Chap011 - Chapter 11 - Accounting and Reporting for the...

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Unformatted text preview: Chapter 11 - Accounting and Reporting for the Federal Government CHAPTER 11: ACCOUNTING AND REPORTING FOR THE FEDERAL GOVERNMENT OUTLINE Number Topic Type/Task Status (re: 14/e) Identify, describe 12-1 revised 11-2 11-3 11-4 11-5 11-6 11-7 11-8 11-9 11-10 Role of OMB, GAO, Treasury, CBO in federal standards setting Federal GAAP standards setting Conceptual framework Accounts used in federal accounting Net position and net assets FASAB compared to GASB U.S. Government consolidated statements Dual track accounting Budgetary accounts used by federal agencies Financial statements for federal agencies Describe Describe Explain Compare Contrast Describe Describe Identify Name 12-2 12-3 12-4 New 12-6 12-7 12-8 12-9 12-10 revised Cases: 11-1 11-2 11-3 OMB press release and audit opinions FASAB statements U.S. Government-wide financial statements Locate, evaluate Internet Internet, evaluate 12-1 revised 12-2 revised 12-3 revised Exercises/Problems: 11-1 Various Multiple choice 12-1 revised 11-2 11-3 11-4 11-5 11-6 11-7 Compute JE JEs and FS Prepare FS JEs and FS Essay 12-2 revised 12-3 revised New 12-5 12-6 12-7 revised Questions: 11-1 Fund balance with U.S. Treasury Agency financial statements, continuation of 12-2. Statement of net cost Statement of budgetary resources Transactions and statement of financing DOT audit report 11-1 Chapter 11 - Accounting and Reporting for the Federal Government CHAPTER 11: ACCOUNTING AND REPORTING FOR THE FEDERAL GOVERNMENT Answers to Questions 11-1. The three principals of the Joint Financial Management Improvement Program (JFMIP) are (1) the Controller General of the United States, who is head of the Governmental Accountability Office, the auditing arm of the legislative branch, (2) the Secretary of the Treasury who is part of the executive branch, and (3) the Director of the Office of Management and Budget, also part of the executive branch. Federal statutes in 1950 assigned responsibility to these principals for establishing and maintaining a sound financial management structure for the federal government. These principals sponsored the Federal Financial Accounting Standards Board (FASAB) in 1990 as a permanent standards-setting organization to establish generally accepted federal accounting standards, much like the FASB and GASB do for the business and nongovernmental and governmental sectors. The principals play similar roles in standards-setting in that they each have a representative of their organization on the FASAB (among other members) and they collectively receive recommendations from the FASAB on accounting principles and standards. If the principals agree, the Comptroller General and the Director of the OMB publish the accounting principles and standards. By 2004, the principals, satisfied with the operations of the FASAB, delegated responsibilities to review FASAB recommendations to the OMB’s Office of Federal Financial Management (OFFM), the Office of Personnel Management, and the Chief Financial Officers Council (CFOC). The JFMIP no longer meets as a stand-alone organization. 11-2. The Federal Accounting Standards Advisory Board (FASAB), comprised of four federal members and six nonfederal members, goes through a “due process” in setting accounting and reporting standards for federal agencies and the federal government much like the FASB does for businesses and nongovernmental entities and the GASB does for governmental entities. The due process steps (laid out in “FASAB Facts” available at www.fasab.gov ) are: • • • • • • • • Identification of accounting issues and agenda decisions. Preliminary deliberations. Preparation of initial documents (issues papers and/or discussion memoranda). Release of documents (e.g., exposure drafts) to the public, public hearings, and consideration of comments. Further deliberations, exposure draft, and consideration of comments. Approval by at least a majority vote. Submission of proposed statement to the Principals (or “sponsors”—Comptroller General, Secretary of the Treasury, Director of the OMB) for a ninety day review (forty-five days for Interpretations). Publication of final Statement or Interpretation. 11-2 Chapter 11 - Accounting and Reporting for the Federal Government Ch. 11, Answers, (Cont’d) The AICPA has identified FASAB standards as category (a) GAAP in the GAAP hierarchy (see SAS No. 91, an amendment to SAS No. 69). 11-3. The conceptual framework for the federal government is at about the same stage as that for state and local governments, even though the GASB was established six years earlier. The FASAB has issued five concepts statements, and the GASB four. Statement of Federal Financial Accounting Concepts (SFFAC) No. 1 identifies the users of federal financial information and their information needs, and establishes the objectives of financial reporting for the federal government, much like GASB Concepts Statement No. 1. SFFAC No. 2 provides criteria for determining the reporting entity and provides guidance on the nature of the financial statements to be prepared and their form and content. The GASBS 14 (a reporting standard rather than a concepts statement) provides comparable criteria to SFFAC No. 2 for defining the reporting entity. SFFAC No. 3 describes the Management Discussion & Analysis. Now that GASB has issued Statement No. 34, both GASB and FASAB have provided for the MD&A as an integral part of financial reporting for a government. SFFAC No. 4 for the federal government describes five intended audiences and qualitative characteristics for the consolidated financial report of the U. S. Government. In many ways, this statement is similar to the GASB’s Concepts Statement 3 on communication methods in general purpose external financial reporting. Finally, the most recent SFFAC (No. 5) describes the elements of financial statements, similar to GASB’s most recent Concepts Statement 4 titled “Elements of Financial Statements.” 11-4. The account name Estimated Revenues used by state and local governments is a budgetary account representing the government’s estimate of the amount of revenue expected to be realized during the year. Federal agencies use the account Other Appropriations Realized in their budgetary track to capture the amount Congress has appropriated to an agency for the upcoming year. Other Appropriations Realized is for basic operating appropriations, rather than appropriations earmarked for specific purposes. Other Appropriations Realized is closer in meaning to Appropriations of state and local governments than it is to Estimated Revenues. A federal agency uses the account Fund Balance with U.S. Treasury in its proprietary track as an asset that represents the balance available to the agency at the Department of Treasury. Fund Balance with U.S. Treasury will be reduced throughout the year by the dollar value of checks drawn. See Illustration 11-17 for a comparison of these terms. Estimated Revenues and Other Appropriations realized have more in common than either one does with Fund Balance with the U.S. Treasury because they are budgetary accounts. 11-5. Agree, in part. The net position account on the balance sheet of a federal agency represents the difference between assets and liabilities, as net assets does for a state or local government. However, net position is classified into two categories: unexpended appropriations and cumulative results of operations which are different than the classifications of net assets for a state or local government. Unexpended appropriations is the amount of the entity’s appropriations represented by undelivered orders and 11-3 Chapter 11 - Accounting and Reporting for the Federal Government Ch. 11, Answers, 11-5, (Cont’d) unobligated balances. Cumulative results of operations is the net difference between expenses/losses and financing sources, including appropriations, revenues, and gains, since the inception of the activity. 11-6. Agree, in part. It is true that the FASAB sets standards for external financial reporting for federal agencies; however, its mission is considerably broader in that it also sets standards for internal management accounting and performance measurement. The GASB does provide guidance in presenting information on service efforts and accomplishments, but its mission and activities to date have been primarily focused on external financial reporting and governmental GAAP. FASAB standards are designed to serve a broader audience than those set by the GASB for state and local governments. For example, FASAB’s objectives for external financial reporting are designed to assist users in evaluating budgetary integrity, operating performance, stewardship, and adequacy of systems and controls. The audiences for federal financial reports include Congress, federal executives, program managers, as well as citizens and their intermediaries. 11-7. The federal government has produced consolidated financial statements, in some prototype form, since 1980, but only since 1997 has the Government Accountability Office (GAO) audited these statements. To date, the GAO has disclaimed an opinion on the statements because of the unreliability of significant portions of the statements, even though the majority of CFO Act agencies have received unqualified audit opinions on their unit’s financial reports. However, the GAO gave the Statement of Social Insurance (a fairly new statement) an unqualified opinion in FY 2007. Areas that are repeatedly mentioned as problems are internal controls; plant, property and equipment and inventories in the Department of Defense; environmental liabilities; and intragovernmental activity and balances. 11-8. The accounting system of a federal agency must provide information useful for financial management of the agency as well as information needed to demonstrate that agency managers have complied with budgetary and other legal requirements. To meet these two information needs, federal agency accounting is based on a dual-track system: One track being a self-balancing set of proprietary (balance sheet and operating) accounts and the other track being a self-balancing set of budgetary accounts. In a very similar way, state and local governments must report both on operational accountability through the government-wide statements, and on fiscal accountability or compliance with the budget in the fund financial statements. The term “dual-track” allows preparers to consider the effect of a transaction on both the entity or agency as a whole, as well as the funds that focus on measuring what was spent compared to what was budgeted to be spent over a one-year period. 11-9. The budgetary accounts required by the U.S. Government Standard General Ledger are: • Other Appropriations Realized—the account that represents the agency’s available resources for the year. This account normally has a debit balance. 11-4 Chapter 11 - Accounting and Reporting for the Federal Government Ch. 11, Answers, 11-9, (Cont’d) • Budgetary accounts that explain where funds are in the spending cycle— Unapportioned Authority, Apportionments, Allotments, Commitments, Undelivered Orders, and Expended Authority. These budgetary accounts normally have a credit balance and when summed will add to the Other Appropriations Realized. • The use of the Commitments account is optional, though highly recommended. Budget authority flows down through the accounts in the sequence given. 11-10. Six financial statements are required and explained in OMB Circular A-136. They are: (1) (2) (3) (4) (5) (6) Balance sheet Statement of net costs Statement of changes in net position Statement of budgetary resources Statement of custodial activities Statement of social insurance Certain statements may not be needed by some agencies, particularly the statements of custodial activities and social insurance. Solutions to Cases 11-1. a. Students can find a list of the 24 federal agencies required to produce audited annual financial reports in the appendix to the Annual Financial Report of the U.S. Government. The GAO provides an opinion in an audit report for each of these agencies. Students will notice that these reports are much longer than those typically prepared for businesses. For the five major agencies that did not receive an unqualified audit report in FY 2007, one received a qualified opinion, and the Departments of Defense, Homeland Security, State, and National Aeronautics and Space Administration received a “disclaimer of opinion” in part because the GAO was unable to determine the reliability of significant portions of the financial statements due to material weaknesses in the financial systems. b. Agencies began to report comparative information showing prior years so students will be able to identify those line-items that are significantly different from the prior year and comment on the reasons for overall changes in net position. c. Agencies will be at different stages of progress in preparing a consolidated performance accountability report (PAR) depending on the year of the statements the student has chosen. After 2008, the PAR should include the annual performance report (APR) required under the Government Performance and Results Act, annual financial statements, management reports on internal control and other accountability issues, and the Inspector General’s assessments of management and performance challenges . Students should examine the transmittal letter that 11-5 Chapter 11 - Accounting and Reporting for the Federal Government Ch. 11, Solutions, Case 11-1, (Cont’d) accompanies the annual report for additional information about progress in integrating financial information. Information about these reports is available in OMB Circular A-136 available at www.omb.gov, under “Circulars.” 11-2. a. The solution to this case depends on the extent of future issuances of new FASAB standards. The FASAB regularly updates a report called “Documents Resulting from the FASAB and the Accounting and Auditing Policy Committee Processes” that can be found at www.fasab.gov. b. The 2008 revision of OMB Circular A-136 is rather extensive and supersedes OMB Bulletin 01-09 so students may not find a newer version of the guidance on financial statement requirements. However, students should develop the skills to locate authoritative information such as these Circulars and Bulletins to be able to confirm that they have the most current and relevant information. 11-3. The FY 2008 report for the U. S. government is expected to be available at www.fms.treas.gov/fr/index.html in December 2008. The answers to these questions for FY 2007 (i.e., October 1, 2006 – September 30, 2007), the report that is presented in Illustrations 11-2 and 11-3, are as follows: a. From the perspective of the balance sheet, the federal government has a net position of a $9,205,800,000,000 (or $9.2 trillion) deficit. There is a $275.5 billion excess of costs of government operations over revenue (i.e., net operating cost) for FY 2007 as seen on the statement of operations and changes in net position. b. The $275.5 billion decrease in net position for FY 2007 is less than the $449.5 billion deficit in FY 2006. The amount of unmatched transactions and balances decreased in FY 2007 to $6.7 billion from $11 billion the year before. c. The Comptroller General of the GAO was not able to render an opinion, therefore he reported a disclaimer of opinion because he was unable to determine the reliability of significant portions of the consolidated financial statements “…resulting from the material deficiencies, and other limitations on the scope of our work...” in five of the major federal agencies (CFO Act agencies). The Comptroller General does go on to express an adverse opinion on internal control over financial reporting and compliance but an unqualified opinion on the new Statement of Social Insurance. d. The GAO reported that the most serious financial management problems were at the Department of Defense (DOD). They cited internal control weaknesses related to capital assets, inventories, and environmental and disposal liabilities. In addition, the report indicated that the DOD was unable to support the total net 11-6 Chapter 11 - Accounting and Reporting for the Federal Government Ch. 11, Solutions, Case11- 3, (Cont’d) cost of operations and could not adequately account for intra-governmental activity between federal agencies. Four other areas of material weaknesses in internal control in other federal agencies related to certain lending programs, determining the extent to which improper payments may exist, ability to manage information security risks on an ongoing basis, and effectively managing its tax collection activities. This information is included in the GAO Report that will accompany each annual Financial Report of the United States Government. e. Nineteen federal agencies out of 24 received unqualified opinions in FY 2007, up considerably from the first audited consolidated financial report eleven years ago. The list of agencies is included in the annual financial report of the U.S. government. The management’s discussion and analysis reports on this topic in the first introductory paragraph. Note to Instructor: The annual report of the U.S. government is certainly provocative and likely to result in a spirited discussion among students. We suggest you focus on the tremendous accounting challenges in auditing the largest organization in the world, and stress the positive aspects of how far federal agencies have come in the few years since audit requirements were enacted. Solutions to Exercises and Problems 11-1. 1. 2. 3. 4. 5. b. a. c. d. c. 6. 7. 8. 9. 10. b. a. c. b. c. 11-7 Chapter 11 - Accounting and Reporting for the Federal Government Ch. 11, Solutions, (Cont’d) 11-2. a. COMPUTATION OF MISSING AMOUNTS: Debits Credits PROPRIETARY ACCOUNTS ACCOUNTS PAYABLE $ 2,300,000 ACCUMULATED DEPRECIATION 2,600,000 APPROPRIATIONS USED 4,500,000 OPERATING MATERIALS AND SUPPLIES $ 2,700,000 CUMULATIVE RESULTS OF OPERATIONS 10/1/10 7,700,000 OPERATING/PROGRAM EXPENSES 4,150,000 DEPRECIATION AND AMORTIZATION 1,150,000 PLANT AND EQUIPMENT 8,900,000 UNEXPENDED APPROPRIATIONS2011 2,100,000 TOTAL AMOUNTS GIVEN 16,900,000 19,200,000 2,300,000 __________ $19,200,000 $19,200,000 FUND BALANCE WITH TREASURY2011 TOTALSPROPRIETARY ACCOUNTS BUDGETARY ACCOUNTS EXPENDED AUTHORITY2011 $ 4,500,000 APPORTIONMENTS2011 600,000 UNDELIVERED ORDERS2011 1,500,000 TOTAL AMOUNTS GIVEN $ OTHER APPROPRIATIONS REALIZED2011 -0- 6,600,000 _________ $ 6,600,000 TOTALSBUDGETARY ACCOUNTS 6,600,000 $ 6,600,000 Note: Unexpended Appropriations ($2,100,000) + Expended Authority ($4,500,000) = $6,600,000 (original appropriation); Appropriations Used ($4,500,000) + Unexpended Appropriations ($2,100,000) = $6,600,000 (original appropriation); 11-8 Chapter 11 - Accounting and Reporting for the Federal Government Ch. 11, Solutions, 11-2, (Cont’d) b. APPROPRIATIONS USED DURING FY 2011 $4,500,000 TOTAL EXPENSES DURING FY 2011 (Note A) 5,300,000 NET DECREASE IN CUMULATIVE RESULTS OF OPERATIONS $ 800,000 (NET DECREASE IN CUMULATIVE RESULTS OF OPERATIONS IS THE SAME AS NET DECREASE IN ASSETS OTHER THAN FUND BALANCE WITH TREASURY IF APPROPRIATIONS IS THE ONLY FINANCING SOURCE) (Note A: Total expenses is the sum of Operating/Program Expenses of $4,150,000 and Depreciation and Amortization of $1,150,000.) 11-3. a. Debits Credits BUDGETARY EXPENDED AUTHORITY2011 4,500,000 APPORTIONMENTS2011 600,000 OTHER APPROPRIATIONS REALIZED2011 5,100,000 PROPRIETARY CUMULATIVE RESULTS OF OPERATIONS 5,300,000 OPERATING/PROGRAM EXPENSES 4,150,000 DEPRECIATION AND AMORTIZATION 1,150,000 APPROPRIATIONS USED 4,500,000 CUMULATIVE RESULTS OF OPERATIONS 11-9 4,500,000 Chapter 11 - Accounting and Reporting for the Federal Government Ch. 11, Solutions, 11-3, (Cont’d) b. FEDERAL AGENCY BALANCE SHEET AS OF SEPTEMBER 30, 2011 ASSETS INTRAGOVERNMENTAL: FUND BALANCE WITH TREASURY2011 $ 2,300,000 GOVERNMENTAL: OPERATING MATERIALS AND SUPPLIES 2,700,000 PLANT AND EQUIPMENT (NET OF ACCUMULATED DEPRECIATION OF $2,600,000) 6,300,000 TOTAL ASSETS $11,300,000 LIABILITIES ACCOUNTS PAYABLE $ 2,300,000 NET POSITION UNEXPENDED APPROPRIATIONS 2,100,000 CUMULATIVE RESULTS OF OPERATIONS 6,900,000 TOTAL NET POSITION 9,000,000 TOTAL LIABILITIES AND NET POSITION 11-10 $11,300,000 Chapter 11 - Accounting and Reporting for the Federal Government Ch. 11, Solutions, (Cont’d) 11-4. RURAL ASSISTANCE AGENCY STATEMENT OF NET COST FOR THE YEAR ENDED SEPTEMBER 30, 2011 FOOD BANK COSTS $ 9,632,800 LESS: EARNED REVENUE 2,611,900 NET COST 7,020,900 HOUSING SERVICES COSTS 7,438,500 LESS: EARNED REVENUE 1,237,400 NET COST 6,201,100 CREDIT COUNSELING COSTS 2,391,000 LESS: EARNED REVENUE 87,000 NET COST 2,304,000 TOTAL COSTS 19,462,300 LESS: EARNED REVENUE 3,936,300 NET COST OF OPERATIONS $ 15,526,000 11-11 Chapter 11 - Accounting and Reporting for the Federal Government Ch. 11, Solutions, (Cont’d) 11-5. FEDERAL SCIENCE ADMINISTRATION STATEMENT OF BUDGETARY RESOURCES FOR THE 11 MONTHS ENDED AUGUST 31, 2011 BUDGETARY RESOURCES: BUDGET AUTHORITY (Note A): APPROPRIATIONS RECEIVED (Note A) TOTAL BUDGETARY RESOURCES $ 4,894,555 $ 4,894,555 STATUS OF BUDGETARY RESOURCES: OBLIGATIONS INCURRED (Note B) UNOBLIGATED BALANCES (Note C) TOTAL STATUS OF BUDGETARY RESOURCES RELATIONSHIP OF OBLIGATIONS TO OUTLAYS: OBLIGATED BALANCE, NETBEG. OF THE PERIOD OBLIGATED BALANCE, NETEND OF THE PERIOD (Note D) OUTLAYS: (Note B) OBLIGATIONS INCURRED $ 3,794,855 1,100,000 $ 4,894,555 1,210,210 (664,131) 3,794,855 NET OUTLAYS (DISBURSEMENTS) (Note E) $4,340,934 Note A: Total budgetary resources are given by the balance of other appropriations realized of $4,894,855. Note B: Expended authority of current year of $3,130,724 plus $664,131 obligated budgetary authority for undelivered orders at 8/31/11. Note C: Unobligated balances is the sum of unapportioned authority, apportionments, allotments, and commitments. Note D: Obligated balance at year-end is equal to undelivered orders plus accounts payable and other accrued liabilities. Note E: Outlays also equal the decrease in fund balances with the U.S. Treasury during the periodthe equivalent of cash disbursed. 11-12 Chapter 11 - Accounting and Reporting for the Federal Government Ch. 11, Solutions, (Cont’d) 11-6. a. FLOOD CONTROL COMMISSION GENERAL JOURNAL Debits 1. Credits BUDGETARY OTHER APPROPRIATIONS REALIZED2011 7,000,000 UNAPPORTIONED AUTHORITY2011 7,000,000 PROPRIETARY FUND BALANCE WITH TREASURY2011 7,000,000 UNEXPENDED APPROPRIATIONS2011 2. 7,000,000 BUDGETARY UNAPPORTIONED AUTHORITY2011 7,000,000 APPORTIONMENTS2011 3. 7,000,000 BUDGETARY APPORTIONMENTS2011 1,000,000 ALLOTMENTS2011 4. 1,000,000 BUDGETARY ALLOTMENTS2011 970,000 UNDELIVERED ORDERS2011 5. 970,000 BUDGETARY UNDELIVERED ORDERS2011 EXPENDED AUTHORITY2011 11-13 170,000 170,000 Chapter 11 - Accounting and Reporting for the Federal Government Ch. 11, Solutions, 11-6, (Cont’d) PROPRIETARY Debits OPERATING/PROGRAM EXPENSES 170,000 DISBURSEMENTS IN TRANSIT2011 DISBURSEMENTS IN TRANSIT2011 170,000 170,000 FUND BALANCE WITH TREASURY2011 UNEXPENDED APPROPRIATIONS2011 170,000 170,000 APPROPRIATIONS USED 6. Credits 170,000 BUDGETARY UNDELIVERED ORDERS2011 395,000 EXPENDED AUTHORITY2011 395,000 PROPRIETARY FURNITURE AND EQUIPMENT 180,000 OPERATING MATERIALS AND SUPPLIES 175,000 OPERATING/PROGRAM EXPENSES 40,000 ACCOUNTS PAYABLE 395,000 UNEXPENDED APPROPRIATIONS2011 395,000 APPROPRIATIONS USED 7. 395,000 BUDGETARY UNDELIVERED ORDERS2011 EXPENDED AUTHORITY2011 11-14 183,000 183,000 Chapter 11 - Accounting and Reporting for the Federal Government Ch. 11, Solutions, 11-6, (Cont’d) Debits Credits PROPRIETARY OPERATING/PROGRAM EXPENSES 183,000 ACCRUED FUNDED PAYROLL AND BENEFITS 183,000 UNEXPENDED APPROPRIATIONS2011 183,000 APPROPRIATIONS USED 8. 183,000 PROPRIETARY ACCOUNTS PAYABLE 189,000 ACCRUED FUNDED PAYROLL AND BENEFITS 183,000 DISBURSEMENTS IN TRANSIT2011 DISBURSEMENTS IN TRANSIT2011 372,000 372,000 FUND BALANCE WITH TREASURY2011 9. 372,000 BUDGETARY UNDELIVERED ORDERS2011 40,000 EXPENDED AUTHORITY2011 40,000 PROPRIETARY OPERATING/PROGRAM EXPENSES 40,000 ACCRUED FUNDED PAYROLL AND BENEFITS 30,000 ACCOUNTS PAYABLE 10,000 OPERATING/PROGRAM EXPENSES OPERATING MATERIALS AND SUPPLIES 11-15 60,000 60,000 Chapter 11 - Accounting and Reporting for the Federal Government Ch. 11, Solutions, 11-6, (Cont’d) Debits DEPRECIATION AND AMORTIZATION 2,500 ACC. DEPRECIATIONFURN. AND EQUIP. UNEXPENDED APPROPRIATIONS2011 2,500 40,000 APPROPRIATIONS USED 10. Credits 40,000 BUDGETARY EXPENDED AUTHORITY2011 788,000 OTHER APPROP. REALIZED2011 788,000 PROPRIETARY CUMULATIVE RESULTS OF OPERATIONS 495,500 OPERATING/PROGRAM EXPENSES 493,000 DEPRECIATION AND AMORTIZATION APPROPRIATIONS USED 2,500 788,000 CUMULATIVE RESULTS OF OPERATIONS 11-16 788,000 Chapter 11 - Accounting and Reporting for the Federal Government Ch. 11, Solutions, 11-6, (Cont’d) b. FLOOD CONTROL COMMISSION BALANCE SHEET OCTOBER 31, 2011 ASSETS INTRAGOVERNMENTAL: FUND BALANCE WITH TREASURY2011 $6,458,000 GOVERNMENTAL: OPERATING MATERIALS AND SUPPLIES 115,000 FURNITURE AND EQUIPMENT, NET OF ACCUMULATED DEPRECIATION OF $2,500 TOTAL ASSETS 177,500 $6,750,500 LIABILITIES ACCOUNTS PAYABLE $ 216,000 ACCRUED FUNDED PAYROLL AND BENEFITS 30,000 TOTAL LIABILITIES COVERED BY BUDGETARY RESOURCES 246,000 NET POSITION UNEXPENDED APPROPRIATIONS CUMULATIVE RESULTS OF OPERATIONS TOTAL NET POSITION 6,212,000 292,500 6,504,500 TOTAL LIABILITIES AND NET POSITION 11-17 $6,750,500 Chapter 11 - Accounting and Reporting for the Federal Government Ch. 11, Solutions, 11-6, (Cont’d) c. FLOOD CONTROL COMMISSION STATEMENT OF CHANGES IN NET POSITION FOR THE MONTH ENDED OCTOBER 31, 2011 CUMULATIVE RESULTS OF UNEXPENDED OPERATIONS APPROPRIATIONS BEGINNING BALANCES $ 0 $ 0 BUDGETARY FINANCING SOURCES: APPROPRIATIONS RECEIVED 7,000,000 APPROPRIATIONS USED 788,000 (788,000) TOTAL FINANCING SOURCES 788,000 6,212,000 NET COST OF OPERATIONS (Note A) (495,500) _________ ENDING BALANCES $ 292,500 $6,212,000 Note A: Operating/program expenses of $493,000 + depreciation and amortization of $2,500. 11-18 Chapter 11 - Accounting and Reporting for the Federal Government Ch. 11, Solutions, 11-6, (Cont’d) d. FLOOD CONTROL COMMISSION STATEMENT OF BUDGETARY RESOURCES FOR MONTH ENDED OCTOBER 31, 2011 BUDGETARY RESOURCES: BUDGET AUTHORITY (Note A) $7,000,000 STATUS OF BUDGETARY RESOURCES: OBLIGATIONS INCURRED (Note B) $970,000 UNOBLIGATED BALANCES AVAILABLE (NOTE C) 6,030,000 TOTAL STATUS OF BUDGETARY RESOURCES $7,000,000 RELATIONSHIP OF OBLIGATIONS TO OUTLAYS: OBLIGATED BALANCE, NET END OF PERIOD (428,000) (Note D) OBLIGATIONS INCURRED 970,000 TOTAL NET OUTLAYS (DISBURSEMENTS) (Note E) Note A: Note B: Note C: Note D: Note E: $ 542,000 Total budgetary resources are the total appropriations for the year, or $7,000,000. Obligations incurred equals expended budgetary authority of $788,000 (see Entry 10A) plus the remaining balance of Undelivered Orders2010 of $182,000 ($970,000 - $788,000), or $970,000. In this case, since the Flood Control Commission obligates prior to all expenditures of budgetary authority, the amount incurred also is simply the amount obligated by the credit to Undelivered Orders2011 (see Entry 4). Total budgetary resources of $7,000,000 less amount obligated of $970,000 (see Note B) equals $6,030,000. Obligated balances at year-end include Undelivered Orders ($182,000) and Accounts Payable and other accrued liabilities ($246,000), or $428,000 in total. Outlays also equals the decrease in Fund Balances with the U.S. Treasury during the periodthe equivalent of cash disbursed. 11-19 Chapter 11 - Accounting and Reporting for the Federal Government Ch. 11, Solutions, (Cont’d) 11-7. a. A federal Inspector General (IG) is independently appointed to a department or agency and is not part of the Government Accountability Office (GAO). However, the IGs typically report to the department or agency of which they are part, but can only be removed with the approval of Congress. So the audit of a federal agency conducted by an IG should be considered independent. For more information on the role of an Inspector General, go to www.gao.gov b. For the fiscal year that ended September 30, 2007, the date of this transmittal letter (November 13, 2007) suggests that the report was available within 45 days of the end of year. That was the required due date for FY 2007. Most federal agencies are making these reports available on their Web sites; however, other ways of obtaining federal publications include going through the Government Printing Office (www.gpo.gov ) or Web sites such as www.FirstGov.gov or www.whitehouse.gov . c. The full Inspector General’s report shows that the department again was cited for material weaknesses in timely process of transactions and accounting for Federal Aviation Administration’s (FAA) property, plant, and equipment, including the construction in process account; although significant improvements were made over the year to result in an unqualified audit opinion for the department as a whole. The FAA’s property, plant and equipment represent 95% of the department’s capital assets, so this in an important area to watch. In addition, significant deficiencies were identified in the areas of internal controls over journal entries in the Highway Transportation Fund, financial control systems, information security programs, and grant accruals. 11-20 ...
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