Policy_Number_DESC-P-1.pdf

DDEFENSE LOGISTICS AGENCY

DEFENSE ENERGY SUPPORT CENTER

8725 JOHN J. KINGMAN RD. SUITE 4950

FORT BELVOIR, VIRGINIA 22060-6222

Policy Number: DESC-P-1 October 28, 2009

Recording and Processing Inventory Transactions

And

End-of-Month Physical Inventory and Operating Gain/Loss Adjustment Transactions

1. General. This procedural guidance is applicable to all Defense Fuel Support Points (DFSPs) that store Defense Working Capital Fund (DWCF) petroleum products including Government- Owned Government-Operated (GOGO), Government-Owned Contractor-Operated (GOCO), and Contractor-Owned Contractor-Operated (COCO) DFSPs managed by or contracted by Defense Energy Support Center (DESC) and the Military Services. This document was coordinated with the Military Service Control Points (SCPs) and approved by DESC as interim guidance pending inclusion to DOD 4140.25-M, Volume II, Chapter 10 “Accountability.”

1.1. Responsible Officers (ROs) or Terminal Managers (TMs) shall ensure compliance with this and other pertinent governing guidance. The Property Administrator (PA) for DESC contracted DFSPs shall include provisions of this interim procedural guidance into routine and scheduled surveillance inspections. DWCF petroleum inventories managed by terms of a NATO, Foreign Government, commercial Transportation Operating Agreement (TOA), or commercial tender agreement are exempt from guidance contained in this document as noted in applicable sections or paragraphs.

1.2. Department of Defense (DD) Form 1348-8 has replaced DESC-Form 24. To facilitate a smooth transition to DD Form 1348-8, DFSPs may continue to use the DESC Form until incorporation of new DD Forms into the FuelsManager® Defense (FMD) application. Use of DESC Form 24 shall discontinue at Fuels Control Center (FCC) processing DFSPs upon conversion to the FMD Application with Service Pack 4. DD forms are available at the Department of Defense Forms Management Program website, http://www.dtic.mil/whs/directives/infomgt/forms/formsprogram.htm

1.3. References

1.3.1. DoDM 4140.25-M, DoD Management of Bulk Petroleum Products, Natural Gas, and Coal

1.3.2. American Petroleum Institute (API) Manual for Petroleum Measurement Standards

1.3.3. DESC-P-2, Receipt and Shipment of Petroleum Product

1.3.4. DESC-P-3, Document Control and Retention

DESC-P-1

October 28, 2009

1.3.5. DESC-P-18, Requests for Waiver and/or Exception to DoDM 4140.25-M and DESC Interim Policy Implementation and Procedural Guidance

1.3.6. DESC-I-2, 1884 Report Data Requirements and Processing Procedures

1.3.7. DESC-I-4, FCC Processing of Fuel Transactions, Physical Inventory and EOM Operating Gain/Loss Transactions

1.3.8. DESC-I-11, Standard Operating Procedures for Defense Working Capital Fund (DWCF) Owned Fuel at Defense Fuel Supply Points in Afghanistan

1.3.9. DESCI-12, Processing Reverse-Post Transactions to Business Systems Modernization – Energy (BSM-E)

1.3.10. DESC-I-29, Standard Operating Instruction for Defense Working Capital Fund (DWCF) Owned Fuels at Iraq and Kuwait Operating Locations

1.3.11. The Base Level User Guide (BLUG) for the FCC, FMD, FuelsManager® Defense- Express (FMD-E) and Business Systems Modernization – Energy (BSM-E). BSM-E is the name for the system formerly known as FAS (Fuels Automated System). The BLUG is located on the DESC “Coach” web page: https://ports2.desc.dla.mil/manuals/REF1111D.htm#.

1.4. Supersession. This administrative update supersedes DESC-P-1, August 9, 2009. A bold line in the right margin indicates the changed paragraphs.

2. Daily Recording and Processing Petroleum Inventory Transactions

2.1. DFSPs shall record all DWCF inventory transaction documents either manually or by approved Electronic Point of Sale capture device as business events occur. DFSPs shall process inventory transactions into the Base Level Support Applications (BLSA) and Fuels Enterprise Server (FES) daily during normal business hours, excluding weekends, government holidays, and installation training days. DFSP, TOA, and commercial tender agreement locations that lack direct access to BSM-E shall provide the DESC Region, DESC-RR, or DESC-N with daily DWCF petroleum transaction data within one business day of each transaction/business event.

The DESC Region, DESC-RR, or DESC-N shall process the transaction data to the applicable DESC System of Record on the same business day when possible, but not later than one business day after transaction data receipt.

2.2. Exceptions to daily recording and processing of petroleum inventory transactions.

Approved exceptions to standard daily recording and processing of DWCF petroleum inventory transactions into the BSM-E are as follows:

2.2.1. DFSPs governed by international or NATO agreements shall record and process inventory transactions in accordance with terms of the agreement.

2.2.2. Tactical DFSPs shall verify physical inventory in tactical fuel bladders by operationally preferred manual gauge readings using methods outlined in DESC-I-29 and/or DESC-I-11 or by total product rotation through a calibrated meter to coincide with End-of-Month (EOM) account closeout actions. Calibrate meters in accordance with American Petroleum Institute Manual for Petroleum Measurement Standards (MPMS) Chapter 4.

2.2.3. DFSPs governed by a TOA or commercial tender agreement shall record and process physical inventory transactions to coincide with EOM account closeout actions.

2.2.4. Emergency Fuel Buy (EFB) receipts frequently require extended time to record and process. Accordingly, DFSPs shall process EFB receipts within one business day following notification from the DESC Contracting Office that the EFB order has posted in the DESC system of record.

2.2.5. DFSPs shall record and process petroleum product receipts that extend over a period of days or months upon completion of the receipt operation in compliance with DESC-P-2.

2.2.6. Annual End-Of-Year (EOY) Closeout. The Department of Defense Comptroller requires the DoD fiscal year closeout each September 30 regardless of day of the week. DESC provides specific EOY supplemental instructions annually. EOY procedures and referenced interim guidance are available for review in advance of closeout execution dates at http://www.desc.dla.mil/DCM/DCMPage.asp?LinkID=DESCSFASInterimPolicy. Additional information concerning EOY inventory reporting requirements is available in DESC Contract Clause I119.04 “Inventory Control Records and Systems of Record” , and DESC Contract Clause I119.05 Inventory Control Records and Systems of Record (GOCO) (Air Force). DFSPs and TOAs shall post transactions and physical inventories to the FES in accordance with DESC- P-1 and DESC-I-4 transaction processing procedures as amended by this letter, which accelerates End-of-Month reporting timelines.

2.2.7. AFLOAT DFSPs: Marine vessels that store capitalized DWCF petroleum shall use the Material Financial Control System Personal Computer (MFCS.PC) or Relational Supply (R- Supply) for onboard DWCF fuel transaction processing. The vessel shall process Transaction Item Reports (TIR) daily including negative reports while permitted at sea, and daily excluding weekends, government holidays, and installation training days while permitted in port.

2.3. Daily Physical Inventory. The daily-recorded physical inventory shall reflect the total on-hand quantity of each DWCF petroleum product grade stored at a DFSP. The total physical inventory for each product grade shall include the following:

2.3.1. Active Storage Tanks: The total daily physical inventory for each product grade shall include all active permanent, tactical, and breakout tanks that store DWCF product. DFSPs shall determine inventory quantities based on either calibrated Automatic Tank Gauge (ATG), manual gauge reading, or combination thereof. Calibrated ATG systems shall have certified strapping charts with verified data points to load accurately into the ATG system. DFSPs shall load a minimum of twenty-one (21) strapping chart data points to assure statistical accuracy and correct extrapolation of converted gauge quantities. Extrapolated gauge quantities computed by the

ATG system shall also be compared /verified against the certified strapping charts and shall be amended as required.

2.3.2. Inactive Storage Tanks: It is not necessary to gauge inactive storage tanks not equipped with calibrated ATGs manually each day. Record the previous manual gauge reading or ATG readout on the DD Form 2921, Physical Inventory Petroleum Products or DD Form 2921C, Physical Inventory Petroleum Products (Continuation Sheet) and include the amount in the daily physical inventory transaction. DD Forms 2921/2921C are accessible at:

http://www.dtic.mil/whs/directives/infomgt/forms/formsprogram.htm. Gauge inactive storage tanks weekly to substantiate product inventories submitted for the weekly 1884 Report in accordance with DESC-I-2. Gauge inactive storage tanks scheduled for return to active status prior to any DWCF product movement or water extraction/removal operation.

2.3.3. Pipelines and Manifolds: DFSPs shall include the total gross pipeline, manifold, and system component inventory capacity for each DWCF product grade in the total daily physical inventory. A qualified Civil Engineer/Public Works or equivalent individual shall certify and record the capacities on Office Memorandum. Pipeline, manifold, and system component inventory is not required to be volume corrected to 60 TOAs, and COCO DFSPs are exempt from requirement to report gross inventory capacity when the system components do not contain DWCF petroleum product.

2.3.4. Rolling Stock: DFSPs shall include the total product quantity of DWCF petroleum products stored in mobile transport/refueling vehicles in the total daily physical inventory.

Manually compute mobile vehicle(s) inventory as the standard fill capacity less any product issue transactions plus any product return transactions. DFSPs that use the BLSA to monitor/track mobile vehicle inventories and fillstand quantities may use the BLSA query function to determine the on-hand book refueling vehicle inventory. DWCF petroleum products that are in transit by mobile vehicle to another DFSP or end use customer and processed into the FES/BSM-E as a shipment or sale shall not be included in the daily DFSP physical inventory quantity.

2.4. Recording Physical Inventories. DFSPs shall record daily physical inventory of each DWCF petroleum product grade on DD Form 2921 and DD Form 2921C where approved/operational ATG systems are not in use. Physical inventory summary reports produced at DFSPs by approved/operational ATG systems may serve as source documents for physical inventory gauge readings and fuel/water quantity conversions. When the ATG summary report is used with DD Forms 2921/2921C, DFSPs shall record the net 60 converted physical inventory quantity reflected on the summary report on the DD Form 2921 at Part II, line 7(2) (Total Net Quantity from Other Pages). Attach the ATG summary report to the DD Form 2921 and retain in the DFSP document control file.

2.5 DFSPs shall retain inventory and data records in accordance with DESC-P-3 and/or DESC Contract Clause I119.04, or I119.05 as applicable. DESC-P-3 contains document and data control requirements. Additionally, Appendix 1 identifies daily and end of month physical inventory documentation requirements.

2.6. Volume Correction. MPMS Chapters 7 and 9 prescribe approved temperature and density determination methods. MPMS Chapter 11.1. and DESC-P-2 prescribe Volume correction methodology.

2.6.1. Permanent Fixed Storage Tank Inventory. DFSPs shall perform daily physical inventory of tanks with capacity of 5,000 gallons and larger and shall temperature correct to 60 or 15/20°C if measured in liters.

2.6.2. Rolling Stock Inventory. Daily physical inventory of mobile refueling/line haul vehicles with a total storage capacity of 5,000 gallons and larger shall be volume corrected to 60 or 15/20° C if measured in liters. For example, a DFSP has five refueling vehicles that service a single product grade: three refuelers each with a 1,000-gallon storage capacity and two with 2,000-gallon storage capacity. The DFSP therefore has a total of 7,000 gallons of storage that requires on-hand inventory API and temperature correction. The volume and API reading of the primary issue tank that supplies the vehicle loading rack/fillstand(s) at time of the daily closeout shall be used to volume correct the vehicle inventory to 60

2.6.3. Pipeline and Manifold Inventory. All GOGO and GOCO DFSPs shall report the certified pipeline/manifold inventory for the daily physical inventory as gross fill capacity not converted to 60 .

3. DWCF Petroleum Transaction Processing

3.1. DFSPs shall process physical inventory adjustment transactions daily to the FES for each petroleum product ledger, regardless if product movement occurred on that day, excluding weekends and holidays. The Responsible Officer, DESC Region, or Property Administrator shall request proposed waivers to daily transaction processing in accordance with DESC-P-18.

Contractors at COCOs and GOCOs shall submit waiver requests to contractual requirements to the Contracting Officer with a copy to the PA.

3.2. Computer system limitations prevent FES acceptance of petroleum transactions older than 365 days. DFSPs required to process “out-of-DFSP-stock” transactions in excess of 365 days shall submit a BSM-E Help Desk assistance request.

3.2.1. Transactions in excess of 365 days are aged transactions and require a script to enable processing. The DFSP shall contact the BSM-E Help Desk and request assistance processing these DWCF petroleum sales transactions.

3.2.2. Processing re-bill or secondary sale transactions in excess of 365 days such as In- Flight/Aerial Tanker sales and Organizational Tank Issues is cost prohibitive. Military service components shall process these aged transactions through the appropriate service financial systems.

4. End-Of-Month (EOM) Physical Inventory and Operating Gain/Loss Adjustment

4.1. The EOM physical inventory transaction shall reflect the closing physical inventory for the preceding month and dated as the last calendar day of the preceding month regardless if that day falls on a normal weekend or holiday.

4.2. DFSPs shall process EOM physical inventory adjustment transactions and operating gain/loss adjustment transactions for each DWCF petroleum product grade within two business days following the last calendar day of each month, regardless if a zero quantity condition exists or if other transactions have not successfully processed into the FES. DFSPs shall not permit unresolved rejects and/or FES transactions to delay timely EOM transaction processing.

Compute book inventories and determinable gain/loss transactions based on all transaction quantities including rejected transactions. Additionally, do not correct physical inventories with the reverse-post function. DESC-I-4 and DESC-I-12 prescribes procedures to correct determinable loss/gain quantities.

4.3. Process operating gain/loss adjustment transactions for all petroleum product ledger accounts regardless if quantities are within or exceed allowable gain/loss tolerance thresholds.

Transaction quantities shall reflect the account ledger cumulative gains/losses for the last calendar day of the preceding month. Operating gain/loss transactions shall also reflect the appropriate determine type (“Operating Gain/Loss Out Of Tolerance” or “Operating Gain/Loss In Tolerance”) based upon tolerance factors displayed at Table 1.

Table 1: Inventory Operating Gain or Loss Tolerances

Product Group Allowable / Standard DOD Operating Tolerance

Gain/Loss Percentage ** Distillates (Diesel Fuels, Jet A1, JP5, JP8, JPTS, F76, Kerosene, other residuals,…etc)

.0025 or .25%

JP4 .003 or .3% Aviation and Motor Gasoline (AVGAS (130), MOGAS (MUR, MUP, etc))

.005 or .5%

Fuel System Icing Inhibitor (FSII) and Lube Oils*

.0025 or .25%

* Note: Report all Lube Oil transactions at gross or ambient temperature

** Note: Where applicable, commercial pipeline tender and TOAs governed by Surface Deployment and Distribution Command (SDDC) shall comply with rules prescribing lower allowable operating tolerances.

4.3.1. FMD and FCC Processing Locations. FMD and FCC automatically create an EOM report and generates an Operating Gain/Loss adjustment when a physical inventory adjustment transaction is processed. Further, the FMD and FCC generates and electronically transmits to DESC, a DESC Form 24 or DD Form 1348-8 that provides a memo data field to explain inventory variances.

4.3.2.. DFSPs, TOAs, and Commercial Tenders Lacking FES Connectivity. DFSPs, TOAs, and Commercial Tenders that lack FES connectivity shall provide the appropriate DESC processing office such as Region, DESC-RR, or DESC-NI with daily and/or EOM transaction data during normal business hours and in compliance with specified contractual or transportation tender obligations. The DESC processing office shall process these transactions to the applicable DESC System of Record on the same business day of transaction data receipt when possible, but not later than end of the following business day.

4.3.3. DFSPs Lacking Connectivity to FES. DFSPs that lack FES connectivity shall report EOM transaction data to the BSM-E Help Desk. The DESC office shall process the transactions to the applicable DESC System of Record on the same business day received when possible but no later than the end of the following business day.

4.4. Review, Disposition and Retention of EOM Inventory Transaction Documents. The RO and TM shall review, validate, and sign the completed DESC Form 24 or DD Form 1348-8.

Further, the RO/TM shall immediately investigate any out-of-tolerance operating gain/loss and annotate the DESC Form 24/DD Form 1348-8 memo data field to report investigation results and describe management action(s) taken to determine the excessive gain/loss. The RO/TM shall forward a copy of the signed DESC Form 24/DD Form 1348-8, both in-tolerance and out of tolerance, to the applicable DESC Region office by facsimile or a scanned copy by electronic mail. The processing office and the RO/TM shall retain the signed copy of the DESC Form 24/DD Form 1348-8 and supporting documentation in the DFSP document control file in accordance with DESC-P-3.

**Note: The inventory manager/technician responsible to process transactions for COCO, TOA, NATO, or foreign government DFSP accounts that do not process account transactions shall prepare the End-of-Month Report, DESC Form 24, or DD Form 1348-8. The Approving Official for End-of-Month Reports shall be an individual within the inventory manager/technician chain of command/supervision. The inventory manager/technician shall forward signed copies of the DESC Form 24/DD Form 1348-8 to the responsible DESC processing office and retain a copy in the document control file.

4.5. Correction of EOM Operating Gain/Loss Adjustment Transactions. DFSPs shall correct an EOM operating gain/loss adjustment transaction whenever a subsequent processed transaction results in change to a previously reported book inventory, physical inventory, or gain/loss adjustment.

5. Account Reconciliation Requirements. DFSP personnel shall reconcile each petroleum product ledger on a daily basis.

5.1. FMD, FMD-E/FCC Processing Locations. DFSPs shall satisfy the following conditions to reconcile FMD/FCC petroleum product ledgers accurately with the FES petroleum account ledgers:

5.1.1. DFSPs shall process all petroleum product movements, transaction events, and inventories into the FES/FMD daily. Processing personnel shall verify the accuracy of all transactions processed into the FES and reconcile/clear all rejects.

5.1.2. Rejected Transactions. DFSPs shall clear rejected transactions within two business days and shall not delete rejected transactions but rather shall contact the BSM-E Help Desk for assistance to resolve rejected transactions properly.

5.1.3. DFSPs shall successfully process the EOM closing physical inventory for each petroleum product ledger to the FES/FMD. When a transaction event processing is delayed due to unfinished receipt or shipment operations that carry over to the next month, the closing physical inventory for the month shall reflect the on-hand inventory of the receipt or issue tank(s) prior to commencement of the receipt or shipment operation.

5.1.4. DFSPs shall process daily and/or EOM determinable gain/loss transactions with appropriate “Determine Type” for each petroleum product ledger to the FES and record any out-of-tolerance operating gain/loss investigation results in the DESC Form 24/DD Form 1348-8 memo field.

5.1.5. The FMD/FCC and FES ledger column totals for all petroleum product ledgers shall be identical.

5.1.6. The FMD/FCC and FES petroleum product ledgers’ closing cumulative gain/loss shall reflect zero quantity.

5.1.7. DFSPs shall forward copies of the signed DESC Form 24/DD Form 1348-8, DFSP Inventory Accounting Document and End-of-Month Report to the responsible DESC processing office and also retain a copy in the document control file.

5.2. FMD-E Processing Locations. DFSPs shall satisfy the following to reconcile FMD/FCC petroleum account ledgers accurately with the FES:

5.2.1. Successfully process all petroleum product movements and transaction events into the

FES.

5.2.1.1. DFSPs, TOAs, and Commercial Tenders that lack FES connectivity may use local accounting systems to record transaction events and ensure forwarding of all pertinent account transactions to the appropriate DESC office such as Region, DESC-RR , or DESC-NI for processing into the FES.

5.2.2. Successfully process the EOM closing physical inventory for each petroleum product ledger into the FES. When a transaction event processing is delayed due to unfinished receipt or shipment operations that carry over to the next month, the closing physical inventory for the month shall reflect the on-hand inventory of the receipt or issue tank(s) prior to commencement of the unfinished receipt or shipment operation.

5.2.2.1. DFSPs shall, where possible, schedule deliveries so that shipment and/or receipt events do not extend into the next month.

5.2.3. Successfully process the EOM determinable gain/loss transaction with appropriate “Determine Type” for each petroleum product ledger to the FES and record any out-of-tolerance operating gain/loss investigation results in the DESC Form 24/DD Form 1348-8 memo field.

5.2.4. The FMD-E petroleum product ledger closing cumulative gain/loss shall reflect zero quantity.

5.2.5. Forward copies of the signed DESC Form 24/DD Form 1348-8, DFSP Inventory Accounting Document and End-of-Month Report to the point of contact and the responsible DESC processing office as well as file in the DFSP document control file.

5.3. DWCF petroleum transactions occasionally suspend/reject between the FES and the Defense Fuels Automated Management System (DFAMS) or the Oil Enterprise Downstream (OED) system. Problem resolution requires DESC Region personnel to reverse-post and/or reprocess transactions with DFSP assistance, which DESC Region personnel shall request by e-mail or facsimile prior to corrective action in accordance with DESC-I-12.

5.4. DWCF sales and credits are governed by business rules that establish point-of-sale billing by use of purchase devices such as DD Form 1896, DOD Fuel Identaplate, AIR CARD®, or VIL Key assigned or issued to specific customer fund accounts. DFSPs shall not amend or change any purchase device data because the billed customer organization “loaned” an aircraft, vehicle, or equipment item to another organization. Customers may seek reimbursement from an appropriate organization through the respective service financial system using a Cross Disbursement of Funds transaction in accordance with DESC-I-10.

//Signed Original on File//

MICHAEL D. BRODERICK

Director, Business Process Support Defense Energy Support Center

DESC OPR: N

DESC-OCR: R/BQ/BP/DESC Regions

Appendix 1: Physical Inventory Documentation Appendix 2: Definitions

APPENDIX 110

AP1. Appendix 1

Physical Inventory Documentation

PHYSICAL

INVENTORY

PROCESSING

FREQUENCY

INCLUDED IN PHYSICAL INVENTORY

PHYSICAL

INVENTORY

DOCUMENTATION

STORAGE TANKS

(TANK GAUGE

READINGS

METHODOLIGY)

LINE

INVENTORIES

REFUELING UNIT

INVENTORIES

Daily, Excluding weekends and holidays.

100% (All Tanks) Certified / Calibrated, and fully operational ATG

All line inventories are loaded in the Base Level FuelsManager® Defense Application from certified line inventories

All Refueling Unit inventories are loaded / tracked electronically in the Base Level FuelsManager® Defense Application

No documentation required if all inventories are tracked in the BSM-E/FES system of record

End of Month

100% (All Tanks) Certified/Calibrated, and fully operational

ATG

All line inventories are loaded in the Base Level FuelsManager® Defense Application from certified Pipeline and Manifold inventories

All Refueling Unit inventories are loaded/tracked in the Base Level FuelsManager® Defense Application

FuelsManager® Defense Printout and DESC Form 24/DD Form 1348- 8 are to be reviewed / signed by the account Responsible Officer or Terminal Manager

End of Month

Combination of Certified/Calibrated, and fully operational ATG, and manual tank gauge readings

Some or all line inventories are loaded in the Base Level FuelsManager® Defense Application from certified Pipeline and Manifold inventories

Some or all Refueling Unit inventories are loaded/tracked in the Base Level FuelsManager® Defense Application

FuelsManager® Defense Printout, DD Forms 2921/2921C and DESC Form 24/DD Form 1348-8 are to be reviewed/signed by the account Responsible Officer or Terminal

APPENDIX 111

**Note: DESC-P-3, Document Control and Retention provides DESC document and data control requirements for DFSPs.

AP1: Physical Inventory Documentation and Document Retention (continued)

PHYSICAL

INVENTORY

PROCESSING

FREQUENCY

INCLUDED IN PHYSICAL INVENTORY

PHYSICAL

INVENTORY

DOCUMENTATION

STORAGE TANKS

(TANK GAUGE

READINGS)

LINE

INVENTORIES

REFUELING UNIT

INVENTORIES

Daily, Excluding weekends and holidays.

Manual Tank Gauge Readings

Certified Pipeline and Manifold Line Inventories

Refueling Unit inventories are loaded/tracked Manually

DD Forms 2921/2921C signed by Responsible Officer /Terminal Manager.

End of Month Manual Tank Gauge

Readings Certified Pipeline and Manifold Line Inventories

Refueling Unit inventories are loaded/tracked Manually

DD Form 2921/2921C and DESC Form 24/DD Form 1348-8 are to be reviewed / signed by the Responsible Officer or Terminal Manager

**Note: DESC-P-3, Document Control and Retention provides DESC document and data control requirements for DFSPs.

APPENDIX 212

AP2. Appendix 2

Definitions

AP2.1. Active storage tank. An active storage tank is a permanent, tactical, or breakout tank that stores DWCF petroleum product from which product has moved into or out of storage including water extraction/removal since the last reported daily physical inventory.

AP2.2. Book inventory. Book inventory is the calculated inventory that should be on-hand for each petroleum product grade. Book inventory as reflected in the BLSA and FES account ledgers, therefore, is the last reported physical inventory quantity plus any inventory increase resulting from receipts, returns, and positive regrades or recovered products – minus inventory decrease resulting from sales, shipments, and negative adjustments such as spills and regrades from the petroleum product ledger.

AP2.3. DESC petroleum issue. A DESC petroleum issue is a DFSP petroleum product transfer that results in a product change of custody. Categories of petroleum issues are either sales or shipments.

AP2.4. Determinable gain/loss. A determinable gain/loss is a product loss or gain attributed to a specific event such as a pipeline break or recovered abandoned product.

AP2.5. Gross quantity. The volume of a DWCF petroleum product at ambient temperature that is not corrected to 60 or 15/20° C if measured in liters.

AP2.6. Inactive storage tank. An inactive storage tank is a permanent, tactical, or breakout tank that stores DWCF petroleum product from which product has not moved into or out of storage including water extraction/removal since the last reported daily physical inventory.

AP2.7. Inventory transaction. An inventory transaction is any event that effects or changes the DWCF petroleum inventory account ledger. Inventory transactions include receipts, sales, credits, shipments, regrades, determinable gains/losses, physical inventory adjustments, and end-of-month (EOM) operating gain/loss adjustments.

AP2.8 Net quantity. The volume of a DWCF petroleum product that is volume corrected to 60 or 15/20° C if measured in liters. Reference MPMS Chapter 12, Calculation of Petroleum Quantities.

AP2.9. Operating gain/loss. Operating gain/loss is the difference between the physical inventory and the book inventory (physical inventory minus book inventory). A positive difference is a gain and a negative difference is a loss. Example: A petroleum product ledger calculates 10,100 gallons of product as on-hand book inventory, while the physical inventory measured by a calibrated automatic tank gauge (ATG) or a manual gauge indicates only 10,000 gallons of on-hand inventory. The negative difference between the book inventory and the physical inventory reflects a 100 gallon loss.

APPENDIX 213

AP2.10. Operating gain/loss tolerance. The operating gain/loss tolerance is a predetermined percentage allowed as acceptable petroleum product gain or loss caused by routine product handling operations.

AP2.11. Physical inventory. Physical inventory is the total on-hand quantity of each petroleum product grade to include petroleum products stored in all permanent storage tanks, tactical storage tanks, breakout tanks, pipelines, manifolds, system components such as filter separators and basket strainer housings, mobile transport vehicles and petroleum dispensing equipment that store DWCF petroleum products.

AP2.12. Petroleum receipt. A petroleum receipt is the transfer of product from one DFSP or contract supplier/source to another DFSP that results in a product change of custody.

AP2.13. Petroleum return/credit. A petroleum return/credit is the return of product from an end user/customer back to DESC capitalized inventory that results in a corresponding monetary reimbursement from the DWCF to the end user/customer DODAAC.

AP2.14. Petroleum sale. A petroleum sale is a DFSP transfer of capitalized petroleum product to an end user/customer that DESC invoices/bills for DWCF reimbursement. A sale may also result in product replacement through terms of a replacement-in-kind (RIK) or fuel-exchange agreement (FEA) with partner nations. In these instances, upon RIK/FEA balance reconciliation, the RIK/FEA partner normally pays for product owed by bank check or occasionally by product replacement.

AP2.15. Petroleum shipment. A petroleum shipment is a DFSP transfer of a capitalized petroleum product and its accountability to another DFSP.

AP2.16. Product downgrade. A product downgrade is an approved redesignation of a petroleum product that does not meet specification requirements to another petroleum product for which it does meet the specification requirements.

AP2.17. Product regrade. A product regrade is the approved redesignation of a petroleum product that meets its specification requirements to another petroleum product for which it also meets the specification requirements.

AP2.18. Rolling stock. The term rolling stock identifies DWCF owned petroleum that is stored in mobile conveyances such as tank trucks, line haul trucks, or rail cars.

AP2.19 Reconciled Account. An account is reconciled when the DFSP BLSA product account ledger and corresponding FES/BSM-E product account ledger are identical and the Running gain/loss equals zero. All transactions must also process and post successfully to the DESC system of record.