United States Air Force 2004 Annual Financial Statement United States Air Force 2004 Annual Financial Statements Financing the Fight Table of Contents Message from the Secretary of the Air Force . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .ii Message from the Assistant Secretary of the Air Force, Financial Management and Comptroller . . . . . .iii Management Discussion and Analysis General Fund Air Force in Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 Air Force Organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 Major Commands, Direct Reporting Units and Field Operating Agencies . . . . . . . . . . . . . . . . .2 Fiscal Year 2004 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 Budget by Appropriation Categories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 Performance Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 Education and Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 Rated Retention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 Operational Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Financing the Fight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 Working Capital Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 Sustained Exceptional Logistics Support to the Warfighter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 Supply Management Activity Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 Depot Maintenance Activity Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 Information Services Activity Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 Financial Statements General Fund Principal Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 Footnotes to the Principal Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25 Consolidating and Combining Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .71 Required Supplementary Stewardship Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .83 Required Supplementary Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .93 Audit Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .103 Working Capital Fund Principal Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .113 Footnotes to the Principal Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .121 Consolidating and Combining Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .155 Required Supplementary Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .167 Audit Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .171 ii UUnniitteedd SSttaatteess AAiirr FFoorrccee •• 22000044 AAnnnnuuaall FFiinnaanncciiaall SSttaatteemmeenntt SECRETARY OF THE AIR FORCE WASHINGTON NNoovveemmbbeerr 22000044 MMeessssaaggee ffrroomm tthhee SSeeccrreettaarryy ooff tthhee AAiirr FFoorrccee Fiscal Year 2004 saw the Airmen of the United States Air Force consistently rise to ever-greater challenges. Whether conducting operations in Afghanistan, Iraq, over the Homeland or elsewhere, they continued to prove America is home to the greatest air and space force in history. The dedication shown by our Airmen is rooted in the fact that the Air Force is a team—a team of professionals. Every Airman is part of a cohesive whole. Financial managers are certainly important contributors and enable the efforts of the entire force. If strategic planning is the brain of any successful organization, and a talented workforce the heart, then superb financial management is the lifeblood of a dynamic, world-class enterprise. I am proud of the Air Force’s responsible stewardship of resources. In the past year we launched our Financial Management Strategic Plan, providing a unifying vision for better service, performance, oversight and visibility. Air Force financial management professionals have embraced our continuing adaptation of processes, improving support to all Airmen. These financial statements illustrate both the success of the Air Force over the past year and our specific financial management success. They comply with the requirements of the Chief Financial Officer Act. The financial information addresses both our General Fund and Working Capital Fund activities. The Airmen responsible for financial management—Active, Reserve, Guard, and Civilian—are models of leadership and accountability. They are, indeed, “Financing the Fight” and providing the best capabilities for the Air Force and for our country. iiii DEPARTMENT OF THE AIR FORCE WASHINGTON DDC OOFFFFIICCEE OOFF TTHHEE AASSSSIISSTTAANNTT SSEECCRREETTAARRYY NNoovveemmbbeerr 22000044 MMeessssaaggee ffrroomm tthhee AAssssiissttaanntt SSeeccrreettaarryy ooff tthhee AAiirr FFoorrccee,, FFiinnaanncciiaall MMaannaaggeemmeenntt aanndd CCoommppttrroolllleerr I am pleased to report that during Fiscal Year 2004, the Air Force Financial Management professionals continued their outstanding support to ongoing military operations and made great strides in improving our financial management processes and systems throughout the world. Even as the Air Force as a whole responded to the tremendous demands of operations IRAQI FREEDOM and ENDURING FREEDOM, along with other global commitments, our financial managers provided improved support to our warfighters and home stations alike. One crucial key to this success was the continued implementation of our Strategic Plan, unveiled last October. It effectively links our financial management vision, mission, goals and objectives with those of the Air Force so that we are fully aligned as an enterprise. Further, it focuses our attention on our three most important strategic elements: the warfighter, strategic resourcing and cost management, and information reliability, and integration. The plan has been the foundation of our relentless drive to con- tinually improve our financial services delivery based on performance-based principles. We have also continued our steady progress in our Transformation imperative across the Air Force. These efforts have matured into a broad program of continuous improvement that is now firmly rooted in the culture of Air Force financial management. I am extremely proud of the way our professionals have embraced the concept of using the best ideas to achieve greater efficiencies and improve our support. The Fiscal Year 2004 Financial Statements likewise reflects this evolution and efficiency. You will notice it contains a more concise Management Discussion and Analysis section that more effectively summarizes the great achievements of the Air Force over the past year. It also fulfills the requirements of the Chief Financial Officer Act, documents the expenditures devoted to our General Fund and Working Capital Fund (addressed in the accounting statements) and reviews selected performance measures established as part of the Government Performance and Results Act. America can be proud of the good stewardship of our resources provided by Air Force financial man- agement professionals. They are indeed supporting our nation by “financing the fight” with integrity, selfless service, and excellence. Financing the Fight iiiiii Management Discussion and Analysis “Our United States Air Force reflects the visions of the founders of airpower. We foster ingenuity in the development of the world’s most professional Airmen. We thrive on transitioning new technologies into joint warfighting systems and drive relentlessly toward integration to realize the potential of our air and space capabilities. We are America’s Airmen—confident in our capability to provide our Nation with dom- inance in air and space.” General John Jumper, USAF Chief of Staff General Fund In line with these investments, we have worked to enhance the systems that enable our Airmen to meet the threat Air Force in Action now and into the future. While America’s adversaries Global vigilance, reach, and power—This is the vision of pursue capabilities to compete with our dominance, we are America’s Air Force: A vision that continued to be realized seeking to enhance and expand our capabilities with during fiscal year 2004. The Air Force proved its ability to aircraft, space systems, and technology using transforma- produce unprecedented success across the spectrum of tional advances in air and space systems, and technology to conflict, around the world and in space. Continued domi- allow us continued dominance. nance in this new era requires new thinking and new flexi- While our Airmen ensure our quality force, our legacy bility. Our Airmen responded with astonishing effective- systems cannot always ensure air and space dominance in ness in the Global War on Terrorism, during Operation future fights. Our systems and platforms must keep pace IRAQI FREEDOM and Operation ENDURING FREEDOM. with our people. We owe it to our dedicated Airmen From a combat controller in the desert to a B-2 crew, our today, and in the future, to continue these investments. Airmen respond to the challenges of a new era using their We owe it to them to continue Financing the Fight. skill and innovative technology to respond to insidious and asymmetric threats from terrorists and rogue states. America’s Airmen have adapted leadership, training, and technology to meet today’s threat and prepare for tomor- row’s. As you will read in this report, we recognize the talents of our Airmen as our greatest resource. We have, therefore, invested in leadership development, training, and education to foster the skills required of a 21st century force. Going a step beyond, we also invested in quality of life for our Airmen and their families to help them cope with the separations and sacrifices we demand of them every day. We have invested in the key technologies that will create an integrated force of intelligence capabilities. We have invested in manned, unmanned, and space tech- nology. But most importantly, we have invested in the training required for our highly-skilled personnel to achieve their fullest potential. 11 UUnniitteedd SSttaatteess AAiirr FFoorrccee •• 22000044 AAnnnnuuaall FFiinnaanncciiaall SSttaatteemmeenntt Air Force Organizations Training Command (AETC), and Air Force Materiel Command (AFMC). In FY 2004, Air Force active duty members, Air National Direct Reporting Unit (DRU) Guardsmen, Reservists, and civilians responded to unprece- dented challenges with unprecedented performance. DRU is a subdivision of the Air Force, directly subordinate Calling upon the Air Force Core Values of“Integrity First – to the Chief of Staff, US Air Force. A DRU performs a mis- Service Before Self – Excellence In All That We Do,”Air Force sion that does not fit into any of the MAJCOMs. A DRU people proved time and time again that they comprise the has many of the same administrative and organizational preeminent air and space power on the planet. responsibilities as a MAJCOM. Examples of DRUs are the Air Force Academy (USAFA), the Air Force Studies and The integrated components of our Air and Space Analysis Agency (AFSAA), and the Air Force Operational Expeditionary Force were involved in operations including Test and Evaluation Center (AFOTEC). major theater war, homeland security, and humanitarian relief. Air Force people and organizations operated with Field Operating Agency (FOA) unprecedented effectiveness and efficiency, all while con- FOA is a subdivision of the Air Force, directly subordinate stantly preparing to face the challenges of the future. to a Headquarters US Air Force functional manager. An Major Commands, Direct Reporting Units, FOA performs field activities beyond the scope of any of Field Operating Agencies the major commands. The activities are specialized or associated with an Air Force-wide mission and do not The Air Force is organizationally aligned into 9 Major include functions performed in management headquarters, Commands (MAJCOMs, including the Air Force Reserve unless specifically directed by a Department of Defense and Air National Guard), with 13 Field Operating Agencies (DoD) authority. Examples of FOAs are the Air Force (FOAs), and four Direct Reporting Units (DRUs). Intelligence Analysis Agency (AFIAA), the Air Reserve Major Command (MAJCOM) Personnel Center (ARPC), and the Air Force Services Agency (AFSA). MAJCOM is a major subdivision of the Air Force, directly subordinate to Headquarters US Air Force. MAJCOM Fiscal Year 2004 Results headquarters are management headquarters and thus have Budget by Appropriation Categories the full range of functional staff. Examples of MAJCOMs are Air Combat Command (ACC), Air Education and Six major appropriation categories comprised the Air Force FY 2004 budget, as follows: • Operations and Maintenance (O&M): Pays the salaries and benefits of civilian employees and other day-to-day operating costs (e.g., fuel, spare parts). • Military Personnel (MILPERS): Finances the salaries and benefits of uniformed personnel. • Procurement (PROC): Funds Air Force investment in major systems. • Research, Development Test and Evaluation (RDT&E): Funds system development. • Military Contruction (MILCON): Pays for facilities construction. 22