1. Intragovernmental Eliminations Brief to the EB-SPS Users’ Conference E-Business/SPS Joint Users’ Conference November 15-19, 2004 Houston, TX

2. Transforming the Acquisition Domain Overview Introduction Intragovernmental Transactions Defined Eliminations Defined DoD’s Material Weakness DoD’s Proposed Solution IGT – The Future Resources

3. Transforming the Acquisition Domain Introduction Intragovernmental Transactions (IGT) and Eliminations is a Government-wide Material Weakness IGT is one of DoD’s 11 Material Weaknesses Prevents Unqualified Audit Opinion on DoD and Government-wide Financial Statements

4. Transforming the Acquisition Domain Intragovernmental Transactions - Defined Any transactions involving sales, services or transfers between two entities of the federal government There are 3 recognized levels of intragovernmental transactions –Level 1 = Between DoD and Non-DoD Entities –Level 2 = Between DoD Components –Level 3 = Within DoD Components

5. Transforming the Acquisition Domain Eliminations – Defined Generally Accepted Accounting Principles (GAAP) require the elimination of intragovernmental transactions from consolidated financial statements to prevent overstating accounts for intra-entity activity –Revenues must match Expenses (and Capitalized Assets) –Accounts Receivable must match Accounts Payable –Transfers In must match Transfers Out When the seller’s revenue matches the buyer’s expenses, both are eliminated - removed from the consolidated total Goal is to eliminate all intragovernmental balances with no adjustments needed

6. Transforming the Acquisition Domain DoD’s Material Weakness Eliminations must be fully supported with transaction level details, including identification of buyers and sellers – they must be auditable DoD cannot support eliminations with the details required to pass an audit –Most DoD systems do not capture the required data fields –Lack of standardization –Timing differences –Inability to reconcile between trading entities

7. Transforming the Acquisition Domain DoD’s Solution Develop a clearing house for DoD intragovernmental transactions that will: –Allow for identification of parties to transactions –Capture and summarize transactions for reporting purposes –Facilitate reconciliation of reported intragovernmental transactions to the source accounting systems and between trading partners –Provide detail support necessary to pass audit –Interface with OMB’s Intragovernmental Transactions Exchange for level 1 transactions to which DoD is a party

8. Transforming the Acquisition Domain IGT – The Future Use SPS to create and route intragovernmental transactions Incorporate mandatory data elements into ERP solutions IGTE/OMB future

9. Transforming the Acquisition Domain Resources OSD (C) –Kathy.sherrill@osd.milKathy.sherrill@osd.mil OSD (AT&L) –Lisa.romney@osd.milLisa.romney@osd.mil IGTE Program Help Desk –igthelp@targetsystems.usigthelp@targetsystems.us IGTS Program Office: –igtsinfo@dfas.miligtsinfo@dfas.mil

10. Transforming the Acquisition Domain Transactions between buyers and sellers of same agency Transactions between buyers and sellers of DoD agencies Transactions between agencies and private sector DoD AgenciesArmyNavyAFFed Agencies ArmyNavyAF Fed AgenciesDoD Federal Government Federal Government financial statement level DoD financial statement level Federal to Federal agency eliminations Department financial statement level DoD to DoD agency eliminations Agency financial statement level Within agency eliminations Transactions between DoD and other Fed agencies Fed Agencies DoD Agencies Intragovernmental Transactions in Consolidated Financial Reports