Federal Government Accounting and Financial Reporting

Transcription

1 Federal Government Accounting and Financial Reporting 11-1 Topics Federal Accounting Background FASAB Federal Budgetary Process Financial Accounting The Federal Accounting and Financial Reporting Model Federal Financial Accounting Concepts & Standards

2 Introduction Federal Accounting Standards Advisory Board (FASAB) was established in 1990 Its mission is to: Establishes federal accounting principles Support Public accountability Determined that financial reports should be: Useful in assessing Government s accountability Government s efficiency and effectiveness Economic, political & social consequences of the allocation & uses of federal resources 11-3 FASAB Mission is accomplished by: Implementing a comprehensive and independent process Encouraging Board Member participation Considering its stakeholders views. Strives to ensure: Timely, open & thorough study of issues Considers work of other standard-setters Considers views of its stakeholders Participation by a variety of stakeholders To provide a voice In standard-setting process Due consideration of the costs & benefits to: Ensures that Preparers & Users are in conformity with GAAP Enhancement of the common understanding of info provided through financial reporting Providing availability of implementation guidance Formal & informal communication with auditors & preparers Providing accountability through governance practices Memorandum of Understanding

3 Agencies with Financial Management Oversight Responsibilities Office of Management and Budget (OMB) Assists in preparing budget and overseeing its execution Provides direction for improving financial mgmt and systems Issues Circular A-136, Financial Reporting Requirements that sets the form & content for the Performance & Accountability Report Treasury Provides central payment services for federal government agencies: Central cash accounting system for program agencies: Operating collection & deposit systems Providing govt-wide accounting and reporting services Prepares govt consolidated FSs & publishes the USSGL General Accountability Office (GAO) Legislative auditor for the federal government Plays major role in federal accounting and financial reporting process Responsible for auditing and expressing an opinion on Treasury CFRs 11-5 FASAB Due Process The open process of FASAB encourages: 1. Identification of accounting issues & agenda decisions. 2. Preliminary deliberations 3. Preparation of initial documents 4. Release of documents for comment to the public 5. Further deliberations & considerations of comments 6. Requires approval by a least a 2/3 s majority affirmative vote. 7. Submission of proposed statements to the Principals for 90 day review (45 days for interpretations) 8. Publication of final Statement or Interpretations

4 FASAB Handbook of Federal Accounting Standards & Other Pronouncements FASAB Handbook consists of: Concepts (Statement of Federal Financial Accounting Concept): General statements on standards that help in understanding federal accounting & financial reports, Does not contain specific authoritative requirements for federal agencies General guidance to the Board to deliberate issues Useful to OMB to carry out its responsibilities Standards (Statement of Federal Financial Accounting Standards): Uses due process to promulgate accounting standards Considers financial & budgetary information needs of Congress, Executive Agencies, Users of financial info & Public Interpretations: Clarifies original meaning, adds definitions and provides other guidance for existing SFFAS Narrow in scope Technical Bulletins Provides guidance for applying statements & interpretations Technical Releases provided by Accounting & Auditing Policy Committee Reviewed and published by FASAB 11-7 GAAP Hierarchy - Federal The hierarchy of GAAP governs what constitutes GAAP for federal reporting entities. The sources of accounting principles that are generally accepted are categorized in descending order of authority as follows: 1. Officially established accounting principles consisting of FASAB SFFAS (Standards) and Interpretations. 2. FASAB Technical Bulletins and, if specifically made applicable to federal reporting entities by the AICPA and cleared by the FASAB, AICPA Industry Audit & Accounting Guide. 3. Technical Releases of the Accounting and Auditing Policy Committee of the FASAB. 4. Implementation guides published by the FASAB staff, as well as practices that are widely recognized and prevalent in the federal government

5 FASAB SFFAC No. 1, Objectives of Federal Financial Reporting states that federal information should help readers determine concerns with: Budgetary Integrity budgetary control government is accountable to public Operating Performance self balancing set of accounts assist users in evaluating service efforts costs, and accomplishments of the reporting entity Stewardship efficiency & effectiveness of managing assets & liabilities assist users assessment of the impact of government s operations & investments Systems & Control - assist report users - in understanding whether financial management systems and internal accounting and administrative controls are adequate The Federal Budgetary Process Begins 18 months before fiscal year (October 1 st ) Policy issues are identified, budget projections are made Preliminary program plans are presented to the President President establishes policy guidelines Agencies prepare budgetary requests Department heads and OMB review the requests

6 The Federal Budgetary Process President transmits the budget proposal to Congress 8 months before the year begins Congressional review is held: Concurrent resolution by budget committees of House of Representatives and Senate Establishes levels for total receipts, total budget authority and outlays Appropriation bills are initiated by the House of Representatives authority to spend Then, the Senate reviews and approves the budget The Federal Budgetary Process President approves or vetoes the budget Additional background terms: Anti-Deficiency Act: states that the govt cannot overspend the appropriations An Obligation is an undelivered order : like an encumbrance When goods or services are received, undelivered orders become delivered orders unpaid Payment is made directly by the Treasury via a disbursement schedule

7 Federal Accounting: Comparison to State and Local Govts Both use budgetary accounting Both use funds accounting: Federal uses: revenues recognized on modified cash basis*; expenses recognized when incurred except for costs of social insurance programs, which uses the full accrual basis of accounting* Both have financial reports: Federal: FSs are consolidated & separate for each agency that complies with GAAP through FASAB Agency reports cover a portion of a fund Completed reports along with notes & supplemental info are at GAO website Federal Accounting: Comparison to State and Local Govts Fund balances Federal: has multiple agencies (ALCs) within one fund (that is then segregated by Treasury Account Symbols (TASs)) Must segregate net assets by each agency Terms of Fund Balance for Federal Govt include: Net Position, Unexpended Appropriations, Cumulative Results of Operations Use of cash State and local govts use banks Federal govt uses the U.S. Treasury as its bank Account name: Fund Balance with U.S. Treasury (FBwT)

8 Federal Accounting Model & Financial Reporting Model Federal Budget Equation: Net Resources (Dr) = Status of Resources (Cr) Status of resources describes budgetary actions taken during the year, the budgetary JEs track from appropriations to payment so that account balances show status of appropriations Uses 8 basic budgetary accounts Uses 2 accounting track system of self balancing accounts 1. Budgetary 2. Proprietary Types of funds: Federal Accounting Model earmarked funds for general funding of appropriations nonearmarked funds for specifically identified revenues for designated purposes. Types of Funds: General Fund nonearmarked fund most of the budget Special Funds earmarked funds for specific sources, specific purposes Trust Funds - earmarked funds such as Social Security, Medicare, Railroad Retirement, etc. Public Enterprise Revolving Funds earmarked for business-type activities funds

9 Consolidated U.S. Government Financial Statements SFFAS # 24 requires the Financial Statements to be consolidated. Consolidate statements include: Statement of net cost Statement of operations and changes in net position Reconciliation of net operating cost and unified budget deficit Balance sheet Statement of social insurance Extensive notes and supplementary data Federal Accounting Federal Accounting Standards SSFAS #3 Requires reporting of several types of tangible inventory by categories: items for resale, operating materials & supplies, and stockpile materials Values at historical cost Most of the inventory is held by the Defense Department SSFAS #4 - Requires use of managerial cost accounting concepts and standards Aimed at providing reliable & timely information on full costs of federal government programs, activities and outputs, Describes relationship among cost accounting, financial reporting & budgeting

10 Federal Accounting Federal Accounting Standards SFFAS #1 & 5 Liabilities for federal government - Exchange: is for liabilities recognized on the accrual basis of accounting for exchange transactions Salaries and salary-related benefits are recognized when employee salaries are rendered Nonexchange: recognize liability for unpaid amounts For Government related liabilities between federal agencies and their environment. SFFAS # 17 Social insurance programs - recognize liabilities due and payable at end of period Complex characteristics requiring specialized accounting standards Blends elements of Exchange and Nonexchange transactions Deviates from the full accrual accounting Additional sustainability data requirements (questions about sustainability) Federal Accounting Federal Accounting Standards SFFAS #6 is for federally owned property, plant, and equipment (PP&E): In General: 2 year life, recorded at acquisition cost and uses straight-line depreciation Most PP&E is with the Defense Department 3 Categories of PPE General, Heritage, & Stewardship assets (land): requires note disclosure only Deferred maintenance disclosed SFFAS #42 Assists users by providing an entity s realistic estimate of DM&R amounts & effectiveness of its asset management practices. The cost of bringing property to an acceptable level Rescinded in SFFAS #6, Accounting for Property, Plant, Equipment Uses straight-line over estimated useful lives

11 Consolidated Financial Report (CCR) of the U. S. Government SFFAS #32 Amends standards for financial reporting based on guidance contained in SSFAC #4 - Clarifies that all parts of SFFAS apply to all federal entities unless a standard specifically states otherwise SFFAS #24 - Requires new statements be presented in Consolidated Financial Reports - Nonexchange (taxes) revenue is recognized when collected - Statement of net costs: is all costs less revenues from goods/services provided - Statement of operations and changes in net position - same as operating statement - President s budget is cash basis - Reported deficit much greater if social programs are fully accrued Consolidated U.S. Government Financial Statements: Characteristics SFFAC #4 Intended Audience and Qualitative Characteristics for the Consolidated Financial Report of the U. S. Government - Describes characteristics of the audience - Primary audience Citizens & Citizen Intermediaries - Others in audience Congress, Federal Executives and Program Managers - Describes qualitative characteristics for financial reporting objectives - Relies on SFFAC #1 for development of : - Accounting standards - Accounting & reporting framework for the federal government - Qualitative characteristics: - Understandability - Reliability - Relevance - Timeliness - Consistency - Comparability - CFR should be a general purpose report directed to external users - Address Broad s objectives - Have highly understandable information that is timely

12 SFFAC #31 Accounting for Fiduciary Activities - Defines fiduciary activities as Federal Government activities that relate to the collection or receipt, and the subsequent management, protection, accounting, investment and disposition of cash or other assets in which non-federal parties have an ownership interest. - Based on statutory or other legal authority - Must be in furtherance of relationship - Fiduciary assets are not recognized on federal entity s Balance Sheet - Requires note disclosure in federal entity s audited financial statements - Explanation of the nature of the fiduciary relationship, - A schedule of fiduciary net assets, and - A schedule of fiduciary activity Pensions Other Retirement, Benefits & Other Postemployment, Benefits SFFAS 33 - highlights gains & losses from changes in amounts on the statement of net cost for the U. S. CFR and for certain component entities - That can result from gains and losses from changes in assumptions - Applies to federal entities reporting liabilities for: - Federal employee pensions other retirement benefits (ORB), and - Other postemployment benefits (OPEB) - Require s gains & losses from changes in long-term assumptions used to estimate federal employee pension, ORB and OPEB liabilities on the statement of net cost separately - Requires disclosure of the components of expense associated with federal employee pension, ORB, and OPEB liabilities in notes to the financial statements - Provides a standard for selecting the discount rate assumption for present value estimates of federal employee pension, ORB, and OPEB liabilities

13 Impairment of General Property, Plant & Equipment Remaining in Use SFFAS #44 - Establishes standard for reporting for impairment of general PP&E remaining in use except for internal use software. - Impaired when a significant and permanent decline in service utility or expected service utility for construction work in progress - Decline is permanent when management has no reasonable expectation that lost service utility will be replaced or restored SFFAC #46 Deferral of the Transition to Basic Information for Long-term Projections - Amends 36 & 45 - A 1 year deferral permitting - Time for consideration of the need for guidance - Time to plan for audit SFFAC #47 Reporting Entity - Establishes principles to determine organizations to be included in the government-wide General Purpose Federal Financial Report (GPFFR) - Budgeted for by elected official of federal government - Owned by the federal government - Controlled by the federal government - Risk of loss, or - Expectation of benefits - Provides for the most appropriated disclosures to include

14 References & Resources Introduction of Governmental and Not-forprofit Accounting, 7ed Martin Ives, Terry & Susan Patton