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Instructor: Janice H. Fergusson, CPA

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1 Instructor: Janice H. Fergusson, CPA
ACCT 728 – Financial Accounting with a Federal Government Emphasis Welcome! Instructor: Janice H. Fergusson, CPA

2 Day 3 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

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

4 Who Establishes Accounting Rules
Private Sector (for profit entities) United States Globally FASB IASB GAAP IFRS 4

5 Who Establishes Accounting Rules
Public Sector (Governments) State and Local Federal GASB FASAB GAAP GAAP 5

6 Private vs Public Sectors
Governmental accounting - not a “whole new ball game” Game played by slightly different rules GAAP GAAP GAAP

7 Development of GAAP Private Sector 1934 Public Sector FASB 1973 1984
GASB 1990 FASAB

8 Private vs Public Sectors
(Organizational Objectives) Operating motive: Businesses want to maximize income from revenues and other resources Governments want to maximize services provided from revenues and other resources 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

9 Private vs Public Sectors
(Sources of Financial Resources) Businesses raise resources from: Sale of goods and services to customers Capital stock Debt transactions 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)

10 Private vs Public Sectors
(Evaluating Performance & Operating Results) In Businesses: Continuing a product or service determined by success in marketplace 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

11 Federal vs State and Local
Both use budgetary accounting Both use funds Use of Cash State and Locals use banks Federal – US Treasury is the bank

12 Fund Accounting “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)

13 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

14 Types of Funds Used – State/Locals
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

15 Types of Funds Used – Federal
NONEARMARKED FUNDS General Fund EARMARKED FUNDS Special Funds Trust Funds Revolving Funds Deposit Funds

16 Federal Accounting – A Changing Environment
Part 2 Federal Accounting – A Changing Environment

17 Federal Government 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) US Federal Government has millions of employees, owns billions, and collects and spends trillions per year.

18 Federal Government Financial Management
Several acts of Congress directed toward federal financial management: Budget and Accounting Procedures Act of 1950 Supplemental Appropriation Act of 1955 Public Law (1956) Congressional Budget and Impoundment Act of 1974 Federal Managers’ Fiscal Integrity Act (FMFIA) of 1982 Federal Credit Reform Act of 1990 Page 1 or 2

19 Federal Government Financial Management
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 Page 2 or 2

20 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

21 Department of the Treasury
Acts as chief accountant and banker Primary 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

22 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

23 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

24 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

25 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

26 U.S. Standard General Ledger
Part 3 U.S. Standard General Ledger

27 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

28 Principal SGL Accounts
Asset Accounts Liability Accounts Net Position Accounts Budgetary Accounts Revenues/Other Financing Sources Expenses Gains/Losses/Miscellaneous Memorandum

29 Visit Blackboard

30 Federal Accounting Model – Two-Track Accounting System
Part 4 Federal Accounting Model – Two-Track Accounting System

31 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

32 Typical Journal Entries – Federal Agency
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 ,000,000 Unapportioned authority ,000,000 Fund balance with Treasury 12,000,000 Unexpended appropriations ,000,000 Apportionment: OMB apportions ¼ of the appropriated amount which may now be expended for first quarter activities. Unapportioned Authority ,000,000 Apportionments ,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 ,500,000 Allotments ,500,000 Obligations (commitments): A unit of the agency places orders for goods and services related to its activities. Allotments ,900,000 Obligations – undelivered orders ,900,000 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 ,000 Equipment ,000 Operating (program) expense ,000 Accounts payable ,000 Accounts payable ,000 Fund balance with Treasury ,000

33 How Budgetary Accounts Work
Budgetary resources (appropriations) are represented by debits. Credits reflect the status of the resources within the spending process.

34 ‘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

35 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

36 Accounting Practices for Selected Federal Activities and Transactions
Part 5 Accounting Practices for Selected Federal Activities and Transactions

37 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

38 T1 – Congress Enacts Appropriation
Budgetary Entry Appropriations Realized Unapportioned Authority Proprietary Entry Fund Balance with the Treasury—2014 Unexpended Appropriations—2014 225,000

39 T2 – OMB Apportionment Budgetary Entry — First Quarter entry
Unapportioned Authority Appropriations Proprietary Entry — None 68,000 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).

40 T3 – Agency Administrative Allotments
Budgetary Entry Appropriations Allotments Proprietary Entry — None 214,000

41 T4 – Preliminary Requests
Budgetary Entry Allotments Commitments Proprietary Entry — None 48,000

42 T5 – Supply Purchase Orders Approved
Budgetary Entry Commitments Undelivered Orders Proprietary Entry — None 37,000

43 (Estimated cost $30,000; $7,000 still outstanding; invoice $30,500)
T6 – Received Supplies (Estimated cost $30,000; $7,000 still outstanding; invoice $30,500) 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

44 T7 – Used Supplies Budgetary Entry — None Proprietary Entry
Operating/Program Expenses Inventory for Agency Operations 25,000

45 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 12,000

46 T9 – Travel Orders Issued
Budgetary Entry Allotments – Realized Resources Undelivered Orders – Unpaid Proprietary Entry — None 1,200

47 T10 – Request for Travel Advance Checks
Budgetary Entry — None Proprietary Entry Advance to Others Disbursements in Transit 1,000

48 T11– Travel Advances Paid
Budgetary Entry Undelivered Orders – Unpaid Undelivered Orders – Paid Proprietary Entry Disbursements in Transit Fund Balance with Treasury 1,000

49 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 Slide 1 of 2

50 T12 - Paid Travel Vouchers
Proprietary Entry Operating/Program Expenses – Travel Advances to Others Accounts Payable Unexpended Appropriations – 2014 Appropriations Used 1,050 880 170 Slide 2 of 2

51 T13 – Travel Checks Ordered
Budgetary Entry — None Proprietary Entry Accounts Payable Disbursements in Transit 170 Since travel advances of $880 had already been paid, the travelers only need another $170 to complete the reimbursements.

52 T14– Collected Prior Year Travel Advances
Budgetary Entry Undelivered Orders – Paid Expired Authority Proprietary Entry Fund Balance with Treasury Advances to Others 800

53 T15 – Checks Issued by Treasury
Budgetary Entry Expended Appropriations – Unpaid Expended Appropriations – Paid Proprietary Entry Disbursements in Transit Fund Balance with Treasury 170

54 T16 - Expenses Not Previously Accrued
Budgetary Entry Allotments – Realized Resources Expended Appropriations – Unpaid 24,700 Slide 1 of 2

55 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 Slide 2 of 2

56 T17 – Purchase Orders Approved and Placed
Budgetary Entry Commitments Allotments – Realized Resources Undelivered Orders – Unpaid Proprietary Entry — None 10,500 300 10,200

57 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 10,000 200

58 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

59 T19 - Salaries and Wages Paid
Proprietary Entry Accrued Funded Payroll and Benefits Operating/Program Expenses – Salaries/Benefits Fund Balance with Treasury – 2013 Fund Balance with Treasury – 2014 Unexpended Appropriations – 2014 Appropriations Used 8,000 126,000 Slide 2 of 2

60 T20 – Commitments Places for Services
Budgetary Entry Allotments – Realized Resources Commitments Proprietary Entry — None 3,000

61 T21 – Services Contract Approved
Budgetary Entry Commitments Undelivered Orders – Unpaid Proprietary Entry — None 3,000

62 T22 – Received Contracted Services
Budgetary Entry Undelivered Orders – Unpaid Expended Appropriations – Unpaid Proprietary Entry Operating/Program Expenses – Contractual Services Accounts Payable Unexpended Appropriations – 2014 Appropriations Used 3,000

63 T23 – Checks Requested from Treasury
Budgetary Entry — None Proprietary Entry Accounts Payable Disbursements in Transit 95,200

64 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 30,000 55,000

65 T25 – Depreciation Recorded
Budgetary Entry — None Proprietary Entry Operating/Program Expenses – Depreciation Accumulated Depreication 2,500

66 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

67 T27 – Increased Liability for Accrued AL
Budgetary Entry — None Proprietary Entry Future Funded Expenses Accrued Unfunded Annual Leave 10,000

68 Day 3 The End!

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