To the baseline and beyond: military equipment valuation sets sights on a clean audit: a clean audit: the avenue to securing the trust of the Congress and the American taxpayer in the DoD's stewardship its assets.

The Department's financial managers deserve praise. For more than three years, they have worked with the personnel in the Property & Equipment (P&E) Policy Office in the Office of the Under Secretary of Defense for Acquisition, Technology and Logistics and in the acquisition community to establish the initial value of every item of military equipment in the Department of Defense (DoD) inventory. Approximately 1,100 individual weapon system programs were assessed for a computed net book value of about $300 billion.

To its credit, the DoD financial management community assisted in developing the policy guidance (business rules) and processes that were used to complete the valuations for the military equipment programs. DoD financial managers also helped to ensure the accuracy of the specific program information needed to complete the valuations.

Establishing the initial values is the first of many significant objectives laid out by the Department as it implements Military Equipment Valuation (MEV), an initiative to value, capitalize, depreciate, properly account for, and report military equipment on financial statements. MEV was created in response to Statement of Federal Financial Accounting Standard (SFFAS) No. 23, "Eliminating the Category National Defense Property, Plant and Equipment," and it makes good business sense.

Prior to SFFAS No. 23, military equipment simply was expensed when it was acquired. Now, knowing the value of each item of military equipment gives senior decision makers the information they need to make better, more timely investment decisions on behalf of our warfighters. Additionally, MEV moves the Department closer to its goal of obtaining a clean audit opinion for military equipment on DoD financial statements. While not an end in itself, an unqualified audit opinion demonstrates to the Congress and U.S. taxpayers that the Department is a good steward of the resources entrusted to it, and enhances confidence in DoD business operations.

Establishing the Military Equipment Baseline

Building on the success of the initial valuations, efforts now are under way to establish the military equipment baseline for year-end …