CDFM Module 3 Competency 3 - Accounting and Finance

What are the types of accounting behind the federal accounting framework? Who are the primary users of federal financial information?

Budgetary
Proprietary
Managerial Cost accounting

External users (citizens and congress)
Internal users (agency heads and management)

What estbalishes the statutory requirements for accounting?

the US Constitution, Article 1 section 9 clause 7

"No money shall be drawn from treasury, but in consequence of appropriations made by law; and a regular statement of account of the receipts and expenditures to all public money shall be published from time to time."

What is the CFO act of 1990?

Required audited financial statements for the business activities of the 24 designated CFO agencies.

Required audits of working capital fund activities only

What is the Government Management Reform Act of 1994?

Amended the CFO Act to require audited financial statements for the 24 CFO agencies and an audited financial report of the US government (starting with FY97)

Required EVERYTHING to be audited
DoD still hasn't passed an audit

What are the names of the federal financial statements?

Balance Sheets
Statements of Net Cost
Statements of Operations and Changes in Net Position

What is the difference between debt and a deficit?

Deficits are for one year
Debt is the cumulative result of each year's financial outcomes

What is the aim Digital Accountability and Transparency act of 2014?

•Aims to make information on federal expenditures more easily accessible and transparent for the public
•Requires Treasury to establish common standards for financial data provided by all government agencies and expand the amount of data agencies must provide to the government website USA Spending

•Focused on standardization of accounting terms, systems and report contents to enable the public to better understand the reported information and making the information available via a centralized web site

What are the purposes of the Digital Accountability and Transparency Act of 2014?

Purposes are to:
•Disclose direct federal agency expenditures and link federal information to federal programs
•Establish government-wide financial data standards
•Simplify reporting for entries receiving federal funds
•Improve the quality of data by holding federal agencies accountable for the completeness and accuracy of data submitted to a centralized data web site

List the most significant accounting related legislation and summarize the most significant aspect of each one

1921 Budget and Accounting Act - Established the GAO and OMB, and required President to submit President's Budget

1949 Federal Property and Administrative Services Act - Established the General Services Administration

1950 Accounting and Auditing Procedures Act - Required apportionment and allocation systems; expanded ADA/required reporting

1982 PPA - required interest payments if gov does not pay invoice within 30 days

1982 Debt Collection Act - If can't collect debt w/in 180 days, refer to treasury

1982 Federal Managers' Financial Integrity Act - Estbalished internal control requirements

1990 CFO Act - mandated audit of business ops.

1993 GPRA - added all agencies/operations to audit requirement

1994 GMRA - Set long term objectives, annual performance plans, annual performance report requirements

1996 Federal Management Improvement Act - (full cost reporting, i.e., managerial cost accounting requirement) - Required systems to support control of cost of government, use of GL at transaction level

What are the Gov. orgs that most affect decisions of DoD financial managers?

OMB
GAO
Treasury
FASAB

What is OMB's role in affecting DoD financial management decision making?

President's comptroller - OMB Conducts a continuous program for improving accounting/finnacial reporting in federal gov. Has primary oversight over this effort. OMB also assists the President in preparing and overseeing budget execution.

What is GAO's role in affecting DoD financial management decision making?

Audits financial performance of the executive and is often referred to as watchdog of congress. Works directly for congress.

What is treasury's role in affecting DoD financial management decision making?

Compiles the consolidated federal financial statements; publishes the USSGL, which feeds to all financial reports and makes the consolidated financial statements possible.

It's the federal gov's banker, manages balance of fund flow required to support govenrment. Formulates/recommends economic, financial, tax, and fiscal policies; serves as financial agent for US gov.

What is FASAB's role in affecting DoD financial management decision making?

Codifies GAAP for the federal government. Their recommendations are adopted and published in SFFAC or SFFAS. These are the basis of government GAAP.

What are the differences between FASB, GASB, and FASAB?

FASB (Financial Accounting Standards Board) - governs business organizations (GAAP), non-government not for profits

GASB (Government Accounting Standards Board) - gov. orgs. (GAAP), governmental not for profits

FASAB - Federal Government GAAP

What is the role of OMB in the implementation of federal accounting standards?

Implements an approved standard by publishing the standard and updating OMB Circular A-136, which governs what forms and standards an agency should use/follow. Publsihed standards become federal GAAP and mus be followed by Federal Executive Branch Agencies

What is the role of GAO in the implementation of federal accounting standards?

GAO formulates General Accepted Government Auditing Standards (GAGAS) that are to be used by Government auditors in performing statement audits

What is the role of Treasury in the implementation of federal accounting standards?

Prescribes GL structure for entire federal government, but DFAS maintains the GL for DoD (they post it). Adjusts crosswalks based on OMB A-136.

Whose financial and budgetary information needs do the federal accounting standards consider?

Those of the:

Citizens
Congressional oversight groups
Executive agencies
other users of federal financial information

What are the objectives of SFFAS?

Budget Integrity
Operating Performance
Systems and Control
Concept of Stewardship

Summarize the concept of stewardship.

Stewardship is the idea that the government is a steward of the public's money.

SFFAC 1, chapter 4, states "federal financial reporting should assist in fulfilling the government's duty to be publicly accountable for monies raised through taxes"

What is the hierarchy of Federal GAAP?

1. FASAB Standards and Interpretations
2. FASAB Technical Bulletins
3. Technical Releases of the Accounting and Auditing Policy Committee of the FASAB
4. Implementation guides published by FASAB staff, as well as practices that are widely recognized and prevalent in the federal government

What are the primary functions of the USD Comptroller?

Principal Advisory to the secretary and deputy SECDEF

Is the DoD CFO

Formulates DoD wide financial management policies

Directs DFAS

Directs the Defense Contract Audit Agency (DCAA)

Represents DoD on the Chief Financial Officers council

What is DFAS?

Accounting entity for DoD
Maintain central GL

What is the purpose/function of a central GL?

Accounts for DoD resources

Helps DoD determine costs of operations

Reports DoD financial position and cost of operations

What are the following DoD FMR volumes?

1
4
6a
6b
9
11a
11b
13
14
15
16

1 - General Financial Management information, Systems and Requirements

4 - Accounting Policy and Procedures

6a - Reporting Policy and procedures

6b - form and content of DoD audited financial statements

9 - Travel policy and procedures

11a - reimbursable operations, policy and procedures

11b - reimbursable operations, policy and procedures - Working capital fund

13 - nonppropriated funds policy and procedures

14 administrative control of funds and ADA violations

15 - security assistance poloicy and procedures

16 - DoD debt management

What are the eight types of government funds?

General

Special

Public Enterprise

Intragovernmental

Trust

Trust revolving

Deposit

Clearing

Describe the general fund

Greater part of the budget

Records receipts not earmakred by law for specific purpose (almost all income tax receipts) and general borrowing

General fund appropriation accounts record general fund expenditures

GF appropriations draw from GF, so not specifically linked to receipt accounts

This is where our taxes go when we pay them

Describe the special funds

receipt accounts that have been earmarked for specific purposes

appropriations linked to earmarked receipt accounts

Describe the public enterprise funds (WCF)

revolving fund

for programs authorized by law to conduct cycle of business-type operations

Outlays generate collections

Describe the intragovernmental funds (WCF)

Revolving fund between gov. agencies

Budget records collections and outlays of revolving funds in same account

Describe trust funds

accounts for receipt/expenditure of money by the gov. for carrying out specific purposes and programs

statutorily designated

also for carrying out stipulations of a trust agreement where nation is the beneficiary

What is the difference between a federal and private trust?

Private: Trust funds in the private sector, beneficiary is owner of trust's assets, which are managed by trustee who must follow stipulations.

Public: Federal government owns assets and can raise/lower future turst-fund collections/payments, or change purpose for which collections are used by changing laws

What is the difference between a trust fund and a special fund and between a public enterprise fund and trust revolving fund?

None

Describe a deposit fund

Not included in the budget

Situation where government acts as trustee for funds

Ex. retirement funds, sales of lost, abandoned, or unclaimed personal property, etc.

Describe clearing accounts

Not technically a fund

used to temporarily account for transactions that belong to gov. but cannot be matched to specific receipt or expenditure account

What are the 5 primary types of funds the DoD refers to?

Appropriated

Non-appropriated

Revolving

Trust

Reimbursable

What are qualities of non-appropriated funds?

Come primarily from sale of goods/services to DoD military and civilians/family

Morale/welfare/recreation and certain other functions (religious/educational)

Separate from funds recorded in books of Treasury

Considered gov. funds that are governed by specific doD regulations even though they are not appropriated

What are the appropriation categories?

Annual

multi year

No-year

Permanent

What is a judgement fund?

Pays court settlements/outcomes rendered against the federal government - fiscal year decision is made is fund that will pay

Flow of funds - what is the flow of funds?

Appropriation
Apportionment
Allotment
Commitment - can be cancelled with no admin penalty
Obligation - legal reservation of funds (amounts of orders/contracts, services received, other transactions occurring during given period that would require payments during same or future period)
Outlay

Bona fide need - reminder

FY appropriation may only be obligated to meet bona fide need arising in FY need arose. Does not apply to no-year, just multi/annual

When are military/civilian pay recorded as obligations?

In the month or pay period earned and supported by payroll records

When are permanent change of station costs recorded as obligations?

When orders are issued, based on travel estimates and dates of travel

What are the two primary docs a program manager or designated funds control official uses to obligate budget authority?

Contracts

MIPRS

What type of MIPRS are there?

Project order MIPRS - non-severable work. Can cross fiscal years, deobligate once work is done

Economy act order MIPRS - severable, deobligate by end of FY for money not used.

What statute covers refunds/rebates?

10 USC 2784 - gives DoD statutory authority to deposit rebates or refunds attributable to use of GPC and refunds attributable to official government travel

What three accounting systems compose federal accounting structure?

Budgetary Accounting - USSGL account starting with 4

Proprietary Accounting (financial accounting) - USSGL accounts not starting with 4

Managerial Cost Accounting

What is the primary function of the USSGL?

provides unform chart of accounts and technical guidance to be used in standardizing federal agency accounting for budgetary and proprietary accounting transactions

What are the account codes, titles, and normal balances of the USSGL chart of accounts?

1000 - Assets - Debit
2000 - Liabilities - Credit
3000 - Net Position - Credit
4000 - Budgetary - Both
5000 - Revenues and Financing Sources - Credit
6000 - Expenses - Debit
7000 - Gains and Losses - Both
8000 - Memorandum - N/A

What is budgetary accounting primarily concerned with?

The legal requirement to control and properly manage budgetary authority provided to entities in appropriations.

What is the budgetary accounting equation?

Resources = status of resources --> best explained on page 3.3.29

What are the primary proprietary accounting formulas?

For Balance sheet:

Asset = Liabilities + Net position

For statement of net cost:

Expenses - Exchange Revenue = Net Cost of Operations

When does a fund balance with treasury get created?

When president signs a bill, even if the fund is unapportioned, an FBwT is created since appropriation exists. The FBwT is the receipt of warrants.

How is budgetary authority apportioned by OMB and available for allotment recorded?

Debit to unapportioned authority, credit to apportionments

How is allotment recorded?

Debit to apportionments, credit to allotments

How are commitments recorded?

Debit to allotments, credit to commitments

How are appropriations recoreded?

Combination of budgetary and proprietary:

Budgetary: Debit Other appropriations realized, credit unapportioned authority

Proprietary: Debit to Fund balance with Treasury, Credit to unexpended appropriations - appropriations received

How are obligations recorded?

Debit Commitments, credit obligations

How would a receipt of materials ordered be recorded?

Goods delivered with vendor's invoice = original obligation recorded in transaction number. All proprietary entries

How would an outlay be recorded?

Budgetary + Proprietary

Budgetary: Debit Delivered orders, unpaid
credit delivered orders, paid (confirms disbursement)

Proprietary: Debit Accounts Payable, Credit FBwT

What does the GL show?

The credits and debits within each account

What does the TB show?

The net debit/credit of each account at the time the query is made - balance sheet reflects this at the end of the quarter, but may be summarized differently.

What are the selected asset accounts?

1. Fund Balance with Treasury
2. Undistributed disbursements
3. Imprest Fund
4. Accounts Receivable
5. Advances

What is FBwT?

Aggregate funds an entity has at Treasury to make expenditures to pay liabilities to purchase assets, goods/services (like bank balance

What are undistributed disbursements?

Funds / obligations that have been paid, but have not yet been identified to a specific organization. These funds are placed within a suspense account and represent the amount of disbursements as reported by finance network that have not been accepted by operating-level accounting entity.

T/F: Undistributed disbursements are a separate asset account

False - they are a subset of the FBwT account 1010, tracked with ledger account 1015. They only exist because DoD can't figure out where these charges should be posted

What is the imprest fund?

A fund for petty cash in the form of currency or coin specifically authorized for making cash payments. Must be specially authorized to have a fund like this.

What are imprest funds typically used for?

Payments, specifically for classified programs (unless special authority to pay for unclassified programs is granted by OUSD-C.

What are accounts receivable?

Amounts owed to entity

What can cause accounts receivable to go up?

account receivable can result from reimbursable agreement or from overpayment to vendor.

What are advances are what are their origins?

occur when entity has given funds to other in anticipation of receiving a future benefit. Examples include:

Payments to contractors who are, or will be, doing work for the entity.

Travel advances paid to employees, both military members and civilians.

How do you account for travel advances?

While largely obsolete, they are still used circumstantially. They must be recognized as an asset, as a receivable of the appropriation or fund from which the travel is to be paid until a settlement has been recorded. As an asset, it must be accounted for accordingly.

Define PP&E

Asset with two years or more useful life

Not intended for sale

Tangible

Cap thresholds established by each department

Intended to be used or available for use by entity

Where are GPP&E capitalization thresholds applicable?

By both General Funds and WCFs

Where should asset costs be recorded?

In the property management system, which is a subsidiary system to the GL

What standard eliminated the category "National Defense Property, Plant, and Equipment?"

SFFAS 23 - with that, weapons systems used by MILDEPS considered PP&E.

What is stewardship PP&E?

Consists of tangible assets classified as either heritage assets or stewardship land

What are heritage assets?

Assets with cultural, historical, artistic value that are expected to be indefinitely managed by the state. They have indeterminable value and are not reported on the financial, unless they are multi-use (such as the Pentagon). In the multi-use scenario, heritage assets are reported on the BS in the same manner as GPP&E (acq. cost - depreciation).

What is stewardship land?

Land/land rights other than that acquired for or in connection with GPP&E, land acquired via public domain, or land acquired at no cost.

Without exception, all land provided to DoD from the public domain, or at no cost, is classified as Stewardship Land, regardless of its use.

What does SFFAS 29 do?

Reclassifies reporting of all heritage assets and stewardship land from required supplemental stewardship info to basic info in financial statements. Requires note on balance sheet but not reporting of acquisition cost.

What is residual or salvage value?

The amount expected to be recovered from disposed asset

How should obsolete, excess, unserviceable inventory be valued on FS?

At Net realizable value (what it's valued at today)

Can cost estimates be used if historical value is unknown?

Yes - deemed cost

What would be included in meeting Federal financial reporting objectives?

BS
SNOC
Changes in Net Position
SBR

What do FS footnotes provide?

They are integral part of FS, providing additional disclosures necessary to making financial statements more informative and not misleading.

What are all federal agencies required to report and in what order?

1. Required Supplementary Stewardship info

2. Required supplementary information

3. Other accompanying information

--> Study this 3.3.40

When did the DoD commit to having fully auditable financial statements?

In October 2011 memo

How is DoD working towards auditability?

Using streamlined approach that focuses on improving auditing information most often used to manage

Holding leaders accountable to achieve long and short-term FIAR goals through governance process

Providing funding to DoD Components to improve systems, processes, and controls

What type of accounting is the statement of net cost considered to be?

Accrual based

Which SFFAS introduced cost accounting to DoD?

SFFAS 4 in '95

What is the definition of managerial cost accounting?

Process of accumulating, measuring, analyzing, interpreting, and reporting cost.

What odes does the managerial cost reporting requirement include?

Direct costs (direct labor and materials)

Indirect Costs (Overhead)

Intra-entity Costs (general and admin)

Inter-entity Costs
Costs of goods/services received from other entities
Providing entity is responsible for providing cost data
Recognition limited to material amounts

What is ratio analysis?

Ratios that measure entity's performance based on balance sheet, SNOC, or both.

What is the desired ratio for ratio analysis?

At least 2 to 1

What are the ratio formulas?

Cash + Accounts Receivable + Inventory / Current Liabilities

Cash + Accounts Receivable/current Liabilities >> Quick ratio, aka acid-test ratio

What is the quick ratio/acid test?

Compares only most liquid assets to current liabilities (at least 1:1)
- current cash/AR (less inventories)/current liabilities

What are the two main ways to use ratios for performance analysis?

1. Trend Analysis (determine how ratio has behaved across time)

2. Comparative Analysis (manager determines how entity is performing at a single point in time relative to other like entities or to a DoD standard).

What is the current ratio?

current assets divided by current liabilities

It is a measure of an entity's ability to meet its current obligations. It's a measure of liquidity, so must ensure assets and liabilities are properly accounted for.

What do entities mean when they refer to working capital?

total current assets, or current assets over current liabilities