16
Chapter
Accounting and Reporting
for the Federal
Government
Federal Government
Financial Management Structure

“Three principals” of the Joint Financial Management
Improvement Program (JFMIP)
General – Audit Division of Congress
(legislative division)
Comptroller

Appointed by president and confirmed by Senate for a
15 year term
Secretary

President Cabinet with consent of senate to an
indefinite term
Director

of the Treasury - Financial condition of gov.
of the OMB – Budget
Appointed by president

Executive branch
Federal Government
Financial Management Structure

Director of Congressional Budget office
Appointed
by the Speaker of the House of Representatives
4- year term
Works with both the house and Senate on Bill appropriations
FASAB

In 1990, the three principals established the Federal
Accounting Standards Advisory Board (FASAB)

To date the FASAB has issued:
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
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3 Statements of Federal Financial Accounting
Concepts (SFFAC)
22 Statements of Federal Financial Accounting
Standards (SFFAS)
Several reports, technical releases, interpretations.
SFFAC No. 1 - Objectives

SFFAC No. 1 identifies four objectives of federal
financial reporting, based on the foundation of
accountability, which are to assist report users in
assessing
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budgetary integrity
operating performance
stewardship
adequacy of systems and controls
SFFAC No. 3 - MD&A
 SFFAC
No. 3, issued in 1999, requires that an Management
Discussion and Analysis (MD&A) to be included in the
general purpose federal financial report (GPFFR).
 Its
purpose is to
 communicate managers’ insights
 increase understandability and usefulness of the GPFFR
 provide accessible information about the entity
Funds used in Federal Accounting

Derived from general taxing and revenue powers
and from business operations

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
General fund (one for entire federal government)
Special funds (receipts earmarked for a specific
purpose)
Revolving funds (similar to internal service funds)
Management funds (including working funds)
Held by the government as custodian or trustee


Trust funds (both expendable and nonexpendable)
Deposit funds (similar to agency funds)
Balance Sheet: Asset Classification



Most federal entities do not have their own
cash.
They draw against their “Fund Balance with
Treasury” account.
Checks are sent by the Department of
Treasury to pay the entity’s obligations
Balance Sheet Property Plant and Equipment (PP&E)

Four categories:
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General PP&E (used to provide general
government goods and services)
National defense PP&E (e.g., military weapon
systems)
Heritage assets PP&E (e.g., Lincoln Memorial;
Statue of Liberty that possess educational, cultural,
or natural characteristics)
Stewardship land PP&E(e.g., Yellowstone National
Park)
Balance Sheet: Liabilities

FASAB standards provide nine criteria for
recognition of liabilities, including


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Generally, accrual basis recognition including
amortization of premiums/discounts on Federal debt
and pensions
Contingencies are generally recognized in the notes,
except for government-acknowledged events (e.g.,
those arising from natural disaster)
Capital lease obligations follow essentially same
criteria as for-profit organizations and state and local
governments
Required Financial Statements

OMB Bulletin 01-09 requires a:
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Balance sheet
Statement of net cost
Statement of changes in net position
Statement of budgetary resources
Statement of financing
Statement of custodial activity
Required supplemental information

Summary information on stewardship property,
plant, and equipment
Social Insurance
 SFFAS
No. 17 presents accounting standards for
Social Security, Medicare and Supplementary
Medical Insurance (Part B), Railroad Retirement
benefits, Black Lung benefits, and Unemployment
Insurance
 Recognize
a liability when payments are due and
payable to beneficiaries or service providers
Dual-Track Accounting System


Federal agencies are required to comply both with
budgetary accounting requirements and accrual basis
proprietary accounting requirements
Many transactions require an entry to record the
budgetary effect and a separate entry to record the
proprietary effect (i.e., the effect on net position of
the entity)
Government-wide Statements
 The
Government Performance and Results Act of 1993
expanded the requirements of the Chief Financial
Officers Act of 1990 and required 24 federal agencies to
be audited and comprehensive government-wide
financial statements be prepared.
 The
Financial Report of the United States Government
has been produced since FY97 by the Department of
Treasury, after years of prototype Consolidated
Financial Statements.
Government-wide Statements (Cont’d)
 The
report follows FASAB standards.
 The Comptroller General of the GAO issued a
disclaimer of opinion on these statements. Difficulties
arise in accounting for
environmental liabilities
 military postemployment health benefits of the DOD
 Loans receivable of the Dept of Agriculture
 inventorying capital assets (e.g., Dept of Defense)

 Each
year more of the 24 federal agencies receive
unqualified opinions on their individual statements.
Concluding Comments



Much progress is being made in the quality of federal
financial management, accounting, and reporting through
federal initiatives.
The three principals of the Joint Financial Management
and Improvement Program (the Comptroller General,
Secretary of Treasury, and Director of the OMB) created
the FASAB, whose statements become GAAP upon
approval by the principals.
A variety of unique financial statements are required of
federal agencies, including both budgetary and
proprietary accounting requirements. Thus, they practice
a dual-track system of accounting.