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Chapter 14
McGraw-Hill/Irwin
Overview of Chapter 14
Federal government reporting standards Reporting requirements of federal agencies Consolidated Financial Report of the U.S. government. Journal entries for typical transactions of a federal government unit, applying budgetary and proprietary accounting practices.
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The Office of Management and Budget, together with the Government Accountability Office (GAO) and the Department of the Treasury are the primary organizations charged with financial management of the federal government. Together they created the Federal Accounting Standards Advisory Board.
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Federal Accounting Standards Advisory Board (FASAB). The purpose of the FASAB is to develop and issue federal accounting standards. The Board is comprised of ten members; two from the executive branch, two from the legislative and six who are not employees of the federal government.
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The standards (called Statements of Federal Financial Accounting Standards) are recognized as the highest level of authoritative standard in the AICPAs Code of Professional Conduct for federal government entities.
Like the FASB and GASB, the FASAB has developed a conceptual framework to guide the Board in the development of new standards
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Balance Sheet, Statement of Net Cost Statement of Changes in Net Position Statement of Budgetary Resources Statement of Custodial Activity (if applicable), and Statement of Social Insurance (if applicable).
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Statement of Custodial Activity (if applicable) This statement is required only if the government agency collects nonexchange funds to be turned over to Treasury and is analogous to an agency fund of a state or local government. The SEC, U.S. Customs and Border Protection and the IRS prepare this statement.
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The consolidated report presents the financial position and results of operation of the federal government, measured on the accrual basis.
The report includes
Managements Discussion and Analysis, Financial Statements, unaudited Supplemental and Stewardship Information, and the auditors (i.e. GAOs) Report
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Balance Sheet, Statement of Net Cost, Statement of Operations and Changes in Net Position, Reconciliation of Net Operating Cost and Unified Budget Deficit, Statement of Changes in Cash Balance from Unified Budget and Other Activities, Statement of Social Insurance
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The Guide presents plain language explanations of key terms It provides graphic displays of revenues by source and the cost of operating the government by function. Finally, it includes an abbreviated financial report, called a Snapshot of the Governments Financial Position and Condition.
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The accounting systems of federal agencies must serve both the external financial reporting needs mandated by the Chief Financial Officers Act and the necessity of having internal budgetary controls over the spending of public resources.
This is accomplished through the maintenance of two selfbalancing sets of accounts, termed budgetary and proprietary accounts.
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The purpose of budgetary accounts is to provide a record by which federal expenditures may be traced back to the budgetary authority granted by Congress through appropriations. Proprietary accounts are those accounts which comprise the accrual basis financial statements prepared by the federal governments and its agencies.
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Typical Journal Entries - Federal Agency Comparison of Budgetary and Proprietary Accounting
Event Description Budgetary Accounting Proprietary Accounting
Debits Credits Fund balance with Treasury 12,000,000 Unexpended appropriations 12,000,000
Debits Credits Appropriations: Treasury notifies the agency Appropriations realized 12,000,000 that Congress passed legislation (signed by Unapportioned authority 12,000,000 the President) granting budgetary authority to fund its activities
Apportionment: OMB apportions of the appropriated amount which may now be expended for first quarter activities.
Allotment: The head of the agency allots a Apportionments portion of the apportionment to the heads Allotments of subunits within the agency. The subunits may now expend resources. Obligations (commitments): A unit of the agency places orders for goods and services related to its activities. Expenditure: Some of the items ordered above (equipment of $ 100,000 and services of $ 800,000) are received and approved for payment.
2,500,000 2,500,000
Equipment 100,000 Operating (program) expense 800,000 Accounts payable Accounts payable 900,000 Fund balance with Treasury
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900,000
Under federal budgetary accounting, budgetary resources (appropriations) are represented by debits. Credits reflect the status of the resources within the spending process.
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Credits reflect the status of the resources within the spending process
Amount Status
$ 9,000,000 - Unapportioned authority: this amount will be apportioned to the agency by OMB over the remaining 3 quarters of the year. 500,000 - Apportionments: current quarter resources that have not yet been allotted by the head of the agency to specific subunits of the agency. 600,000 - Allotments: resources currently available to agency offices, but have not yet been committed by placing orders for goods or services. 1,000,000 - Obligations for undelivered orders: commitments for outstanding purchase orders for goods and services that have not yet been received. 900,000 - Expended appropriations: amounts that have been expended on goods and services received. $ 12,000,000 Total appropriation
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Proprietary accounts measure assets, liabilities, revenues and expenses (including depreciation) in much the same manner as accrual basis accounts of state and local governments.
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Unexpended appropriations, represents a source of funds to the federal agency and is similar to a transfer in account in a state or local government fund. Fund Balance with Treasury. Federal agencies do not typically maintain cash balances. Instead, the ability to draw cash from the Treasury is recognized as an asset at the time of an appropriation with this account.
Payments made by Treasury on behalf of the agency are reflected with a credit to this account.
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