Chapter 14 – Financial Reporting by the Federal Government
Chapter 14
Financial Reporting by the Federal Government
True / False Questions
1. The Department of Treasury maintains a government-wide system of accounts and
prepares the federal government’s consolidated financial statements.
Answer: True
2. Accounting standards for the federal government and its agencies are established by the
Federal Accounting Standards Advisory Board.
Answer: True
3. Accounting standards for the federal government and its agencies are established by the
Government Accountability Office.
Answer: False
4. The Federal Accounting Standards Advisory Board was formed by the Secretary of the
Treasury, Director of OMB, and Comptroller General.
Answer: True
5. Federal agencies must include a Managements’ Discussion and Analysis in their financial
report.
Answer: True
6. The Statement of Net Cost of a federal agency is prepared on the accrual basis of
accounting.
Answer: True
7. Federal agencies must include a Statement of Cash Flows in their annual report.
Answer: False
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Chapter 14 – Financial Reporting by the Federal Government
8. The difference between assets and liabilities of a federal agency is comprised of Fund
Balance and may be classified as Nonspendable, Committed, Restricted, Assigned and
Unassigned.
Answer: False
9. The net position of a federal agency is comprised of Cumulative Results of Operations and
Unexpended Appropriations.
Answer: True
10. The Statement of Changes in Net Position of a federal agency should articulate with net
position on the agency’s Balance Sheet.
Answer: True
11. The Statement of Budgetary Resources for a federal agency is prepared on the accrual
basis.
Answer: False
12. The Statement of Custodial Activity is not required of every federal agency but is
prepared by the SEC, IRS and Customs.
Answer: True
13. The Statement of Operations and Changes in Net Position for the consolidated report of
the federal government is prepared on the modified accrual basis of accounting.
Answer: False
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Chapter 14 – Financial Reporting by the Federal Government
14. The budgetary authority process for a federal agency begins with the Treasury
Department issuing a warrant granting the agency the authority to withdraw funds.
Answer: False
15. Apportionments are issued by the OMB and establish the amount of an appropriation
that will be available each quarter.
Answer: True
16. Allotments are made at the agency level and assign portions of the appropriation to
subunits or programs.
Answer: True
17. The proprietary accounts of a federal agency reflect the status of an appropriation.
Answer: False
18. The proprietary accounts of a federal agency are used to prepare the accrual basis
financial statements of the federal government and its agencies.
Answer: True
19. The account Fund Balance with Treasury is classified as an asset on a federal agency’s
balance sheet.
Answer: True
20. The account Obligations – Undelivered Orders is credited when goods and services are
received.
Answer: False
21. Typically, budgetary authority that is not obligated by a federal agency before the end of
the fiscal year rolls over and is available for the following fiscal year.
Answer: False
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Chapter 14 – Financial Reporting by the Federal Government
Multiple Choice Questions
22. Which of the following is responsible for preparing the federal government’s
consolidated financial statements?
A)
B)
C)
D)
Government Accountability Office
Congressional Budget Office
Office of Management and Budget
Department of Treasury
Answer: D
23. Which organization promulgates Statements of Federal Financial Accounting
Standards?
A)
B)
C)
D)
The American Institute of Certified Public Accountants
The Federal Accounting Standards Advisory Board
The U.S. Office of Management and Budget
The U.S. Government Accountability Office
Answer: B
24. Which of the following is one of the principal organizations that formed the Federal
Accounting Standards Advisory Board?
A)
B)
C)
D)
Department of Treasury
Congressional Budget Office
American Institute of CPAs
All of the above
Answer: A
25. Which of the following is (are) true regarding the Government Accountability Office?
A) The GAO establishes accounting standards applicable to the federal government
and its agencies
B) The GAO establishes auditing standards applicable to the federal government
and its agencies
C) Both (a) and (b) above
D) Neither (a) nor (b) above
Answer: B
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Chapter 14 – Financial Reporting by the Federal Government
26. Which of the following is responsible for auditing the federal government’ consolidated
financial statements?
A)
B)
C)
D)
Congressional Budget Office
US Department of Internal Audit
Office of Management and Budget
Government Accountability Office
Answer: D
27. Which of the following organizations is (are) part of the executive branch of the federal
government?
A)
B)
C)
D)
Government Accountability Office
Office of Management and Budget
Both (a) and (b) above
Neither (a) nor (b) above
Answer: B
28. Which of the following is (are) true regarding Federal Accounting Standards Advisory
Board?
A) The Board is called “Advisory” because Statements issued by the board are
recommended accounting standards but are not “level A GAAP” for federal
agencies
B) Statements issued by the board are recognized as the highest level of authoritative
standard for federal government entities
C) Both (a) and (b) above
D) Neither (a) nor (b) above
Answer: B
29. Which of the following is not required in a federal agency’s financial report?
A)
B)
C)
D)
Statement of Budgetary Resources
Statement of Changes in Net Position
Statement of Cash Flows
Balance Sheet
Answer: C
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Chapter 14 – Financial Reporting by the Federal Government
30. Which of the following is (are) true regarding the Chief Financial Officers Act?
A)
B)
C)
D)
The Act created the position of chief financial officer within federal agencies
The Act called for audits of the financial statements of federal agencies
Both (a) and (b) above
Neither (a) nor (b) above
Answer: C
31. Which of the following is not required in a federal agency’s financial report?
A)
B)
C)
D)
Management’s Discussion and Analysis
Notes to the Financial Statements
Required Supplemental Information
Budgetary Comparison Schedule
Answer: D
32. Which of the following should appear within the equity (net position) section of a federal
agency balance sheet?
A)
B)
C)
D)
Net Position – Unexpended Appropriations
Fund Balance with Treasury
Both (a) and (b) above
Neither (a) nor (b) above
Answer: A
33. Which of the following accounts are used to display the difference between assets and
liabilities in a federal agency Balance Sheet?
A) Unrestricted Net Position, Restricted Net Position, and Net Investment in Capital
Assets.
B) Unassigned, Assigned, Committed, Restricted and Nonspendable fund balance.
C) Unrestricted, Temporarily Restricted, and Permanently Restricted Net Assets
D) Unexpended Appropriations and Cumulative Results of Operations
Answer: D
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Chapter 14 – Financial Reporting by the Federal Government
34. Which of the following is true regarding the Balance Sheet of a federal agency?
A) The balance sheet is prepared using the economic resource measurement focus
and accrual accounting.
B) Assets are measured on the modified accrual basis.
C) The difference between assets and liabilities is termed “Net Assets”.
D) Assets are separated between current and noncurrent.
Answer: A
35. Which of the following is accurate regarding a federal agency’s Statement of Net Costs?
A) It is similar in presentation to the GASB government-wide Statement of Activities
in that earned revenues are subtracted from costs to determine the net cost of
government services.
B) Costs are reported within the broad categories of current, capital, and debt service.
C) Both (a) and (b) above
D) Neither (a) nor (b) above
Answer: A
36. Which of the following is (are) accurate regarding a federal agency’s Statement of Net
Costs?
A) Net costs reported on the Statement of Net Costs may differ from those appearing
in the Statement of Changes in Net Position, since the latter are measured on the
budgetary basis.
B) The Statement of Net Costs provides greater detail about the cost of the Agency’s
programs, but agrees in total net cost reported on the Statement of Changes in Net
Position
C) Both (a) and (b) above
D) Neither (a) nor (b) above
Answer: B
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Chapter 14 – Financial Reporting by the Federal Government
37. Which of the following is (are) accurate regarding a federal agency’s Statement of
Changes in Net Position?
A) The statement starts with the beginning of year balances in the net position
accounts and reconciles these to the ending balances appearing on the agency’s
Balance Sheet.
B) The statement does not report Appropriations Received since this is a budgetary
account and does not affect net position.
C) Both (a) and (b) above
D) Neither (a) nor (b) above
Answer: A
38. Which of the following is (are) accurate regarding a federal agency’s Statement of
Budgetary Resources?
A)
B)
C)
D)
The statement reports the status of budgetary resources at year end.
Outlays are measured using the budgetary basis of accounting.
Both (a) and (b)
Neither (a) nor (b)
Answer: C
39. Which of the following federal entities would be required to prepare a Statement of
Custodial Activity?
A)
B)
C)
D)
Department of Defense
Internal Revenue Service
Department of Homeland Security
Department of Health and Human Services
Answer: B
40. Federal agencies that are required to report a Statement of Custodial Activity have
transactions that are similar to which fund type of a state or local government?
A)
B)
C)
D)
Agency funds
Internal service funds
Capital projects funds
Permanent funds
Answer: A
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Chapter 14 – Financial Reporting by the Federal Government
41. Which of the following does not appear in the federal government’s consolidated
financial report?
A)
B)
C)
D)
Management’s Discussion and Analysis
Statement of Social Insurance
Statement of Cash Flows
Auditors Report
Answer: C
42. Which of the following statements appearing in the federal government’s consolidated
financial report are prepared on the accrual basis of accounting?
A)
B)
C)
D)
Balance Sheet
Statement of Operations and Changes in Net Position
Both (a) and (b) above
Neither (a) nor (b) above
Answer: C
43. Which of the following are included in the Financial Snapshot section of the federal
government’s Citizen’s Guide to the Financial Report of the US Government?
A)
B)
C)
D)
The Net Operating Cost of the federal government
The Net Position (assets minus liabilities) of the federal government
Both (a) and (b) above
Neither (a) nor (b) above
Answer: C
44. Which of the following are true of the proprietary accounts of the federal government?
A) The accounts provide a record by which federal expenditures may be traced to the
budgetary authority granted by Congress.
B) The accounts are used to present the financial position and results of operations of
the federal government and its agencies using the accrual basis of accounting.
C) Both (a) and (b) above
D) Neither (a) nor (b) above
Answer: B
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Chapter 14 – Financial Reporting by the Federal Government
45. Which of the following steps in the budgetary authority process occurs when the Office
of Management and Budget establishes the quarterly amount available to a federal agency for
spending?
A)
B)
C)
D)
Apportionment
Appropriation
Allotment
Obligation
Answer: A
46. Which of the following steps in the budgetary authority process occurs when Congress
passes a spending bill which is signed by the President?
A)
B)
C)
D)
Apportionment
Appropriation
Allotment
Obligation
Answer: B
47. Which of the following steps in the budgetary authority process occurs when a federal
agency issues a purchase order?
A)
B)
C)
D)
Apportionment
Appropriation
Allotment
Obligation
Answer: D
48. At what point in the budgetary authority process may a federal agency or its subunits
begin to place orders for goods and services?
A)
B)
C)
D)
Apportionment
Appropriation
Allotment
Obligation
Answer: C
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Chapter 14 – Financial Reporting by the Federal Government
49. Assume a spending bill has been passed by Congress and signed by the President. The
journal entries at the agency level to record this event will include:
A)
B)
C)
D)
a debit to the account Unexpended Appropriations
a debit to the account Unapportioned Authority
a debit to the account Fund Balance with Treasury
None of the above
Answer: C
50. Which of the following events will result in a journal entry being recorded in both the
budgetary and proprietary accounts of a federal agency?
A) Treasury notifies the agency that Congress passed legislation (signed by the
President) granting budgetary authority to fund its activities.
B) The agency places orders for goods or services.
C) Both (a) and (b)
D) Neither (a) nor (b)
Answer: A
51. Which of the following events will result in a journal entry being recorded in both the
budgetary and proprietary accounts of a federal agency?
A) OMB establishes the amount of the total appropriation that the agency may expend
in the first quarter.
B) Goods or services are received and approved for payment.
C) Both (a) and (b)
D) Neither (a) nor (b)
Answer: B
52. Which of the following steps in the federal government’s budgetary authority process is
most similar to the recording of encumbrances by state and local governments?
A)
B)
C)
D)
Apportionment
Appropriation
Allotment
Obligation
Answer: D
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Chapter 14 – Financial Reporting by the Federal Government
53. Assume the OMB apportions 1/4th of an appropriation to a federal agency for the first
quarter of the fiscal year. The journal entries at the agency level to record this event will
include:
A)
B)
C)
D)
a debit to the account Unexpended Appropriations
a debit to the account Unapportioned Authority
a credit to the account Fund Balance with Treasury
None of the above
Answer: B
54. Assume the director of a federal agency allots a portion of the agency’s apportionment to
subunits within the agency. The journal entries at the agency level to record this event will
include:
A)
B)
C)
D)
a debit to the account Apportionments
a debit to the account Allotments
a credit to the account Obligations – Undelivered Orders
None of the above
Answer: A
55. Assume a federal agency places orders for contracted services supporting a federal
program. The journal entries at the agency level to record this event will include:
A)
B)
C)
D)
a credit to the account Expended Appropriations
a debit to the account Allotments
Both (a) and (b)
Neither (a) nor (b)
Answer: B
56. Assume a federal agency places orders for contracted services supporting a federal
program. The journal entries at the agency level to record this event will include:
A)
B)
C)
D)
a debit to the account Allotments
a credit to the account Obligations – Undelivered Orders
Both (a) and (b)
Neither (a) nor (b)
Answer: C
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Chapter 14 – Financial Reporting by the Federal Government
57. Assume a federal agency receives supplies that had been previously ordered that will be
used to support a federal program. The journal entries at the agency level to record this event
will include:
A)
B)
C)
D)
a credit to a liability account such as Accounts Payable
a debit to the account Unexpended Appropriations
Both (a) and (b)
Neither (a) nor (b)
Answer: A
58. Assume an outstanding account payable of a federal agency is paid. The journal entries at
the agency level to record this event will include:
A)
B)
C)
D)
a debit to the account Accounts Payable
a credit to the account Cash
Both (a) and (b)
Neither (a) nor (b)
Answer: A
59. Assume a federal agency has $ 150,000 of unobligated budgetary authority at the end of
the fiscal year that must be returned to Treasury. The journal entry at the agency level to
record this event in the proprietary accounts will include:
A)
B)
C)
D)
a debit to the account Unexpended Appropriations
a credit to the account Fund Balance with Treasury
Both (a) and (b)
Neither (a) nor (b)
Answer: C
60. Allotments is an example of which type of federal government account?
A)
B)
C)
D)
Budgetary
Account
Yes
No
Yes
No
Proprietary
Account
Yes
Yes
No
No
Answer: C
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Chapter 14 – Financial Reporting by the Federal Government
61. Fund Balance with Treasury is an example of which type of federal government
account?
A)
B)
C)
D)
Budgetary
Account
Yes
No
Yes
No
Proprietary
Account
Yes
Yes
No
No
Answer: B
62. Operating Expense: Contracted Services is an example of which type of federal
government account?
A)
B)
C)
D)
Budgetary
Account
Yes
No
Yes
No
Proprietary
Account
Yes
Yes
No
No
Answer: B
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Chapter 14 – Financial Reporting by the Federal Government
63. A federal agency prepared the following schedule showing the status of federal
appropriations at the end of the first quarter:
Amount
$ 600,000
10,000
45,000
15,000
130,000
Status
- Unapportioned authority
- Apportionments.
- Allotments.
- Obligations for undelivered orders.
- Expended appropriations
$ 800,000 Total appropriations
What is the total amount of purchase orders placed in the first quarter of the year?
A) 30,000
B) 145,000
C) 175,000
D) 180,000
Answer: B
64. A federal agency prepared the following schedule showing the status of federal
appropriations at the end of the first quarter:
Amount
$ 600,000
10,000
45,000
15,000
130,000
Status
- Unapportioned authority
- Apportionments.
- Allotments.
- Obligations for undelivered orders.
- Expended appropriations
$ 800,000 Total appropriations
What is the total amount allotted to subunits or programs within the agency during the first
quarter of the year?
A)
B)
C)
D)
15,000
45,000
190,000
200,000
Answer: C
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Chapter 14 – Financial Reporting by the Federal Government
Short Answer
65. List the financial statements required of every federal government agency and indicate
whether the statement is prepared using the accrual or budgetary basis of accounting.
1. Balance Sheet - accrual basis
2. Statement of Net Cost – accrual basis
3. Statement of Changes in Net Position – accrual basis
4. Statement of Budgetary Resources – budgetary basis
66. Identify (in order of occurrence) the steps in the federal budgetary authority process.
1. Appropriations
2. Apportionments
3. Allotments
4. Obligations
5. Expended Appropriations
67. Describe the purpose of the following:
a) Federal government budgetary accounts
b) Federal government proprietary accounts
a) Budgetary accounts provide a record whereby federal expenditures may be
traced back to the budgetary authority granted by Congress. Under federal
budgetary accounting, budgetary resources (appropriations) are represented by
debits. Credits reflect the status of the resources within the spending process.
b) Proprietary accounts are those accounts which comprise the accrual basis
financial statements prepared by the federal governments and its agencies.
Proprietary accounts measure assets, liabilities, revenues and expenses
(including depreciation) in much the same manner as accrual basis accounts of
state and local governments.
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Chapter 14 – Financial Reporting by the Federal Government
68. Identify the primary functions of the following entities as they relate to financial
reporting by the federal government:
a) Office of Management and Budget
b) Department of Treasury
c) Government Accountability Office
a) Office of Management and Budget – OMB is in the executive branch of the
federal government and is charged with carrying out the financial management
directives of the Chief Financial Officers Act. It is one of the founding
organizations of the Federal Accounting Standards Advisory Board and must
approve the Board’s standards.
b) Department of Treasury – Treasury is in the executive branch of the federal
government and maintains a government-wide system of accounts and prepares
the federal government’s consolidated financial statements. It is one of the
founding organizations of the Federal Accounting Standards Advisory Board
and must approve the Board’s standards.
c) Government Accountability Office – GAO is in the legislative branch of the
federal government and is responsible for promulgating governmental auditing
standards (i.e. the Yellow Book) and for auditing the financial statements of
some federal agencies and the consolidated statements of the federal
government. It is one of the founding organizations of the Federal Accounting
Standards Advisory Board and must approve the Board’s standards.
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Chapter 14 – Financial Reporting by the Federal Government
Exercises
69. Assume a federal agency has the following events:
1. Receives a warrant from the Treasury notifying the agency of appropriations of
$12,000,000.
2. OMB apportions 1/4th of the appropriation for the first quarter of the year.
3. The Director of the agency allots $ 2,850,000 to program units.
4. Program units place orders $ 2,790,000.
5. Supplies ($ 490,000) and services ($ 2,291,000) are received and paid during the first
quarter. Supplies of $ 417,000 were used in the quarter.
Required: Prepare any necessary journal entries to reflect the events described above.
Identify whether the entry is budgetary or proprietary.
BUDGETARY ACCOUNTING
PROPRIETARY ACCOUNTING
1.
APPROPRIATIONS REALIZED 12,000,000
UNAPPORTIONED AUTHORITY
12,000,000
FUND BALANCE WITH TREASURY 12,000,000
UNEXPENDED APPROPRIATIONS 12,000,000
2.
UNAPPORTIONED AUTHORITY 3,000,000
APPORTIONMENTS
3,000,000
NO JOURNAL ENTRY REQUIRED
3.
APPORTIONMENTS
ALLOTMENTS
NO JOURNAL ENTRY REQUIRED
4.
ALLOTMENTS
2,790,000
OBLIGATIONS – UNDELIVERED ORDERS 2,790,000
NO JOURNAL ENTRY REQUIRED
5.
OBLIGATIONS
– UNDELIVERED ORDERS
2,781,000
EXPENDED APPROPRIATIONS
2,781,000
SUPPLIES
490,000
OPERATING (PROGRAM) EXPENSE 2,291,000
ACCOUNTS PAYABLE
2,781,000
2,850,000
2,850,000
ACCOUNTS PAYABLE
2,781,000
FUND BALANCE WITH TREASURY
2,781,000
OPERATING (PROGRAM) EXPENSE
SUPPLIES
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417,000
417,000
Chapter 14 – Financial Reporting by the Federal Government
70. Assume a federal agency prepared the following journal entries during the first quarter of
the year. Prepare a schedule showing the status of the appropriation at the end of the
first quarter.
Budgetary Accounts
1.
Appropriations realized
Unapportioned authority
2
Unapportioned Authority
Apportionments
2,000,000
3.
Apportionments
Allotments
1,980,000
4.
Allotments
1,925,000
Obligations – undelivered orders
1,925,000
5.
Obligations – undelivered orders
Expended Appropriations
1,900,000
AMOUNT
$ 6,000,000
20,000
55,000
25,000
1,900,000
$ 8,000,000
8,000,000
8,000,000
2,000,000
1,980,000
1,900,000
STATUS
- UNAPPORTIONED AUTHORITY
- APPORTIONMENTS.
- ALLOTMENTS.
- OBLIGATIONS FOR UNDELIVERED ORDERS.
- EXPENDED APPROPRIATIONS
TOTAL APPROPRIATIONS
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