Introduction to Federal Accounting Presented by: John Reifsnyder, CDFM Graduate School Instructor johnreifsnyder@cox.net.

Introduction to Federal Accounting Presented by: John Reifsnyder, CDFM Graduate School Instructor

Of the financial records of an enterprise
Accounting The Systematic - Classification - Recording - Reporting - Analyzing - Interpretation Of the financial records of an enterprise used to - recognize the factors that determine financial condition - evaluate the progress or failures of an activity

Common Accounting Terms
Accounting Cycle Double Entry Accounting General Journal Ledger Accounts General Ledger Cash and Accrual Basis of Accounting details later

The United States Constitution
“No money shall be drawn from the Treasury but in consequence of appropriations made by law . . .” – and – “. . . A regular statement and account of receipts and expenditures of all public money shall be published from time to time.” (Article 1, Sec 9, Clause 7) Previous focus was on receipts and payments from the U.S. Treasury. FY 97 - Audited consolidated Financial Statements were produced for the government as a whole. Article 1 - Legislative Branch - Law making powers to Congress Article 2 - Executive Branch - Gives the President power to Execute Article 3 - Judicial powers to the courts

Accounting Introduction
Federal accounting framework Budgetary accounting Financial accounting Managerial cost accounting Users of Federal Financial Information External users (citizens and Congress) Internal users (agency heads and management) Budgetary Accounting - Track the expenditure of government funds Financial Accounting - Account for assets, liabilities, the same as a private business. Managerial Accounting - Relates to performance based budgeting and reporting. External users are the stockholders in the federal government.

Federal Financial Statements
UNITED STATES GOVERNMENT CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1997 (In billions of dollars) Consolidated Statements Assets: Cash and other monetary assets Accounts receivable Loans receivable Taxes receivable Inventories and related property Property, plant, and equipment Other assets Total assets Commitments and contingencie Net position Total liabilities and net position Liabilities and net position: Accounts payable Federal debt securities held by the Federal employee and veteran ben Environmental liabilities Benefits due and payable Loan guarantee liabilities Other liabilities Total liabilities UNITED STATES GOVERNMENT CONSOLIDATED STATEMENT OF NET COSTS FOR THE YEAR ENDED SEPTEMBER 30, 1997 National defense Human resources: Education, training, employme social services Health Medicare Income security Social security Veterans benefits and services Total human resources Physical resources: Energy National resources and enviro Commerce and housing credit Transportation Community and regional devel Total physical resources Net interest: Treasury securities held by th Other functions: International affairs General science, space, and te Agriculture Administration of justice General government Total other functions Total UNITED STATES GOVERNMENT CONSOLIDATED STATEMENT OF CHANGES IN NET POSITION FOR THE YEAR ENDED SEPTEMBER 30, 1997 Less: Financing sources from non-exchange revenues: Individual income tax and tax withholdings Corporation income taxes Unemployment taxes Excise taxes Estate and gift taxes Customs duties Miscellaneous Total non-exchange revenues Other earned revenues Excess of costs over revenues before unreconciled transactions Unreconciled transactions affecting the change in net position. Change in net position Net position-beginning of period Net position-end of period 1,247.5 179.8 27.8 55.8 19.7 20.0 26.1 1,603.3 Net cost of Government operations 1,576.7 11.6 -15.0 12.4 -2.6 -5,000.4 -5,003.0 Balance Sheet Statement of Net Cost Statement of Change in Net Position Required Supplemental Stewardship Information - Vol 6B, Chapter 11 RSI - Vol 6B, Chapter 12 (DM)

Accounting-Related Legislation
BUDGET AND ACCOUNTING ACT OF 1921: - ESTABLISHED AN EXECUTIVE BUDGET PROCESS - REQUIRED THE PRESIDENT TO SUBMIT HIS BUDGET RECOMMENDATIONS TO CONGRESS EACH YEAR. TO ASSIST HIM, THE BUREAU OF THE BUDGET WAS CREATED - CONGRESS WOULD BETTER COORDINATE REVENUE AND SPENDING DECISIONS - APPROPRIATIONS COMMITTEES JURISDICTION OVER SPENDING WAS STRENGTHENED - GOVERNMENT ACCOUNTABILITY OFFICE (GAO) WAS ESTABLISHED

1950 BUDGET AND ACCOUNTING ACT Amended the 1921 Budget and Accounting Act. Assigned to the executive branch the responsibility for maintaining accounting systems and producing financial reports. The Comptroller General, in consultation with the Director of OMB, was required to prescribe the principles, standards, and related requirements for accounting to be observed by the executive agencies. Each was given the responsibility for establishing and maintaining systems of accounting and internal controls. Established accounting systems of executive agencies were required to conform to the principles, standards, and related requirements prescribed by the CG. The Budget and Accounting Procedures Act of 1950 ultimately adopted a less descriptive definition of performance budgeting. Specific language detailing the requirements of a performance budget was dropped before final passage of the bill since in the opinion of the Bureau of the Budget (now OMB) 1.the executive branch was already implementing performance budgeting, and 2.specific performance budgeting language would appear too rigid and make it difficult to proceed with future budgeting improvements.

THE CONGRESSIONAL BUDGET AND IMPOUNDMENT CONTROL ACT OF Changed the fiscal year to October 1 through September Established the Congressional Budget Office (CBO) Established to provide data to the Congress on and analysis of the federal budget - Established the House and Senate Budget Committees -Charged with development of a “Concurrent Resolution on the Budget” The Congressional Budget and Impoundment Control Act of 1974 Describes the current Congressional budget process and controls certain aspects of congressional action, i.e., the budget resolution process. Created the deferral and rescission process. Created the House and Senate Budget Committees Established the Congressional Budget Office Moved the start of the fiscal year from July 1 to October 1

1982 Federal Managers’ Financial Integrity Act: Each agency reports the results of a self-evaluation of the adequacy of systems of internal control Assurance that agencies are managed properly Obligations and costs comply with applicable laws Funds, property and other assets are safeguarded against waste, loss, and unauthorized use

Prompt Payment Act of Pay vendors on time or pay interest

Chief Financial Officers Act of Required the establishment of CFOs in cabinet departments and specified agencies - CFOs charged with overseeing financial management activities

Government Performance and Results Act of 1993 Requires agencies: to submit 5-year strategic plans…DoD must update at least every 4 years to submit annual performance plans Now part of Performance Budget to report prior year program performance by November 15th of each year Performance and Accountability Report (PAR) or separate Performance and Accountability reports Shifts focus of programs from workload activities to performance metric outputs and outcomes. When Congress passed GPRA, it made the following observations, 1. Waste and inefficiency in federal programs undermine the confidence of the American people in the government and reduces the federal government’s ability to adequately address vital public needs. 2. Federal managers are seriously disadvantaged in their efforts to improve program efficiency and effectiveness, because of insufficient articulation of program goals and inadequate information on program performance. 3. Congressional policy making, spending decisions and program oversight are seriously handicapped by insufficient attention to program performance and results. What are your reactions to the Congressional findings? Performance Budgets: Beginning with the FY05 budget, agencies prepare a “performance budget” instead of the Annual Performance Plan (APP) for their budget submission to OMB and Congress. GPRA still requires the APP, but the agency performance budget substitute for the APP per OMB Circular A-11.

Government Management Reform Act – Required systems to: -- support the control of cost of government -- support full cost reporting and full disclosure of financial data - Required application of accounting standards to produce consistency in financial reporting

Federal Financial Management Improvement Act – 1996 Each agency head establish, evaluate, and maintain adequate systems of accounting and internal control Incorporate accounting standards and reporting objectives Each audit of an agency’s financial statements shall report if the agency is in compliance with the preceding requirements

Federal Accounting Standards Advisory Board (FASAB)
Develops and recommends federal accounting concepts and standards established in 1990 5 Concepts 36 Standards Federal Generally Accepted Accounting Principles (GAAP)

Implementation of Federal Accounting Standards
Office of Management and Budget (OMB) Government Accountability Office (GAO) OMB - Publishes and implements approved Standards – OMB Cir A-136 (Form and Content of Financial Statements) GAO - When standards are approved GAO updates Title 2 Department of Treasury - Performs four basic functions: 1. Formulates/recommends economic, financial, tax & fiscal policies, also updates the US Standard General Ledger 2. Serves as Financial Agent for the US Govt. 3. Enforce the law 4. Manufacture coins & currency Department of Treasury

Types of Government Funds
Department of Defense: Appropriated Funds Reimbursable Funds Revolving Funds Trust Funds Nonappropriated Funds APPROPRIATED FUNDS - Provided by Congress and have a limited life for obligations REIMBURSABLE FUNDS - Funding in addition to those appropriated by Congress - Must be included in the Budget Request REVOLVING FUNDS - Work like a for-profit business and sell products and services to customers at a price that covers the costs incurred TRUST FUNDS - Used for carrying out specific purposes and programs, (Foreign Military Sales) NON-APPROPRIATED FUNDS - Not appropriated by Congress - Funds generated from: - Sale of goods & services to DOD Military & Civilian personnel Used to support MWR

Budgetary Accounting Budgetary accounting is often referred to as fund accounting. Budgetary accounts are a set of accounts that are self-balancing and represent different levels of obligational authority for different units.

Budgetary Accounting Purpose Record appropriation status
Record subdivisions of budgetary authorities Record valid commitments, obligations, expenditures, outlays Control use of budgetary authorities Use for appropriate purpose Use during time provided Use within amount provided

Budgetary Definitions
Appropriations Congressional authorization to obligate government and make payment from the Treasury Apportionment Distribution of congressional budgetary authority to a federal agency by OMB Allotment Distribution of apportioned budgetary authority to organizational activities Commitment Administrative reservation of budgetary authority

Budgetary Definitions (cont’d)
Obligation Legally encumbers a specified sum of budgetary authority that requires future payment Outlays/Disbursements Payment for costs incurred, goods and services received Expended Authority Budgetary authority used to fund goods and services received Expired Authority Budgetary authority that is no longer available for new obligations Canceled Authority Budgetary authority that has been closed

Categories of Appropriations
Annual Appropriations Multiyear Appropriations No-Year Appropriations Permanent (Indefinite) Appropriations ANNUAL APPROPRIATIONS - O & M, and Salaries & Expenses MULTIYEAR APPROPRIATIONS - RDT&E years PA years Shipbuilding & Conversion Navy – 5 years Military Construction 5 Years NO-YEAR APPROPRIATIONS - They do not expire (Working Capital Funds) NOTE: Closed if there were no payments for two years PERMANENT (Indefinite) Appropriations - Social Security, Federal Retirement, interest on the debt. NOTE: What’s needed will be provided by Congress

Flow of Funds CONGRESS THE PRESIDENT TREASURY OMB Agency Divisions
PRESIDENT AND CONGRESS AGREE ON THE BUDGET PRESIDENT SIGNS APPROPRIATIONS BILLS TREASURY OMB ISSUE TREASURY WARRANTS AND CREATES “BANK ACCOUNTS” APPORTIONS THE APPROPRIATIONS Units A, B, C BUDGET EXECUTION BEGINS Agency Hqs. Agency Divisions

Fiscal Law An agency may obligate and expend appropriations:
Only for a proper purpose Only within the authorized time limits Within the amounts established by Congress for a bona fide need

Purpose Proper Purpose Rule:
For the purposes for which they were appropriated per 31 U. S. C (a): “ Appropriations shall be applied only to the objects for which the appropriations were made except as otherwise provided by law ” Purpose - Necessary expense rule - Expend only for the purposes authorized in the appropriations acts. The Necessary expense rule must meet three tests: - Logical Relationship must exist - Not prohibited by law - Not funded for elsewhere

Time Within the authorized time limits:
Expenditure of funds must be incurred within the time for which the appropriation was made available. Do not execute current year funds for prior or future year expenditures. (31 USC 1502) 31 U.S.C. 1502 “The balance of a fixed-term appropriation is available only for payment of expenses properly incurred during the period of availability or to complete contracts properly made within that period.”

Time A valid obligation must be made to an appropriation within the period the funds are available. O&M: One fiscal year RDTE: Two fiscal years Procurement: Three fiscal years MILCON: Five fiscal years SCN: Five fiscal years No Year: Dollar specific, indefinite expiration

Amount Within the amounts established by Congress:
The obligation may not exceed the amount appropriated by statute, nor may it be incurred before the appropriation becomes law (31 U.S.C. 1341) Amount - May not exceed the amounts established in law U.S.C. 1341 “An officer or employee of the United States Government may not (A) make or authorize an expenditure or obligation exceeding an amount available in an appropriation or fund for the expenditure or obligation; or (B) involve the government in a contract or obligation for the payment of money before an appropriation is made unless authorized by law.”

No-Year Appropriations
31 U.S.C. 1555 A No-Year Account is to be Closed If: Agency Head or President Determines Purpose Fulfilled No Disbursements Have Been Made for Two Years

Flow of Resources Commitments (FMR Volume 3 Chapter 8)
Obligations (Bona fide need - FMR Volume 11A ) Obligating Documents Contracts, Purchase Orders Travel Orders Requisitions Military Interdepartmental Purchase Requests (MIPR) Project Orders (FMR Volume 11A, Chapter 2) Economy Act Orders (FMR Volume 11A, Chapter 3) Outlays COMMITMENT- Administrative Reservation of Funds OBLIGATION - Legal Reservation of Funds (May want to address object classes.) CONTRACTS MIPR (DDFORM 448) MIPR ACCEPTANCE (DD FORM 448-2) ACCEPT AS EITHER DIRECT CITE OR REIMBURSABLE - PROJECT ORDERS (Title 41, USC Sec. 23) DODI R Volume 11A, Chapter 2 - ECONOMY ACT ORDERS (Title 31, USC 1535) DFAS -IN Reg OUTLAYS - THE terms “EXPENDITURE”and “NET DISBURSEMENTS” are used interchangeably REIMBURSEMENTS - Amounts earned and collected from the selling of goods and services. REFUNDS - Recovery of excess payments and are credited to the appropriation that made the payment.

Accounting Classification
Identifies the source of funding and purpose for which used Creates an audit trail

What is an Obligation?

Government Definition
Orders placed, Contracts awarded, Grants issued, Services received, etc.-- -- that will require payments (“outlays”) during the same or a future period.

Obligations are Classified as:
Undelivered Order Delivered Order Use of the Standard General Ledger ensures government-wide identification of apples to apples and oranges to oranges. Unpaid 4801 Paid 4802 Paid 4902 Unpaid 4901

What is an “Accrued Expenditure”?
Charges…that reflect liabilities incurred and the need to pay for: services… goods…received… amounts becoming owed under programs for which no current service or performance is required (such as annuities, benefit payments..)* Expenditures accrue regardless of when cash payments are made…* *GAO, “Glossary of Federal Terms Used in the Federal Budget Process”, 1981.

Expenditures in the Budget
OBLIGATION Delivered Order UNPAID PAID Expenditure

Accrual Accounting Events
Timing of the Recording of Purchase of Materials Under Accrual Method of Accounting Records in Accounting Records in Month in Which: Transaction Order is Placed Materials are Delivered Bill is Paid Materials are used Placing an order for materials As an obligation Materials Delivered As an accrued expenditure Payment made for materials As a disbursement of cash Materials used or consumed As an applied cost

What is an Outlay?

A payment of an obligation
Once all payments are made, the obligation goes away (is “liquidated”) Outlays during a fiscal year may be for payment of obligations incurred in prior years or in the same year

Outlays are Paid Obligations
Undelivered Order Delivered Order An outlay is an accounting event that has to be recorded in an accounting system. UNPAID PAID PAID UNPAID OUTLAY

Reimbursements Project Order (41 U.S.C. 23):
Placed with and accepted by: A DoD Government Owned and Government Operated (GOGO) establishment. Shipyard, arsenal, ordinance plant or other manufacturing plant or shop.

Project Orders Same as a commercial contract to the customers’ appropriation Extends beyond the life of the appropriation. Up to five years after the appropriation expires for new obligations Over-billing may create a 31 USC 1517 violation Normally issued for the overhaul or manufacturing of a specific number of items within a specific time frame for a specific price Performing activity should incur costs of not less than 51% of the total costs of performing the work The performing activity must not accept the project order if the requirements of the project order regulations are not met A Military Interdepartmental Purchase Request (DD 448 Form) is used to issue project orders

Project Order Characteristics
Specific regarding work to be done Single purpose with identification to a final product or end item Includes a production schedule Includes funded cost per item Usually mission oriented Be performed in house Bona fide need in the year executed Commence work within a reasonable time (90 days) Return orders for cancellation if work financed by an expiring appropriation is not started by 1 January

Economy Act Orders Must be closed-out by 30 September.
Change in dollar amount requires: An amendment to the original MIPR (DD Form 448). Acceptance (DD Form 448-2) of the amendment by the performing activity. Adjust the obligation in accounting based on the acceptance of (DD Form 448-2).

Non-Economy Act Orders
Non-Economy Act orders are for intra-governmental support, where a DoD activity needing goods and services obtains them from a Non-DoD agency. Specific statutory authority is required to place an order with a Non-DoD agency for goods or services, and to pay the associated cost. If specific statutory authority does not exist, the default will be the Economy Act, 31 U.S.C

Customer/Provider Scenario
Customer (ordering agency) prepares MIPR requesting the repair and overhaul of 400 widgets for a total cost of $ 1,300,000. The MIPR was issued as a Project Order and is funded with an annual O&M appropriation Performing agency accepts the MIPR and prepares a MIPR acceptance, DD Form 448-2 Based on the MIPR acceptance the ordering agency records an obligation in their accounting records and the performing agency records an order received in their accounting records in the amount of $1,300,000

Order Impact On Customer/ Provider Books
MIPR ACCEPTANCE $ 1.3M FY ’10 – 15 – Available To complete Work thru 30 Sept., 2015 Assumes O&M customer 4220/4210 Unfilled Orders/Anti. Reimb & Other Income Project Order (DD 448-2) 4610/4801 Orders Received Obligations $ 1.216M Billed to Customer based on Cost In support of the Project (SF 1080 bill submitted) /4220 R.E./UFO 1310/5200 A/R - REV $ M Based on SF 1080 Bill /4901 6100/2110 3100/5700 Reimbursements Earned Cost $ 1.216M /4251 R.E. COLL./R.E / FWTT/A.R. $ M / /1010 Collections Payment / Liquidation $ 84 Should complete work by 30 Sept. 2015 Must be de-obligated if not Completely liquidated by Unfilled Orders Unliquidated Obligations Customer Books

How do we Link to the Budget?
Accounting events are assigned unique identifiers from a standard government-wide list (U.S. Standard General Ledger) All federal agencies are required to use these standard accounts in order to properly link to the Budget

USSGL Chart of Accounts
1000 Assets 2000 Liabilities 3000 Net Position (Capital) 4000 Budgetary 5000 Revenues and Financing Sources 6000 Expenses 7000 Gains and Losses 8000 Memorandum Accounts USED IN SUPPORT OF: BUDGETARY, FINANCIAL(PROPRIETARY), AND MANAGERIAL ACCOUNTING 1000, 2000, are PERMANENT or REAL ACCOUNTS 4000 -Budgetary accounts - Maintained in the Accounting records by FY. 5000, 6000, are TEMPORARY ACCOUNTS, (the balances in these accounts are closed at the end of the FY). are MEMORANDUM ACCOUNTS in support of Guaranteed Loan Programs (or) reserved for Agency Use.

Flow of Budget Authority
President signs appropriation into law, thereby creating budget authority - the authority for an agency to obligate the government to pay for goods and services Accounting processes now come into play OMB prepares to apportion Treasury prepares agency warrant OMB apportionment Agency request Agency headquarters apportionment allotment Major Organizations Sub-allotment or allocation Subordinate organizations

Flow of Budget Authority (continued)
Organization may commit to reserve budget authority for actual obligation later in the fiscal period Organizational element with allotment or allocation Obligate for goods and services Cost Consumable supplies = cost Supplies for inventory issued/consumed = cost Equipment in revolving fund: Capitalized/depreciated = cost(in some accounting systems) Expenditure Receipt of goods/services: cancellation or undelivered orders Outlay Cash from the Treasury pays for goods/services

Budgetary Accounting RESOURCES = STATUS OF RESOURCES
4450 Unapportioned 4510 Apportionments 4610 Allotments 4700 Commitments 4801 Undel Order, Unpaid 4901 Deliv Order, Unpaid Deliv Order, Paid 4650 Expired Authority 4350 Canceled Authority 4119 Appropriations 4201 Total Actual Resources Collected

Proprietary Accounting
Purpose Accounting for assets and liabilities Accounting for revenues and expenses Determining financial position Determining results of operations SFFAS NO. 7

Proprietary Accounting
Balance Sheet Assets = Liabilities + Net Position 1000 Assets = 2000 Liabilities Net Position (Capital) Statement of Net Cost Expenses – Exchange Revenue = Net Cost of Operations Proprietary accounting (accrual basis) captures costs and revenues and applies them to the appropriate period. More complex than Budgetary accounting. Requires more general ledger accounts to accommodate this complexity. Statements compiled: Balance Sheet Statement of Net Cost Statement of Changes in Net Position

The Historical Cost Concept
Generally accepted accounting principles (GAAP) requires that assets always be stated at their actual cost rather than at their current market values Accounting is concerned with what you paid for something, not what it is worth today

The Matching Principle Concept
Expenses of a period that are recorded and reported are only those incurred to produce the revenues generated for the same period Some expenses require periodic adjustment to reflect only the amount of expenses for the financial period Examples: Prepaid Insurance Prepaid Rent Depreciation of Capital Assets

Cash versus Accrual Accounting
Cash accounting -- revenue is recorded when cash is received and expenses when cash payment is made fails to match revenue with related expenses, therefore does not lead to logical income measurement

Cash Accounting

Accrual Basis of Accounting

Accrual Accounting (cont.)
Example: $10,000 payroll that is split between two reporting periods: A portion is earned but not paid at end of the month: 4 days ($4,000) earned in September 6 days($6,000 to be earned in October) $4,000 is recorded as a payroll expense in September. $4,000 is recorded as a liability (salaries payable)

Flow of Accounting Data
Recognized A Transaction Has Occurred Prepare A Source Document Analyze and Prepare a Journal Entry Process (Record) Into Accounting Records Close the Books Prepare A Trial Balance Make Period End Adjustments and Accruals Prepare Financial Statements (Reports)

The Accounting Process (Cycle)
The Cycle Involves: Work Performed During The Period JOURNAL ENTRIES POSTING TO LEDGER ACCOUNTS DETERMINING UNADJUSTED BALANCES ESTABLISHING A TRIAL BALANCE AND COMPLETING WORKSHEET Work Performed At The End Of The Period JOURNALIZE AND POST ADJUSTING AND POST CLOSING ENTRIES PREPARE POST CLOSING TRIAL BALANCE AND FINANCIAL STATEMENTS

General Journal “Original” day-to-day record showing the “debit” and “credit” effect of each event Includes a brief explanation for each event Used to update the general ledger accounts

Ledger Account Means of accumulating in “one place” all information regarding changes in a specific account Comprised of three elements title left side which is called the debit side right side which is called the credit side Commonly referred to as a “T Account”

General Ledger All ledger accounts are maintained within the general ledger Federal government general ledger account structure is established, maintained, and updated by the Treasury Department

Accounts And Ledgers Accounts Are Classified As Follows:
Assets (What Is Owned) Liabilities - (What Is Owed) Costs/Expenses - (What Is Spent) Revenue/Income - (What Is Earned) Equity - (Assets –Liabilities = Net Worth) Gains/Losses Budget Memorandum

The Accounting Equation
Assets = Liabilities + Equity Or A = L + E Or A – L = E Given The Accounting Equation, With Any Two Of The Three Factors, We Can Determine The Third Factor

Double Entry Accounting
Forms the basis for most current day accounting operations Every business transaction affects two or more accounts Equal debit and credit entries are made for every transaction Total of all debit entries must equal the total of all credit entries

Normal Account Balance
Refers to the Debit (left side) or Credit (right side) of a ledger account Assets normally have debit balances Liabilities and net position accounts normally have credit balances Expense accounts normally have debit balances Revenue accounts normally have credit balances

Account Type Affected By Transaction Effect of Transaction on Account
Debit and Credit Guide Account Type Affected By Transaction Effect of Transaction on Account How You Record Normal Balance Debit Credit Assets + DR - CR Liabilities Net Position Budgetary CR* DR / CR ** Revenues Expenses * = To increase the budgetary account “Other Appropriations Realized” you debit (DR) ** = Budgetary Accounts have either a debit or credit balances, depending on the account.

General Journal 100,000 100,000 Reference Debit Credit
Account Title and Explanation APPROPRIATIONS Appropriations-Realized Resources 4119 100,000 Unapportioned Appropriations 4450 100,000 Funds With Treasury 1010 100,000 Unexpended Appropriations 100,000 3101

General Journal Reference Debit Credit Account Title and Explanation
OMB APPORTIONMENT Unapportioned Authority 4450 25,000 Apportionment 4510 25,000

ALLOTMENT Apportionments 4510 20,000 Allotments-Realized Resources 4610 20,000

COMMITMENT Allotments-Realized Resource 4610 2,000 Commitments 4700 2,000

OBLIGATION Commitments 4700 2,000 Undel. Orders – Obligs. Unpaid 4801 2,000

RECEIPT OF MAT’LS ORDERED Undel. Orders – Obligs. Unpaid 4801 2,000 2,000 Del. Orders – Oblig. Unpaid 4901 Operating Materials Held for Use 2,000 1511 Accounts Payable 2110 2,000 Unexpended Appropriation 3107 2,000 2,000 Expended Appropriation 5700

PAYMENT OF INVOICE Delivered Orders Oblig. Unpaid 4901 2,000 Delivered Orders Oblig - Paid 4902 2,000 Accounts Payable 2110 2,000 Fund Balance With Treasury 1010 2,000

Managerial Cost Accounting
Is the process of: - Accumulating - Measuring - Analyzing - Interpreting - Reporting Cost Source: SFFAS No. 4 MANAGERIAL COST ACCOUNTING - IS THE THIRD ACCOUNTING SYSTEM *SFFAS No. 4 Defines Managerial Cost Accounting as: THE PROCESS OF ACCUMULATING, MEASURING, ANALYZING, INTERPRETING AND REPORTING COST THE MOVE TO PERFORMANCE-BASED BUDGETING AND PERFORMANCE REPORTING WILL RELY A GREAT DEAL ON COST INFORMATION * SFFAS - STATEMENT OF FEDERAL FINANCIAL ACCOUNTING STANDARDS

Managerial Cost Accounting
Full Cost Direct Costs (Direct Labor/Direct Material) Indirect Costs (Overhead) Intra-entity Costs (General and Administrative) Inter-entity Costs Cost of goods and services received from other entities Providing entity responsible for providing cost data Recognition limited to material amounts

Reference - 10 U.S.C., Section 2208 DoDFMR Volume 3, Chapter 19
Working Capital Funds Established to satisfy recurring DoD requirements using a businesslike buyer-and-seller approach. Have a goal to breakeven over the long term. Use the funds collected to pay for acquisition of resources needed to operate the fund. Reference - 10 U.S.C., Section 2208 DoDFMR Volume 3, Chapter 19 MAJOR REVOLVING FUND IN DOD DBOF - OCT 1, 1991 WCF - DEC NO-YEAR APPROPRIATION WITH BUSINESS AREAS IN THE SERVICES AND DEFENSE AGENCIES: ARMY WORKING CAPITAL FUND AIR FORCE WORKING CAPITAL FUND NAVY WORKING CAPITAL FUND DEFENSE WORKING CAPITAL FUND COMMISSARY WORKING CAPITAL FUND (FY 1999) WCF SETS PRICES FOR GOODS AND SERVICES TO RECOVER COST OF OPERATIONS (STABILIZED RATES). TYPE OF ASSETS: SUPPLY MANAGEMENT - INVENTORY INDUSTRIAL ACTIVITIES - WORK IN PROCESS INV. References: DOD R, FMR. Vol. 2A - Cost Management Concepts as they relate to DWCF Vol. 2B - DWCF Activity Group Analysis,(Cash Mgmt., Mgmt HQ costs, Mil. Personnel Costs, Pre/Post Investment Anal.) Vol 4, Ch 6. Vol. 11B - Reimb. Operations Policy & Procedures for WCF BASIC TENET - Make managers and decision-makers at all levels more concerned with the cost of goods and services

DEFENSE WORKING CAPITAL FUND How it Works
CUSTOMERS OPERATING FORCES READINESS COMMANDS APPROPRIATES $ FUNDS PLACE ORDERS PAY BILL FOR COSTS/ SERVICES REVOLVING FUNDS WORKING CAPITAL $$ CONGRESS APPROPRIATED $ WORKING CAPITAL AT INCEPITON OF THE FUND FINANCES COST OF PERFORMING WORK PRODUCTION OVERHEAD GENERAL & ADMINISTRATIVE LABOR COSTS DIRECT MATERIAL

Objectives of Federal Financial Reporting
Budgetary Integrity Funding properly spent? Operating Performance Outputs and outcomes? Controls Safeguarding assets?

Federal Financial Reporting
DoDFMR Volume 6B Balance Sheet (Chapter 4) Statement of Net Cost (Chapter 5) Statement of Changes in Net Position (Chapter 6) Statement of Budgetary Resources (Chapter 7) Statement of Custodial Activity (Chapter 9) Balance Sheet - presents the status of an organization as of a specific point in time. Presents the activities Assets, Liabilities and Net Position Balance Sheet Equation: Assets = Liabilities + Net Position Statement of Net Cost - Shows the components of the net cost of the reporting entity’s operation for the period. Net Cost = the gross cost incurred by the entity less any exchange revenue earned from its activities Statement of Changes in Net Position - Reports the beginning net position, the items that caused net position to change during the reporting period, and the ending net position. Statement of Budgetary Resources - Provides information regarding how budgetary resources were made available as well as their status at the end of the period. Statement of Financing - Designed to report those differences between the Statement of Financing and the Statement of Budgetary Resources and facilitate reconciliation.

Statement of Net Costs Also Referred to as: Purpose
Statement of Operations Income statement Purpose intended to provide revenue and expense details reports results (net profit or net loss) Prepared on basis of general ledger 5000 and 6000 account balances Statement of Net Cost - Shows the components of the net cost of the reporting entity’s operation for the period. Net Cost = the gross cost incurred by the entity less any exchange revenue earned from its activities

Statement of Net Costs

Statement of Changes in Net Position
Reports the beginning net position effect of those transactions that caused the net position to change ending net position Prepared on the basis of the Statement of Net Costs and the “Financing Sources” Statement of Changes in Net Position - Reports the beginning net position, the items that caused net position to change during the reporting period, and the ending net position.

Statement of Changes in Net Position
ITEMS THAT INCREASE NET POSITION Excess of revenue over cost (net income) Legislative appropriations Property obtained from another govt. agency for which no reimbursed is required ITEMS THAT DECREASE NET POSITION Excess of cost over revenue (net loss or net cost of operations) Property provided to another agency for which no reimbursement is expected Funds returned to the Treasury Appropriations returned

Statement of Financial Position
Also referred to as the Balance Sheet assets dollar amount of future economic benefits owned and managed by the agency liabilities dollar amounts owed by the agency net position (equity) the difference between assets and liabilities

Summarizes the net worth or liquidity of an entity at a particular time Changes from day to day Accounts on this statement are permanent accounts Is a summary of accounting equation Assets = Liabilities + Government Equity

Statement of Budgetary Resources
Provides information on how budget resources were made available as well as their status at the end of the reporting period. Should be reconcilable to the budget execution information reported on the SF 133 Report on Budget Execution and Budgetary Resources. Statement of Budgetary Resources - Provides information regarding how budgetary resources were made available as well as their status at the end of the period.

SF 133 Report on Budget Execution and Budgetary Resources
The SF 133 consists of the following sections:

Questions? ? ? ? ? ?

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Introduction to Federal Accounting Presented by: John Reifsnyder, CDFM Graduate School Instructor johnreifsnyder@cox.net.

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