting center providing the sellerside data shall use the buyer-side documentation as supporting evidence to adjust their seller-sidebalances when submitting seller-side data for the elimination balancing process. Suchadjustments will be recorded in accordance with time frames established annually by the DFASArlington.B.If both the DoD accounting center with the buyer-side data and the DoDaccounting center with the seller-side data have been waived from buyer-side adjustments, theDoD accounting centers shall work to reconcile the balances and to identify any reconcilingitems that must be considered during the eliminations process.130405.When gathering, reviewing, and exchanging data with intra-DoD tradingpartners at all levels, the DoD accounting centers shall ensure that seller-side data provided iscomplete and accurate. The DoD accounting centers must review data before exchanging datawith intra-DoD trading partners. This review shall identify any abnormal balances, such asnegative revenue. The DoD accounting centers shall work with their customers to resolve theabnormal balances and eliminate them before exchanging intra-DoD trading partner data.130406.The DoD accounting centers shall distribute undistributed collections anddisbursements before exchanging intra-DoD trading partner data. The DoD accounting centersshall allocate undistributed collections and disbursements to public and federal accountsreceivable and accounts payable. When allocating federal accounts receivable and accountspayable, the allocation should be to the entity code trial balance level before entering seller-sideinformation into the DDRS-AFS.130407.The DoD accounting centers shall ensure that the Report on PublicReceivables reconciles with the ending balance for accounts receivable with the public on thefinancial statements. In those cases where the Report on Public Receivables does not agree withthe ending balance for accounts receivable with the public on the financial statements, the DoDaccounting centers shall analyze accounts receivable and identify differences. Additionally,corrective actions shall be taken to bring the Report on Public Receivables and the financialstatements into agreement.130408.Any changes made to seller-side data after data was exchanged withtrading partner shall be communicated to the trading partner. These changes shall becommunicated by reissuing only the revised seller-side data to respective trading partners.13-9

DoD Financial Management RegulationVolume 6B, Chapter 13January 2002130409.For financial statement disclosure requirements related to the eliminationof abnormal balances, see section 100207 of this volume.1305 INTRA-DOD SELLER/BUYER ACCRUAL ADJUSTMENT CALCULATIONThe seller-side entity code trial balance level balances for accounts receivable, advancesfrom others (unearned revenue), and earned revenue are provided to the accounting centerresponsible for the buyer-side entity code trial balance level via DDRS-AFS. The buyer-sideaccounting center compares this seller-side data to its buyer-side intra-DoD governmentalbalances for accounts payable, advances to others, and purchases, respectively. The resultingreconciling calculation is reflected in Table 13-2 using the applicable United States GovernmentStandard General Ledger (USSGL) accounts.Total of Seller Amounts Reportedfor the Entity Code Trial BalanceLevel1310 (Fed) Accounts Receivable2310 (Fed) Advances from Others2320 (Fed) Deferred Credits5100 (Fed) Revenue from GoodsSoldPlus5200 (Fed) Revenue from ServicesProvidedPlus5400 (Fed) Benefit ProgramRevenuePlusBuyer Entity Code Trial BalanceLevel BalancesLessLessLessLess2110 (Fed) Accounts Payable1410 (Fed) Advances to Others1450 (Fed) Prepayments6100 (Fed) Operating Expenses/Program Costs (relatedto goods or servicespurchased)PlusAmount ofAccrualAdjustmentEqualsEqualsEqualsEquals6500 (Fed) Cost of Goods SoldPlus6900 (Fed) Nonproduction Costs5900 (Fed) Other RevenueTable 13-21306 RECORDINGBUYERSIDEDEPARTMENTALTRANSACTION BALANCE ADJUSTMENTSLEVELINTRA-DOD130601.The following adjusting entries are based upon the data presented inTable 13-3. The data presented for the selling activity in Table 13-3 represents the aggregatedtotals (for selected accounts) of all entities that provided goods or services to the buyer. Thesummary proprietary balances of the sellers are compared to the related proprietary balances ofthe buyer. At the departmental level, the buyer-side balances are adjusted so that the proprietaryaccounts equal the totals from the sellers’ records for intra-DoD transactions. In addition, thebuyer-side related budgetary accounts are adjusted. These adjusting entries must be reversed atthe start of the next fiscal year. Subparagraphs 130601 A through D, below, provide samplegeneral ledger transactions to record these adjustments. Table 13-3 contains the sample balancesused in the sample transactions in those subparagraphs.13-10

DoD Financial Management RegulationVolume 6B, Chapter 13January 2002SUM OF ALL INTRA-DOD SELLER-SIDE BALANCESFOR A SINGLE BUYER-SIDE ENTITY CODE TRIAL (Fed)(Fed)(Fed)Title of AccountDebitBalanceAccounts ReceivableAdvances from OthersDeferred CreditsRevenue from Services 0Table 13-3A.Entry 1-Accounts Receivable/Accounts PayableThe seller-side balances reflect Accounts Receivable of 700,000. The buyer-sidebalances reflect Accounts Payable of 300,000. The buyer-side records are adjusted to recordthe unrecorded increase in Accounts Payable of 400,000.1.Entry 1.A-Accounts Payable Accrual Adjustment for General Fund2110Operating Expenses/Program Costs (Fed) 400,000Accounts Payable (Fed)400,0004901Unexpended Obligations - Unpaid (Fed) 400,000Expended Authority - Unpaid (Fed)400,0005700Unexpended AppropriationsAppropriations UsedReporting ntry 1.B-Accounts Payable Accrual Adjustment for WorkingCapital Fund Reporting Entities.Dr6100CrDr2110Operating Expenses/Program Costs (Fed) 400,000Accounts Payable (Fed)400,0004901Unexpended Obligations - Unpaid (Fed) 400,000Expended Authority - Unpaid (Fed)400,0004801CrB.Entry 2–Advances from Others (Unearned Revenue)/Advances to OthersThe seller-side balances reflect Unearned Revenue (Account 2310, Advances fromOthers) of 100,000. The buyer-side records reflect Advances (Account 1410, Advances) of 700,000. The buyer-side records are adjusted to record the unrecorded decrease in Advances of 600,000.13-11

DoD Financial Management Regulation1.Fund Reporting Entities.Dr6100Cr1410Dr4802CrDrEntry 2.A–Advances to Others Accrual Adjustment for GeneralOperating Expenses/Program Costs (Fed) 600,000Advances to Others (Fed)600,0004902Unexpended Obligations - Paid (Fed)Expended Authority - Paid (Fed)600,000600,0005700Unexpended AppropriationsAppropriations Used600,000600,0003100CrVolume 6B, Chapter 13January 20022.Entry 2.B–Advances to Others Accrual Adjustment for WorkingCapital Fund Reporting Entities.Dr6100CrDr1410Operating Expenses/Program Costs (Fed) 600,000Advances to Others (Fed)600,0004902Unexpended Obligations - Paid (Fed)Expended Authority - Paid (Fed)4802CrC.600,000600,000Entry 3–Deferred Credits/PrepaymentsThe seller-side balances reflect Unearned Revenue (Account 2320, Deferred Credits) of 500,000. The buyer-side records reflect Prepayments (Account 1450, Prepayments) of 900,000. The buyer-side records are adjusted to record the unrecorded decrease in thePrepayments of 400,000.1.Entry 3.A–Prepayments Accrual Adjustment for General Fund1450Operating Expenses/Program Costs (Fed) 400,000Prepayments (Fed)400,0004902Unexpended Obligations - Paid (Fed)Expended Authority - Paid (Fed)400,000400,0005700Unexpended AppropriationsAppropriations Used400,000400,000Reporting Entities.Dr6100CrDr4802CrDr3100Cr13-12

DoD Financial Management Regulation2.Fund Reporting Entities.Dr6100CrDrD.Entry 3.B–Prepayments Accrual Adjustment for Working Capital1450Operating Expenses/Program Costs (Fed) 400,000Prepayments (Fed)400,0004902Unexpended Obligations - Paid (Fed)Expended Authority - Paid (Fed)4802CrVolume 6B, Chapter 13January 2002400,000400,000Entry 4-Revenue/CostThe process used within the Department to post undistributed disbursements necessitatesan allocation of the undistributed disbursements between Account 4902 (Fed) ExpendedAuthority Paid–Government, and Account 4902 (NFed) Expended Authority Paid–Nongovernment. Because an alloca

accounting office. 4. The DoD accounting centers identify elimination amounts required for the eliminations column of the consolidating DoD stand-alone entity financial statements (e.g., Army General Funds) and supporting schedules (e.g., Active Army Consolidating Statements). Using the DDRS-AFS trial balance data base with trading partner