1. Define Governmental Operating Activities
Principles of Cost Analysis and Management
Show Slide #1: Define Governmental Operating Activities
Title: Define Governmental Operating Activities
References: FM 1-06 Financial Management Operations, Handouts, Excel Spreadsheets
Facilitator Material: Each primary facilitator should possess a lesson plan, slide deck, course handouts, practical exercises, access to Excel spreadsheets, case-studies, and FM 1-06 Financial Management Operations. All required references and technical manuals will be provided by the local Command.
Learner Material: Learners should possess standard classroom supplies, course handouts, practical exercises, access to Excel spreadsheets, case-studies, and FM 1-06 Financial Management Operations. All required references and technical manuals will be provided by the local Command.

2. What’s the Difference? Consider the purchasing sequence:
When does the Accounting System “count” the cost?
Plan
Order
Receive
Pay
Consume
Show Slide #2: Concrete Experience What’s the Difference?
Facilitator’s Note: (Concrete Experience 5 minutes) Present learners the slide questions Ask learners what their thoughts are on “The Purchasing Sequence, and when is the cost counted”
Facilitator’s Note: (Publish and Process 5 minutes) The critical portion of this part of the ELM process is to force the learners to reflect.
Ask a series of thought influencing questions, for example: What does your Senior Leader want to know?
How should you present the information? What are your presentation pet peeves? What should you avoid?

3. Terminal Learning Objective
Action: Define governmental operating activities
Condition: FM Leaders in a classroom environment working as a member of a small group, using doctrinal and administrative publications, self-study exercises, personal experiences, practical exercises, handouts, and discussion.
Standard: With at least 80% accuracy (70% for international students) you must:
Describe timing differences between cash-based, budgetary and accrual accounting methods
Identify key budgetary inputs and outputs from GFEBS
Record operating transactions
Show Slide #3: TLO
Action: Define Governmental Operating Activities
Conditions: : FM Leaders in a classroom environment working as a member of a small group, using doctrinal and administrative publications, self-study exercises, personal experiences, practical exercises, handouts, and discussion.
Standard: With at least 80% accuracy (70% for international students) you must:
Describe timing differences between cash-based, budgetary and accrual accounting methods
Identify key budgetary inputs and outputs from GFEBS
Record operating transactions
Safety Requirements: In a training environment, leaders must perform a risk assessment in accordance with DA PAM , Risk Management. Leaders will complete a DD Form 2977 DELIBERATE RISK ASSESSMENT WORKSHEET during the planning and completion of each task and sub-task by assessing mission, enemy, terrain and weather, troops and support available-time available and civil considerations (METT-TC). Local policies and procedures must be followed during times of increased heat category in order to avoid heat related injury. Consider the work/rest cycles and water replacement guidelines IAW TRADOC Regulation
Environmental Considerations: Environmental protection is not just the law but the right thing to do. It is a continual process and starts with deliberate planning. Always be alert to ways to protect our environment during training and missions. In doing so, you will contribute to the sustainment of our training resources while protecting people and the environment from harmful effects. Refer to FM Environmental Considerations and GTA ENVIRONMENTAL-RELATED RISK ASSESSMENT.
INSTRUCTIONAL LEAD-IN. The previous slide is an example of just a few “thought-provoking” questions to ask oneself about Counting Costs.

4. Why a Different Method of Accounting?
Different entities have different external reporting requirements
Individuals report income on a cash basis
Governmental entities report activities on a budgetary basis
Businesses, revolving funds and the proprietary governmental accounts report activities on an accrual basis
Show Slide #4: Describe timing differences between cash-based, budgetary and accrual accounting methods
1. Learning Step/Activity #1 Describe timing differences between cash-based, budgetary and accrual accounting methods
Method of Instruction: DSL (large or small group discussion)
Facilitator to learner Ratio: 2:25
Time of Instruction: 10 Minutes
Media: Power Point Presentation, Printed Reference Materials
Facilitator's Note: Before facilitating this lesson, ask the students which of the 21st Century Soldier Competency do they think pertain to this lesson? Facilitate a discussion on the answers given and at the end of the lesson revisit it and see if the students still believe their choice are the same.
Note: For this lesson these competencies should be talked about. (Delete those that do not apply)
1. Character and accountability
2. Communication and engagement (oral, written, and negotiation)
3. Critical thinking and problem solving
4. Tactical and technical competence (full spectrum capable)
Facilitator Read and facilitate discussion: The reporting objective is different in each case, therefore the measurement rules differ.
The external reporting objective for individuals is to measure taxable income for purposes of tax assessment. The external reporting objective for government entities is accountability for funds. Therefore they use a budgetary basis which focuses on the inflow and outflow of resources in the current period. Assets are only recorded when the benefit will be received in the current period. Liabilities are only recorded when they must be paid during the current period. The external reporting objective for business, revolving fund entities and the proprietary governmental accounts is a longer term view of income and financial position. This is known as the accrual basis. All liabilities, whether due in the short term or long term, must be reported. All assets, whether they benefit the short term or the long term, will be recorded.

5. What’s the Difference? Consider the purchasing sequence:
Cash based accounting records a Cost at the time it is paid
Plan
Order
Receive
Pay
Consume
Show Slide #5: Describe timing differences between cash-based, budgetary and accrual accounting methods (Cont.)
Facilitator's Note: (Facilitator Read and facilitate discussion) In general the purchase of goods and services follows this sequence (there may be some exceptions, but the criteria for counting remains the same).
In cash accounting the cost is counted when the cash is paid, even if the cash is paid BEFORE the goods are received. Under this measurement criteria, any payment of cash would constitute an expense, even a down payment on a house. Of course, not all cash payments are deductible for tax purposes. But those items that are deductible must be paid in cash in order to be counted.

6. What’s the Difference? Consider the purchasing sequence:
Budgetary accounting records a Commitment when the plan is made
…an Obligation when an order is placed
…and an Expenditure when goods are received
Plan
Order
Receive
Pay
Consume
Commitment  Obligation  Expenditure
Show Slide #6: Describe timing differences between cash-based, budgetary and accrual accounting methods (Cont.)
Facilitator's Note: (Facilitator Read and facilitate discussion) Budgetary accounting records a Commitment when the plan is made
…an Obligation when an order is placed
…and an Expenditure when goods are received
Budgetary accounting “counts the cost” at the point of the expenditure. That is, when goods are received, the authorization to spend has been used up. Up until that point it would theoretically be possible to cancel the order and undo the spending process. In the Federal budgetary accounts, the accounting essentially ends here. The payment of the bill is recorded separately in the proprietary accounts.

7. What’s the Difference? Consider the purchasing sequence:
Accrual accounting records an Asset and a Liability when the goods are received
…and an Expense when goods are consumed
Plan
Order
Receive
Pay
Consume
Asset & Liability  Remove Liability  Expense
Show Slide #7: Describe timing differences between cash-based, budgetary and accrual accounting methods (Cont.)
Facilitator's Note: Accrual accounting records an Asset and a Liability when the goods are received
…and an Expense when goods are consumed. The liability is removed when the bill is paid. We will cover this in more detail in day 3.
(Facilitate discussion using the slide)

8. LSA #1 Check on Learning
Q1. Which method of accounting records the cost when cash is paid? A1. Cash Basis Q2. Which method of accounting records the cost when goods are received? A2. Budgetary Basis
Show Slide #8: Conduct Check on Learning
Facilitator's Note: Ask the following questions, facilitate the answers given.
Q. Which method of accounting records the cost when cash is paid?
A. Cash Basis
Q. Which method of accounting records the cost when goods are received?
A. Budgetary Basis

9. LSA #1 Summary
During this block, we identified three different types of accounting methods that entities use. We also discussed how commitments, Obligations and Expenditures are recorded during the Budgetary basis of accounting.
Show Slide #9: LSA #1 Summary
Facilitator's Note: During this block, we identified three different types of accounting methods that entities use. We also discussed how commitments, Obligations and Expenditures are recorded during the Budgetary basis of accounting.

10. Review: Budgetary Terminology
Appropriation
Authorization to spend
Obligation
Order placed; Appropriation is no longer available to be spent
Expenditure
Goods or services received; Appropriation used up
Unobligated Balance
What is left in the envelope; Appropriation still available to be spent
Show Slide #10: Identify key budgetary inputs and outputs from GFEBS
2. Learning Step/Activity #2 Identify key budgetary inputs and outputs from GFEBS
Method of Instruction: DSL (large or small group discussion)
Facilitator to learner Ratio: 2:25
Time of Instruction: 15 Minutes
Media: Power Point Presentation, Printed Reference Materials
Facilitator's Note: (Facilitate discussion on areas below)
Appropriation; Authorization to spend. This authority is subdivided into apportionments (time periods) and allotments (for various purposes.)
Obligation; Order placed; Appropriation is no longer available to be spent,
Expenditure; Goods or services received; Appropriation used up.
Unobligated Balance; What is left in the envelope; Appropriation still available to be spent

11. Fund Accounting
Governmental entities account for activities using Funds
A Fund is a separate Accounting Entity within the larger governmental entity
Has its own self-balancing set of accounts
Produces its own separate financial statements
Ensures segregation of monies for specific purposes
Show Slide #11: Identify key budgetary inputs and outputs from GFEBS (Cont.)
Facilitator's Note: Governmental entities account for activities using Funds. (Facilitate discussion on areas below)
A Fund is a separate Accounting Entity within the larger governmental entity the larger governmental entity
Has its own self-balancing set of accounts
Produces its own separate financial statements
Ensures segregation of monies for specific purposes
The federal government has a single GENERAL FUND which is subdivided into multiple appropriation funds for practical purposes and for reporting at agency level.
A FUND is a GFEBS master data element, and is the smallest element for which a balance sheet (statement of financial position) can be produced.

12. Status of Budgetary Resources
Budgetary Accounting
The following equation:
Can be restated as:
Appropriations -
Open
Obligations
Expenditures
Unobligated
Balance =
Expenditures +
Open
Obligations
Unobligated
Balance
Appropriations
& Other =
Show Slide #12: Identify key budgetary inputs and outputs from GFEBS (Cont.)
Facilitator's Note: In the last module we learned the equation for calculating unobligated balance. The budgetary reporting takes this equation and rearranges it:
Unobligated Balance = Appropriation – Open Obligations – Expenditures
(Multiply by -1)
- Unobligated Balance =- Appropriation + Open Obligations + Expenditures
(Add Appropriations to both sides)
Appropriations - Unobligated Balance = Open Obligations + Expenditures
(Add Unobligated Balance to both sides)
Appropriations (and other resources) = Expenditures+ Open Obligations + Unobligated Balance
Budgetary Resources =
Status of Budgetary Resources

13. Highlights Unobligated Balance to help managers avoid overspending
Budgetary Accounting
Highlights Unobligated Balance to help managers avoid overspending
The following equation:
Can be restated as:
Appropriations
& Other -
Open
Obligations
Expenditures
Unobligated
Balance =
Expenditures +
Open
Obligations
Unobligated
Balance
Appropriations
& Other =
Show Slide #13: Identify key budgetary inputs and outputs from GFEBS (Cont.)
Facilitator's Note: The re-arranged equation reflects that budgetary resources equal status of budgetary resources. The focus of the first equation is to make sure that the manager doesn’t overspend.
Budgetary Resources =
Status of Budgetary Resources

14. Status of Budgetary Resources
Budgetary Accounting
The following equation:
Can be restated as:
Appropriations
& Other -
Open
Obligations
Expenditures
Unobligated
Balance =
Highlights budgetary resources to promote accountability to external users
Expenditures +
Open
Obligations
Unobligated
Balance
Appropriations
& Other =
Show Slide #14: Identify key budgetary inputs and outputs from GFEBS (Cont.)
Facilitator's Note: The focus of the second equation is to assure that all of the public funds are accounted for. That is, the appropriations are either spent, obligated, or unobligated (waiting to be spent). Status of Funds or Status of Budgetary Resources is a report that can be run in the Business Intelligence (BI) module of GFEBS. We will also look at the Statement of Budgetary Resources in the next module.
Budgetary Resources =
Status of Budgetary Resources

15. GFEBS Open Obligation Report
Show Slide #15: Identify key budgetary inputs and outputs from GFEBS (Cont.)
Facilitator's Note: The Open Obligation report is a key GFEBS output for tracking the unobligated balance.

16. LSA #2 Check on Learning
Q1. What is the budgetary accounting equation? A1. Budgetary resources = status of budgetary resources Q2. What is the smallest budgetary unit in GFEBS for which financial statements can be produced? A2. A Fund – an accounting entity with a self-balancing set of accounts.
Show Slide #16: LSA #2 Check on Learning
Facilitator's Note: As the following Questions;
Q1. What is the budgetary accounting equation?
A1. Budgetary resources = status of budgetary resources
Q2. What is the smallest budgetary unit for which financial statements can be produced?
A2. A Fund – an accounting entity with a self-balancing set of accounts.

17. LSA #2 Summary
During this block, we discussed the characteristics of a fund. We also identified the formula; Budgetary Resources = Status of Budgetary Resources, which allows us to find the unobligated balance for an entities budget.
Show Slide #17: LSA #2 Summary
Facilitator’s Note: During this block, we discussed the characteristics of a fund. We also identified the formula; Budgetary Resources = Status of Budgetary Resources, which allows us to find the unobligated balance for an entities budget. .

18. Lacy’s Lemonade Stand
Lacy Simmons receives a $200 appropriation from the family and starts a lemonade stand
Record the appropriation in the table below:
Description
Approp & Other
Obligations
(-)
Expenditures
Unobligated Balance
Show Slide #18: Record operating transactions
3. Learning Step/Activity #3 Record operating transactions
Method of Instruction: DSL (large or small group discussion)
Facilitator to learner Ratio: 2:25
Time of Instruction: 20 minutes
Media: Power Point Presentation, Printed Reference Materials
Facilitator's Note: learners will have the blank slide; Lacy Simmons receives a $200 appropriation from the family and starts a lemonade stand
Record the appropriation in the table below.

19. Lacy’s Lemonade Stand (Cont.)
Lacy Simmons receives a $200 appropriation from the family and starts a lemonade stand
Record the appropriation in the table below:
Description
Approp & Other
Obligations
(-)
Expenditures
Unobligated Balance
Appropriation
+200
Balance
200
Show Slide #19: Record operating transactions (Cont.)
Facilitator’s Note: Lacy’s appropriation is recorded as a deposit to her envelope.

20. Lacy’s Lemonade Stand (Cont.)
Orders flyers from the print shop at an estimated cost of $10
Description
Approp & Other
Obligations
(-)
Expenditures
Unobligated Balance
Balance forward
200
Show Slide #20: Record operating transactions (Cont.)
Facilitator's Note: learners will have the blank slide. Orders flyers from the print shop at an estimated cost of $10

21. Lacy’s Lemonade Stand (Cont.)
Orders flyers from the print shop at an estimated cost of $10
Description
Approp & Other
Obligations
(-)
Expenditures
Unobligated Balance
Balance forward
200
Orders Flyers
+10
-10
Balance 10
190
Show Slide #21: Record operating transactions (Cont.)
Facilitator’s Note: Ordering flyers triggers an obligation

22. Lacy’s Lemonade Stand (Cont.)
Buys a pitcher, a juicer and a table at a yard sale for $20
Description
Approp & Other
Obligations
(-)
Expenditures
Unobligated Balance
Balance forward
200 10
190
Show Slide #22: Record operating transactions (Cont.)
Facilitator’s Note: learners will have the blank slide
Buys a pitcher, a juicer and a table at a yard sale for $20

23. Lacy’s Lemonade Stand (Cont.)
Buys a pitcher, a juicer and a table at a yard sale for $20
Description
Approp & Other
Obligations
(-)
Expenditures
Unobligated Balance
Balance Forward
200 10
190
Buys Table & Utensils
+20
-20
Balance 20
170
Show Slide #23: Record operating transactions (Cont.)
Facilitator’s Note: Even though the pitcher, juicer and table have a long life, they will be counted as expenditures in the current period. Receiving goods or services constitutes and expenditure.

24. Lacy’s Lemonade Stand (Cont.)
Receives the flyers and pays the bill for $10
Description
Approp & Other
Obligations
(-)
Expenditures
Unobligated Balance
Balance forward
200 10 20
170
Show Slide #24: Record operating transactions (Cont.)
Facilitator’s Note: learners will have the blank slide
Receives the flyers and pays the bill for $10

25. Lacy’s Lemonade Stand (Cont.)
Receives the flyers and pays the bill for $10
Description
Approp & Other
Obligations
(-)
Expenditures
Unobligated Balance
Balance Forward
200 10 20
170
Receives flyers
-10
+10
Balance
180
Pays Bill 30
Show Slide #25: Record operating transactions (Cont.)
Facilitator’s Note: Receiving the flyers triggers an expenditure.

26. Lacy’s Lemonade Stand (Cont.)
Pays Bert $5 to pass out flyers
Description
Approp & Other
Obligations
(-)
Expenditures
Unobligated Balance
Balance Forward
200 30
170
Show Slide #26: Record operating transactions (Cont.)
Facilitator’s Note: learners will have the blank slide
Pays Bert $5 to pass out flyers

27. Lacy’s Lemonade Stand (Cont.)
Pays Bert $5 to pass out flyers
Description
Approp & Other
Obligations
(-)
Expenditures
Unobligated Balance
Balance Forward
200 30
170
Pays Bert +5 -5
Balance 35
165
Show Slide #27: Record operating transactions (Cont.)
Facilitator’s Note: Receiving goods and services triggers an expenditure

28. Lacy’s Lemonade Stand (Cont.)
Purchases supplies: cups $15; napkins $5; lemons, $25; sugar, $10 and ice, $10
Description
Approp & Other
Obligations
(-)
Expenditures
Unobligated Balance
Balance Forward
200 35
165
Show Slide #28: Record operating transactions (Cont.)
Facilitator’s Note: learners will have the blank slide
Purchases supplies: cups $15; napkins $5; lemons, $25; sugar, $10 and ice, $10

29. Lacy’s Lemonade Stand (Cont.)
Purchases supplies: cups $15; napkins $5; lemons, $25; sugar, $10 and ice, $10
Description
Approp & Other
Obligations
(-)
Expenditures
Unobligated Balance
Balance Forward
200 35
165
Purchases supplies
+65
-65
Balance
100
Show Slide #29: Record operating transactions (Cont.)
Facilitator’s Note: Purchasing supplies (receiving goods) triggers an expenditure.

30. Lacy’s Lemonade Stand (Cont.)
First day’s sales: $15 in cash and $20 in IOUs
Description
Approp & Other
Obligations
(-)
Expenditures
Unobligated Balance
Balance Forward
200
100
Show Slide #30: Record operating transactions (Cont.)
Facilitator’s Note: learners will have the blank slide
First day’s sales: $15 in cash and $20 in IOUs

31. Lacy’s Lemonade Stand (Cont.)
First day’s sales: $15 in cash and $20 in IOUs
Collections from customers increase Lacy’s spending authority
Description
Approp & Other
Obligations
(-)
Expenditures
Unobligated Balance
Balance Forward
200
100
Cash Collections
+15
Balance
215
115
Show Slide #31: Record operating transactions (Cont.)
Facilitator’s Note: First day’s sales. The cash collected from customers is ADDED to Lacy’s unobligated balance. This is considered a budgetary resource and increases Lacy’s spending authority. The IOUs don’t count.

32. Lacy’s Lemonade Stand (Cont.)
Receives $5 cash toward the IOUs
Description
Approp & Other
Obligations
(-)
Expenditures
Unobligated Balance
Balance Forward
215
100
115
Show Slide #32: Record operating transactions (Cont.)
Facilitator’s Note: learners will have the blank slide
Receives $5 cash toward the IOUs

33. Lacy’s Lemonade Stand (Cont.)
Receives $5 cash toward the IOUs
Description
Approp & Other
Obligations
(-)
Expenditures
Unobligated Balance
Balance Forward
215
115
Cash Collections +5
Balance
220
100
120
Show Slide #33: Record operating transactions (Cont.)
Facilitator’s Note: Again, the collection of cash increases Lacy’s unobligated balance.

34. Lacy’s Lemonade Stand (Cont.)
Purchases $40 in supplies on account at the grocery store
Description
Approp & Other
Obligations
(-)
Expenditures
Unobligated Balance
Balance Forward
220
100
120
Show Slide #34: Record operating transactions (Cont.)
Facilitator’s Note: learners will have the blank slide
Purchases $40 in supplies on account at the grocery store

35. Lacy’s Lemonade Stand (Cont.)
Purchases $40 in supplies on account at the grocery store
Description
Approp & Other
Obligations
(-)
Expenditures
Unobligated Balance
Balance Forward
220
100
120
Purchased supplies
+40
-40
Balance
140 80
Show Slide #35: Record operating transactions (Cont.)
Facilitator’s Note: Even though Lacy has not yet paid the bill for the supplies, this is still an expenditure because she received the goods.

36. Lacy’s Lemonade Stand (Cont.)
Makes cash sales of $50
Description
Approp & Other
Obligations
(-)
Expenditures
Unobligated Balance
Balance Forward
220
140 80
Show Slide #36: Record operating transactions (Cont.)
Facilitator’s Note: learners will have the blank slide
Makes cash sales of $50

37. Lacy’s Lemonade Stand (Cont.)
Makes cash sales of $50
Description
Approp & Other
Obligations
(-)
Expenditures
Unobligated Balance
Balance Forward
220
140 80
Cash Sales
+50
Balance
270
130
Show Slide #37: Record operating transactions (Cont.)
Facilitator’s Note: Again, the cash collections increase Lacy’s unobligated balance

38. Statement of Net Cost Expenditures: Supplies $105 Utensils 20
Advertising
Total Expenditures $140
Less Revenues:
Net Cost $70
Show Slide #38: Record operating transactions (Cont.)
Facilitator's Note: The statement of net cost is the federal agency equivalent of the statement of activities. Since most agencies generate little revenue, it is expected that expenditures will exceed revenues, resulting in net cost rather than net income. Expenditures are highlighted by listing them first. Revenues that were collected to offset costs are listed next.

39. What about Cash Basis?
How does Lacy’s Lemonade Stand measure up on a cash basis?
Cash collections: $70
Less Cash Payments:
Supplies $65
Utensils
Advertising 15
Total payments: $100
Net Loss $30
Show Slide #39: Record operating transactions (Cont.)
Facilitator's Note: Since Lacy did not yet pay the $40 grocery bill, the cash basis shows a net loss of $30 compared to the “net cost” of $70.

40. LSA #3 Check on Learning
Q1. When will an expenditure be recorded under budgetary accounting rules? A1. When goods and services are received. Q2. How does the collection of cash affect the budgetary equation? A2. It is considered a budgetary resource and increases spending authority.
Show Slide #40: LSA #2 Check on Learning
Facilitator's Note: Ask the following Questions, facilitate the answers given.
Q1. When will an expenditure be recorded under budgetary accounting rules?
A1. When goods and services are received.
Q2. How does the collection of cash affect the budgetary equation?
A2. It is considered a budgetary resource and increases spending authority.

41. LSA #3 Summary
During this lesson, we discussed the Recording of Operating Transactions. After noting the description, separate areas for input included Appropriations and Other, Obligations, Expenditures, and Un-obligated Balance.
Show Slide #41: LSA #3 Summary
Facilitator's Note: During this lesson, we discussed the Recording of Operating Transactions. After noting the description, separate areas for input included Appropriations and Other, Obligations, Expenditures, and Un-obligated Balance.

42. Practical Exercise: Define Governmental Activities
Show Slide #42 Practical Exercise
Facilitator's Note: (run phase) Have the learners enter the Transactional Data into Hand Out “Budgetary Accounting Excel Spreadsheet”.

43. TLO Summary Action: Define governmental operating activities
Condition: FM Leaders in a classroom environment working as a member of a small group, using doctrinal and administrative publications, self-study exercises, personal experiences, practical exercises, handouts, and discussion.
Standard: With at least 80% accuracy (70% for international students) you must:
Describe timing differences between cash-based, budgetary and accrual accounting methods
Identify key budgetary inputs and outputs from GFEBS
Record operating transactions
Show Slide #43: TLO Summary
Facilitator’s Note: Restate the TLO
Action: Define Governmental Operating Activities
Conditions: : FM Leaders in a classroom environment working as a member of a small group, using doctrinal and administrative publications, self-study exercises, personal experiences, practical exercises, handouts, and discussion.
Standard: With at least 80% accuracy (70% for international students) you must:
Describe timing differences between cash-based, budgetary and accrual accounting methods
Identify key budgetary inputs and outputs from GFEBS
Record operating transactions
“Or”
Facilitator’s Note: Facilitator at this time, have one Learner from each group to explain the most important take away to them from this lesson. Facilitate a discussion on each answer.