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Introduction to Federal Accounting Presented by: John Reifsnyder, CDFM Graduate School Instructor johnreifsnyder@cox.net. Accounting. The Systematic - Classification - Recording - Reporting - Analyzing - Interpretation. Of the financial records of an enterprise. used to.
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Introduction to Federal Accounting Presented by:John Reifsnyder, CDFMGraduate SchoolInstructorjohnreifsnyder@cox.net
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 madeby 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)
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)
Consolidated Statements UNITED STATES GOVERNMENT CONSOLIDATED BALANCE SHEETAS 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 UNITED STATES GOVERNMENT CONSOLIDATED STATEMENT OF NET COSTSFOR THE YEAR ENDED SEPTEMBER 30, 1997 (In billions of dollars) National defense Human resources: Education, training, employmesocial 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 Consolidated Statements UNITED STATES GOVERNMENT CONSOLIDATED STATEMENT OF CHANGES IN NET POSITIONFOR THE YEAR ENDED SEPTEMBER 30, 1997 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 (In billions of dollars) Net cost of Government operations 1,603.3 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 Commitments and contingencie Net position Total liabilities and net position 1,576.7 11.6 -15.0 12.4 -2.6 -5,000.4 -5,003.0 Federal Financial Statements Balance Sheet Statement of Net Cost Statement of Changein 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
Accounting-Related Legislation 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.
Accounting-Related Legislation • THE CONGRESSIONAL BUDGET AND IMPOUNDMENT CONTROL ACT OF 1974- Changed the fiscal year to October 1 through September 30 - 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”
Accounting-Related Legislation • 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
Accounting-Related Legislation • Prompt Payment Act of 1982Pay vendors on time or pay interest
Accounting-Related Legislation • Chief Financial Officers Act of 1990 - Required the establishment of CFOs in cabinet departments and specified agencies - CFOs charged with overseeing financial management activities
Accounting-Related Legislation • 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.
Accounting-Related Legislation • Government Management Reform Act – 1994- 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
Accounting-Related Legislation • 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) Department of Treasury
Types of Government Funds Department of Defense: • Appropriated Funds • Reimbursable Funds • Revolving Funds • Trust Funds • Nonappropriated Funds
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
CONGRESS Flow of Funds THE PRESIDENT 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. 1301 (a): “ Appropriations shall be applied only to the objects for which the appropriations were made except as otherwise provided by law ”
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)
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)
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 020507) • 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
Accounting Classification • Identifies the source of funding and purpose for which used • Creates an audit trail
Government Definition • Orders placed, • Contracts awarded, • Grants issued, • Services received, etc.-- • -- that will require payments (“outlays”) during the same or a future period.
OBLIGATION Undelivered Order Delivered Order Unpaid 4801 Paid 4802 Paid 4902 Unpaid 4901 Obligations are Classified as:
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.
OBLIGATION Expenditure Delivered Order PAID UNPAID Expenditures in the Budget
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
OBLIGATION Undelivered Order Delivered Order UNPAID PAID OUTLAY PAID UNPAID Outlays are Paid Obligations
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 expiringappropriation 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. 1535.
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
Reimbursements Earned Collections Unfilled Orders Orders Received $ 1.216M Billed to Customer based on Cost In support of the Project (SF 1080 bill submitted)4251/4220 R.E./UFO 1310/5200 A/R - REV $ 1.216M 4252/4251 R.E. COLL./R.E 1010/1310 FWTT/A.R. $ 84 Should complete work by 30 Sept. 2015 MIPR ACCEPTANCE $ 1.3M FY ’10 – 15 – Available To complete Work thru 30 Sept., 2015 Assumes O&M customer4220/4210 Unfilled Orders/Anti.Reimb & Other Income Cost Payment / Liquidation Unliquidated Obligations Obligations $ 1.216 M Based on SF 1080 Bill4801/4901 6100/2110 3100/5700 $ 1.216 M4901/49022110/1010 $ 84 Must be de-obligated if not Completely liquidated by 30 Sept. 2015 MIPR ACCEPTANCE $ 1.3M Project Order (DD 448-2)4610/4801 Order Impact On Customer/ Provider Books Provider Books 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