Instructor:Janice H. Fergusson, CPA

Welcome!Welcome!

ACCT 728 – Financial Accounting with a Federal Government Emphasis

ACCT 728 – Financial Accounting with a Federal Government Emphasis

Day 3Day 3What’s Inside:

Contrast/Compare Accounting for Private Sector, State and Local Governments, and Federal Agencies

Federal Accounting – A Changing Environment

U.S. Standard General Ledger

Federal Accounting Model – Two-Track Accounting System

Accounting Practices for Selected Federal Activities and Transactions

InClass Exercises/Cases/Daily Quiz

What’s Inside:

Contrast/Compare Accounting for Private Sector, State and Local Governments, and Federal Agencies

Federal Accounting – A Changing Environment

U.S. Standard General Ledger

Federal Accounting Model – Two-Track Accounting System

Accounting Practices for Selected Federal Activities and Transactions

InClass Exercises/Cases/Daily Quiz

Part 1Contrast/Compare Accounting for Private Sector, State and Local Governments,

and Federal Agencies

Part 1Contrast/Compare Accounting for Private Sector, State and Local Governments,

and Federal Agencies

Who Establishes Accounting Rules

United States

United States

GloballyGlobally

FASBFASB IASBIASB

GAAPGAAP IFRSIFRS

Private Sector (for profit entities)

Who Establishes Accounting Rules

State and Local

State and Local FederalFederal

GASBGASB FASABFASAB

GAAPGAAP GAAPGAAP

Public Sector (Governments)

Governmental accounting - not a “whole new ball game”

Game played by slightly different rules

Private vs Public Sectors

Private Sector Public Sector1934

1973 FASB

1984 GASB

Development of GAAP

FASAB1990

Operating motive: Businesses want to maximize income from revenues

and other resources Governments want to maximize services provided

from revenues and other resources

Private vs Public Sectors (Organizational Objectives)

Operational focus: Businesses must report quarterly but look to the

long-term as well Governments operate on an annual budget, so

current year is of primary importance

Businesses raise resources from: Sale of goods and services to customers Capital stock Debt transactions

Private vs Public Sectors (Sources of Financial Resources)

Governments raise resources from: Involuntary contributions – taxes! Revenues from other government entities (grants) Donations Charges for goods and services Debt transactions (typically not used for operations)

In Businesses: Continuing a product or service determined by

success in marketplace

Private vs Public Sectors (Evaluating Performance & Operating Results)

In Government Organizations: Profit not a motive, so performance frequently

difficult to measure Some services provided not found elsewhere,

so no competition Can force financial resources through taxation Face rules/regulations not found in private sector

Both use budgetary accounting

Both use funds

Federal vs State and Local

Use of Cash State and Locals

use banks

Federal – US Treasury is the bank

“In short, a “fund” is an independent accounting entity with a self-balancing set of accounts

In other words, an entity with its own set of books (i.e., chart of accounts, general journal, general ledger, trial balances, and financial statements)

Fund Accounting

Why?

To control and segregate resources that are externally restricted and internally (managerially) designated

To ensure and demonstrate compliance with legal and administrative requirements

Fund Accounting

GOVERNMENTAL FUNDS General Fund Special Revenue Funds Capital Projects Funds Debt Service Funds Permanent Funds

PROPRIETARY FUNDS Enterprise Funds Internal Service Funds

FIDUCIARY FUNDS Pension Trust Funds Investment Trust Funds Agency Funds Private Purpose Trust

Funds

Types of Funds Used – State/Locals

NONEARMARKED FUNDS General Fund

EARMARKED FUNDS Special Funds Trust Funds Revolving Funds Deposit Funds

Types of Funds Used – Federal

Part 2Federal Accounting –

A Changing Environment

US Federal Government is largest governmental entity in the world, comprised of:

Three Branches of Government (Legislative, Executive, Judicial)

Numerous offices (e.g., Office of Management and Budget)

Many Departments (e.g., Department of Defense)

Many Independent Establishments and Government Corporations (e.g., Postal Service, SEC, CIA)

Federal Government

Several acts of Congress directed toward federal financial management:

Budget and Accounting Procedures Act of 1950

Supplemental Appropriation Act of 1955

Public Law 84-863 (1956)

Congressional Budget and Impoundment Act of 1974

Federal Managers’ Fiscal Integrity Act (FMFIA) of 1982

Federal Credit Reform Act of 1990

Federal Government Financial Management

Page 1 or 2

Several acts of Congress affect federal government financial management:

Chief Financial Officers Act (CFO) of 1990

Government Performance and Results Act (GPRA) of 1993

Government Management Reform Act (GMRA) of 1994

Federal Financial Management Improvement Acct (FFMIA) of 1996

Accountability of Tax Dollars Act (ATDA) of 2002

Federal Government Financial Management

Page 2 or 2

Financial Accounting Responsibilities

Oversight agencies Department of the Treasury Office of Management and Budget (OMB) Government Accountability Office (GAO)

Federal Accounting Standards Advisory Board (FASAB)

Individual agencies

Department of the Treasury

Acts as chief accountant and bankerPrimary functions

Central accounting and reporting, including developing government-wide consolidated financial statements

Cash receipt and disbursement management Management of the public debt Supervision of agency borrowing from the Treasury Maintenance of government-wide Standard General Ledger

(SGL) Issue Treasury Financial Manual, which contains agency

proprietary reporting requirements and requirements to implement the SGL

Office of Management and Budget (OMB)

Broad financial management powers Independent of Executive Branch – responsible only to

Congress Primary duties:

Apportion enacted appropriations among agencies and establish reserves in anticipation of cost savings, contingencies, etc.

Set requirements for accounting and reporting on budget execution

Prescribe form and content of financial statements Provide guidance on all matters related to budget

preparation and execution Issue OMB Circulars & Bulletins

Government Accountability Office (GAO)

Headed by Comptroller General of United States Independent Agency in Legislative Branch Primary duties

Serves Congress in the general oversight of the executive branch

Independent legislative auditor of federal government Prescribe principles and standards for federal agency

accounting and financial reporting, internal control, accounting systems, and auditing

Auditing financial statements of federal agencies

Financial Accounting Standards Advisory Board (FASAB)

Created jointly by Treasury, OMB, and GAO in 1990 Promulgates accounting principles and standards to be

followed by federal agencies Nine member board

One each from Treasury, OMB, and GAO Six non-federal members, one of whom serves as

Chairman More information available at www.fasab.gov

FASAB Accounting Standards Recognized as GAAP for federal agencies by

AICPA SAS No. 91, Federal GAAP Hierarchy Currently, FASAB has issued

6 Statements of Federal Financial Accounting Concepts

45 Statements of Federal Financial Accounting Standards

7 Interpretations Numerous Technical Bulletins and other documents

Part 3U.S. Standard General Ledger

Part 3U.S. Standard General Ledger

Standard General Ledger

Developed in 1986 and implemented in 1988 Integration of budgetary and proprietary

accounts required 6-digit USSGL account numbers provided Central agency reporting requires lower level

of detail

Principal SGL Accounts

100000 Asset Accounts

200000 Liability Accounts

300000 Net Position Accounts

400000 Budgetary Accounts

500000 Revenues/Other Financing Sources

600000 Expenses

700000 Gains/Losses/Miscellaneous

800000 Memorandum

Visit Blackboard

https://blackboard.sc.edu

Part 4Federal Accounting Model –

Two-Track Accounting System

Part 4Federal Accounting Model –

Two-Track Accounting System

Two-Track Accounting System

Focus of federal accounting is broad – information needed for management of resources (proprietary track) as well as for compliance with fund control requirements (budgetary track) – dual track

Many transactions require entry to record the budgetary effect and separate entry to record the proprietary effect

Event Description Budgetary Accounting Proprietary Accounting

Appropriations: Treasury notifies the agency that Congress passed legislation (signed by the President) granting budgetary authority to fund its activities

Appropriations realized 12,000,000 Unapportioned authority 12,000,000

Fund balance with Treasury 12,000,000 Unexpended appropriations 12,000,000

Apportionment: OMB apportions ¼ of the appropriated amount which may now be expended for first quarter activities.

Unapportioned Authority 3,000,000 Apportionments 3,000,000

No journal entry required

Allotment: The head of the agency allots a portion of the apportionment to the heads of subunits within the agency. The subunits may now expend resources.

Apportionments 2,500,000 Allotments 2,500,000

No journal entry required

Obligations (commitments): A unit of the agency places orders for goods and services related to its activities.

Allotments 1,900,000 Obligations – undelivered orders 1,900,000

No journal entry required

Expenditure: Some of the items ordered above (equipment of $ 100,000 and services of $ 800,000) are received and approved for payment.

Obligations – undelivered orders 900,000 Expended Appropriations 900,000

Equipment 100,000Operating (program) expense 800,000 Accounts payable 900,000 Accounts payable 900,000 Fund balance with Treasury 900,000

Typical Journal Entries – Federal Agency

How Budgetary Accounts Work

Budgetary resources (appropriations) are represented by debits.

Credits reflect the status of the resources within the spending process.

‘Credits’ reflect status of resources within spending process

Amount Status  

$ 9,000,000 Unapportioned authority: Amount to be apportioned to the agency over the remaining three quarters of the year.

500,000 Apportionments: Current quarter resources not yet allotted by agency head to specific subunits of the agency.

600,000 Allotments: Resources currently available to agency offices, but not yet committed by placing orders for goods or services.

1,000,000 Obligations for undelivered orders: Commitments for outstanding purchase orders for goods and services not yet received.

900,000 Expended appropriations: Amounts expended on goods and services received.

$ 12,000,000 Total appropriation  

How Proprietary Accounts Work

Proprietary accounts measure assets, liabilities, revenues and expenses in much the same manner as accrual basis accounting.

‘Unexpended appropriations’ represents source of funds to federal agency

‘Fund Balance with Treasury’ - agencies typically do not maintain cash balances

Part 5Accounting Practices for Selected Federal

Activities and Transactions

Part 5Accounting Practices for Selected Federal

Activities and Transactions

Case Illustration

Prepared for fiscal year 2014 Activities financed with single-year appropriation Simplifications for examples

Assume general ledger control accounts are employed Presentation is only general ledger entries Summary entries presented Closing entries not shown on slides

Effects of transactions on budgetary and proprietary accounts

T1 – Congress Enacts Appropriation

Budgetary Entry

Appropriations Realized

Unapportioned Authority

Proprietary Entry

Fund Balance with the Treasury—2014

Unexpended Appropriations—2014

225,000

225,000

225,000

225,000

T2 – OMB Apportionment

Similar budgetary entries would be made each quarter. By the end of the year, a total of $220,000 will have been recorded in these accounts ($225,000 appropriation less a $5,000 holdback by OMB).

Budgetary Entry — First Quarter entry

Unapportioned Authority

Appropriations

Proprietary Entry — None

68,000

68,000

T3 – Agency Administrative Allotments

Budgetary Entry

Appropriations

Allotments

Proprietary Entry — None

214,000

214,000

T4 – Preliminary Requests

Budgetary Entry

Allotments

Commitments

Proprietary Entry — None

48,000

48,000

T5 – Supply Purchase Orders Approved

Budgetary Entry

Commitments

Undelivered Orders

Proprietary Entry — None

37,000

37,000

T6 – Received Supplies

Budgetary Entry

Undelivered Orders

Allotments

Expended Appropriations – Unpaid

Proprietary Entry

Inventory for Agency Operations

Accounts Payable

Unexpended Appropriations – 2014

Appropriations Used

30,000

500

30,500

30,500

30,500

30,500

30,500

(Estimated cost $30,000; $7,000 still outstanding; invoice $30,500)

T7 – Used Supplies

Budgetary Entry — None

Proprietary Entry

Operating/Program Expenses

Inventory for Agency Operations

25,000

25,000

T8 – Checks Ordered in 2013, Issued in 2014

Budgetary Entry

Expended Appropriations – Unpaid

Expended Appropriations – Paid

Proprietary Entry

Disbursements in Transit

Fund Balance with Treasury - 2013

12,000

12,000

12,000

12,000

T9 – Travel Orders Issued

Budgetary Entry

Allotments – Realized Resources

Undelivered Orders – Unpaid

Proprietary Entry — None

1,200

1,200

T10 – Request for Travel Advance Checks

Budgetary Entry — None

Proprietary Entry

Advance to Others

Disbursements in Transit

1,000

1,000

T11– Travel Advances Paid

Budgetary Entry

Undelivered Orders – Unpaid

Undelivered Orders – Paid

Proprietary Entry

Disbursements in Transit

Fund Balance with Treasury - 2014

1,000

1,000

1,000

1,000

T12 - Paid Travel Vouchers

Budgetary Entry

Allotments – Realized Resources

Undelivered Orders – Unpaid

Undelivered Orders – Paid

Expended Appropriations – Unpaid

Expended Appropriations – Paid

50

120

880

170

880

Slide 1 of 2

T12 - Paid Travel Vouchers

Proprietary Entry

Operating/Program Expenses – Travel

Advances to Others

Accounts Payable

Unexpended Appropriations – 2014

Appropriations Used

1,050

1,050

880

170

1,050

Slide 2 of 2

T13 – Travel Checks Ordered

Budgetary Entry — None

Proprietary Entry

Accounts Payable

Disbursements in Transit

170

170

Since travel advances of $880 had already been paid, the travelers only need another $170 to complete the reimbursements.

T14– Collected Prior Year Travel Advances

Budgetary Entry

Undelivered Orders – Paid

Expired Authority

Proprietary Entry

Fund Balance with Treasury - 2014

Advances to Others

800

800

800

800

T15 – Checks Issued by Treasury

Budgetary Entry

Expended Appropriations – Unpaid

Expended Appropriations – Paid

Proprietary Entry

Disbursements in Transit

Fund Balance with Treasury - 2014

170

170

170

170

T16 - Expenses Not Previously Accrued

Budgetary Entry

Allotments – Realized Resources

Expended Appropriations – Unpaid

24,700

24,700

Slide 1 of 2

T16 - Expenses Not Previously Accrued

Proprietary Entry

Operating/Program Expenses – Rent

Operating/Program Expenses – Utilities

Operating/Program Expenses – Misc.

Accounts Payable

Unexpended Appropriations – 2014

Appropriations Used

13,000

8,200

3,500

24,700

24,700

24,700

Slide 2 of 2

T17 – Purchase Orders Approved and Placed

Budgetary Entry

Commitments

Allotments – Realized Resources

Undelivered Orders – Unpaid

Proprietary Entry — None

10,500

300

10,200

T18 – Equipment Received

Budgetary Entry

Undelivered Orders – Unpaid

Allotments – Realized Resources

Expended Appropriations – Unpaid

Proprietary Entry

Equipment

Accounts Payable

Unexpended Appropriations – 2014

Appropriations Used

10,200

10,000

10,000

200

10,000

10,000

10,000

T19 - Salaries and Wages Paid

Budgetary Entry

Allotments – Realized Resources

Expended Appropriations – Unpaid

Expended Appropriations – Paid

126,000

8,000

134,000

Slide 1 of 2

T19 - Salaries and Wages Paid

Proprietary Entry

Accrued Funded Payroll and BenefitsOperating/Program Expenses – Salaries/Benefits

Fund Balance with Treasury – 2013

Fund Balance with Treasury – 2014

Unexpended Appropriations – 2014

Appropriations Used

8,000

126,000

126,000

8,000

126,000

126,000

Slide 2 of 2

T20 – Commitments Places for Services

Budgetary Entry

Allotments – Realized Resources

Commitments

Proprietary Entry — None

3,000

3,000

T21 – Services Contract Approved

Budgetary Entry

Commitments

Undelivered Orders – Unpaid

Proprietary Entry — None

3,000

3,000

T22 – Received Contracted Services

Budgetary Entry

Undelivered Orders – Unpaid

Expended Appropriations – Unpaid

Proprietary EntryOperating/Program Expenses – Contractual Services

Accounts Payable

Unexpended Appropriations – 2014

Appropriations Used

3,000

3,000

3,000

3,000

3,000

3,000

T23 – Checks Requested from Treasury

Budgetary Entry — None

Proprietary Entry

Accounts Payable

Disbursements in Transit

95,200

95,200

T24 – Checks Issued by Treasury

Budgetary Entry

Expended Appropriations – Unpaid

Expended Appropriations – Paid

Proprietary Entry

Disbursements in Transit

Fund Balance with Treasury – 2013

Fund Balance with Treasury – 2014

85,000

85,000

85,000

30,000

55,000

T25 – Depreciation Recorded

Budgetary Entry — None

Proprietary Entry Operating/Program Expenses – Depreciation

Accumulated Depreication2,500

2,500

T26 - Accrual of Salaries and Benefits

Budgetary Entry\

Allotments – Realized Resources

Expended Appropriations – Unpaid

Proprietary Entry Operating/Program Expenses – Salaries/Benefits

Accrued Funded Payroll and Benefits

Unexpended Appropriations – 2014

Appropriations Used

7,000

7,000

7,000

7,000

7,000

7,000

T27 – Increased Liability for Accrued AL

Budgetary Entry — None

Proprietary Entry Future Funded Expenses

Accrued Unfunded Annual Leave10,000

10,000

Day 3

The

End!