19 CHAPTER FEDERAL GOVERNMENT FEDERAL ACCOUNTING ACCOUNTING
2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders
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LEARNING OBJECTIVES
Have
the ability to understand the
Federal financial management environment Roles and responsibilities of various federal
organizations Federal accounting model and financial statement requirements for federal agencies Financial statements presented for the U.S. Government as a whole
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LEARNING OBJECTIVES
Have
the ability to
Identify the source of GAAP for the federal
government financial report Explain the basic budgetary process and terminology used by the federal government Prepare basic budgetary accounting entries and basic proprietary accounting entries for a federal agency
2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders 19 - 3
GOVERNMENT OVERVIEW
Biggest
employer and consumer FY 2003 disbursements - $2+ trillion Federal accounting
Influenced by law and regulation A tool of fund and appropriation control The agency (not the fund) is the primary
accounting entity
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GOVERNMENT OVERVIEW
Agencies Provide for both budgetary and
proprietary accounting and reporting Prepare financial reports of the agency
OMB
& Treasury Department
Compile financial reports for the federal
government as a whole from
Central accounts Agency reports
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FINANCIAL MANAGEMENT FINANCIAL ENVIRONMENT ENVIRONMENT
Importance
based in the United States Constitution Article I, Section 9 A shared function of
Legislative (via power of the purse) Executive (administering and reporting)
branches of the federal government
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FINANCIAL MANAGEMENT FINANCIAL ENVIRONMENT ENVIRONMENT
1. 2. 3.
Accounting and reporting roles and responsibilities center around
Three (3) oversight agencies
Department of the Treasury Office of Management & Budget (OMB) General Accounting Office (Comptroller General)
Federal Accounting Standards Advisory Board (FASAB) Individual federal agencies
(See Figure 19-1 for a summary of the roles and responsibilities)
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FINANCIAL MANAGEMENT FINANCIAL ENVIRONMENT ENVIRONMENT
Primary
accounting and reporting roles and responsibilities of
Department of Treasury Chief accountant and banker Office of Management & Budget Budget preparation General Accounting Office Prescribes accounting and reporting standards Independent legislative auditor Federal Accounting Standards Advisory Board Promulgates accounting principles and standards
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FINANCIAL MANAGEMENT FINANCIAL ENVIRONMENT ENVIRONMENT
Accounting
and reporting roles and responsibilities of federal agencies
Prepare agency budget requests Establish and maintain effective systems in
conformity with the principles and standards prescribed by the GAO Implement and operate the Standard General Ledger (SGL) Prepare and submit proprietary and budget execution reports Maintain an Inspector General (IG) function
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FINANCIAL MANAGEMENT FINANCIAL ENVIRONMENT ENVIRONMENT
Overview
- accounting and financial reporting
Responsibility not as simple or clear-cut as private
or state and local government Congressional legislation established guidelines set forth in law Two major categories of principles, standards, and requirements:
Budgetary accounting Proprietary (actual) accounting
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FINANCIAL MANAGEMENT FINANCIAL ENVIRONMENT ENVIRONMENT
Two
major categories of principles, standards, and requirements:
Budgetary accounting OMB develops requirements for agencies to implement under prescribed mandates Treasury establishes reporting requirements Proprietary (actual) accounting
GAO develops requirements (responsibility by law) FASAB develops and promulgates (current process) Treasury implements by direction to agencies
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FINANCIAL MANAGEMENT FINANCIAL ENVIRONMENT ENVIRONMENT
AICPA recognizes FASAB as the body designated to establish GAAP for federal governmental entities Hierarchy of accounting principles for federal governmental entities
(a) (b) (c) (d)
FASAB Statements and Interpretations FASAB Technical Bulletins AICPA AcSEC Bulletins FASAB implementation guides
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2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders
BUDGETARY PROCESS
Major
processes impacting accounting
Agency obligation authority Usually not directly based on estimates of revenues Congress can increase debt limit to raise cash Budget authority to incur obligations is granted
by Congress under three types:
Appropriations (one-year, multiyear or permanent) Contract authority Borrowing authority
Additional authority may be derived from collections from performing services
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BUDGETARY PROCESS
1. 2. 3. 4. 5.
Major processes impacting accounting (continued)
Process of spending budget authority is divided into five (5) clearly distinct steps
Apportionment Allotment Commitment Obligation Expended appropriation
The processes are closely monitored for legal and regulatory compliance
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2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders
BUDGETARY PROCESS
THE BUDGET CYCLE
Four (4) phases
(1) Preparation (2) Approval (3) Execution (4) Reporting
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BUDGETARY PROCESS
THE BUDGET CYCLE
Preparation Begins in executive branch Ends when formally presented to Congress Budget preparation and presentation to
Congress is a presidential responsibility
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BUDGETARY PROCESS
THE BUDGET CYCLE
Approval
(a Congressional function)
Congressional Budget Act of 1974 (Present procedure) Congress adopts a concurrent resolution to
establish target levels for
Overall expenditures Budget authority Budget outlays Broad functional expenditure categories Revenues The deficit The public debt
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BUDGETARY PROCESS
THE BUDGET CYCLE
Approval
(Continued)
An appropriation is contained in an act passed
by Congress that becomes a public law
About 13 major laws passed in the budget process Contain 1,200 - 1,400 individual appropriations
Congressional appropriations Not based directly on expended appropriations (i.e., receipt of goods or services) Are based on authority to obligate the federal government to ultimately make disbursements Encumbrances outstanding are treated as uses of appropriation authority
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BUDGETARY PROCESS
THE BUDGET CYCLE
Execution
Treasury forwards appropriation warrant to
the agency Agency sends apportionment request to OMB OMB makes apportionments to the agency, reserving some appropriations for
Contingency Savings Timing Policy reasons
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BUDGETARY PROCESS
THE BUDGET CYCLE
Execution
(Continued)
Agency executes its programs through
allotments for programs and activities by
Committing, obligating, and expending money Providing services
Agency reports to the OMB on its activities and
uses of budgetary authority Agency
Prepares vouchers for expended appropriations Submits them to Treasury or disbursement officers for payment
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BUDGETARY PROCESS
THE BUDGET CYCLE
Budget Reporting
execution reported periodically and
annually to OMB For each category of appropriation or other budget authority, agencies report the amount of
Authority Expended appropriations Obligations Apportionments unobligated (unused budget) Outlays (essentially disbursements) incurred
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BUDGETARY PROCESS
THE BUDGET CYCLE
Reporting
(Continued)
The OMB reports for the overall government on Obligations and Outlays
in the annual budget proposal submitted to Congress by the President that contains
Current years projected amounts Summary actual amounts (total obligations and outlays) for preceding years
The Treasury Department reports periodic and
annual amounts of actual disbursements
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BUDGETARY PROCESS
EXCEEDING BUDGET AUTHORITY
Authority is considered exceeded when any one of four (4) events occur
1. 2.
3.
4.
An apportionment exceeds an appropriation An allotment exceeds an appropriation or an apportionment An obligation exceeds an allotment, apportionment, or appropriation An expended appropriation exceeds an appropriation, an apportionment, or an allotment
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2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders
ACCOUNTING PRINCIPLES ACCOUNTING AND STANDARDS AND
Six (6) required year-end financial statements
1. 2. 3. 4. 5. 6.
Balance Sheet Statement of Net Cost Statement of Changes in Net Position Statement of Budgetary Resources Statement of Financing Statement of Custodial Activity
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2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders
THE FEDERAL MODEL
A
dual-track system
accounts; each reflecting an accounting equation for both
Contains a complete set of self-balancing
Budgetary accounts
Budgetary Resources = Status of Authority
Proprietary accounts
Assets = Liabilities + Net Position
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THE FEDERAL MODEL
A
dual-track system (Continued)
Budgetary Resources
Budgetary equation components of
Appropriations Borrowing Authority Contract Authority Reimbursable Authority (between agencies) Collections from Other Sources
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THE FEDERAL MODEL
A
dual-track system (Continued)
Status of Authority
Budgetary equation components of
Unapportioned Appropriations (Authority) Apportionments Allotments Commitments Obligations Expended Appropriations (Authority) Expired Authority
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THE FEDERAL MODEL
A
dual-track system (Continued)
from private sector
Cash account and disbursements Net position accounts
Proprietary equation variations
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THE FEDERAL MODEL
A
dual-track system (Continued) of Cash:
Small imprest balances (some large balances) Line of credit with U.S. Treasury
Proprietary equation components
Called Fund Balance with Treasury Handled like a bank account
of Disbursements:
Payment requests establish
Disbursements in Transit
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2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders
THE FEDERAL MODEL
A
dual-track system (Continued) Net Position
Cumulative results of operations Unexpended appropriations Trust Fund balances
Proprietary equation components of
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THE FEDERAL MODEL
Net position component Cumulative Results of Operations
Net difference
From the inception of an agency or activity To the reporting date
between
(1) Expenses and losses and (2) Financing sources (i.e., appropriations used and revenues) and gains (whether financed from appropriations, revenues, reimbursements, or any combination)
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THE FEDERAL MODEL
Net
position component Unexpended Appropriations
The budgetary fund balance of an agency
represents obligation authority (appropriations)
Unexpended Not withdrawn
as of the reporting date
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THE FEDERAL MODEL
Changes
in Net Position
Unexpended appropriations Increased by enacted appropriation authority Decreased by expended or withdrawn appropriations Cumulative results of operations Increased by expended appropriations used, revenues, reimbursements, gains, investments Decreased by expenses, losses, transfers
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STANDARD GENERAL LEDGER
Developed
in 1986 Issued as a requirement to all agencies by the three oversight agencies in 1988 The SGL most influential requirement inducing agencies to implement the dual-track federal model
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STANDARD GENERAL LEDGER
Principal
accounts
1000s 2000s 3000s 4000s 5000s
Asset Accounts Liability Accounts Net Position Accounts Budgetary Accounts Revenues and Other Credits in the
Statement of Operations
6000s Expenses 7000s Gains and Losses
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FUNDS & THE FEDERAL ENTITY
Classified
as follows:
(1) Funds derived from
General taxing and revenue powers Business operations Known as Federal or Government-Owned Funds
(2) Funds held by the government
In capacity as custodian or trustee Referred to as not-government-owned, or Trust and Agency Funds
Six types of funds are employed within these two broad categories
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FUNDS & THE FEDERAL ENTITY
Six
(6) types of funds Federal or Government-Owned Funds
General Fund Special Funds Revolving Funds Management Funds
Trust and Agency Funds Trust Funds Deposit Funds
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FUNDS & THE FEDERAL ENTITY
Funds
do not influence accounting or reporting of the federal government Federal entity is instead twofold
The budgetary entity Each appropriation or Other budget authority granted by Congress Budget execution reports are required for each appropriation The proprietary entity is broader
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FUNDS & THE FEDERAL ENTITY
Federal
entity is twofold (Continued)
The proprietary entity is broader Can also be each appropriation Treasury requires approximately 650 to 750 sets of the proprietary financial statements
Many single-year appropriations Consolidated statements of agencies and departments
The SGL is designed to separately maintain two proprietary accounts
Fund Balance with Treasury and Unexpended Appropriations, on an appropriation basis by year in the subsidiary accounts
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FINANCIAL REPORTING
Reporting
includes both agency-level and government-wide statements
Each major agency must submit agency-
level financial statements covering the last fiscal to the director of the OMB by March 1 each year Government-wide financial statements must be audited annually
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FINANCIAL REPORTING
Required
agency-level statements
Balance Sheet Statement of Net Cost Statement of Changes in Net Position Statement of Budgetary Resources Statement of Financing Statement of Custodial Activity
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FINANCIAL REPORTING
Required
government-wide statements
Balance Sheet Statement of Net Cost Statement of Changes in Net Position Statement of Budgetary Resources
Statements must include all departments, agencies, and other units
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