chap 011

Chapter 11 - Accounting and Reporting for the Federal Government

Chapter 11Accounting and Reporting for the Federal Government

True / False Questions

1. Responsibility for setting accounting and reporting standards for federal agencies rests primarily with the Federal Accounting Standards Advisory Board. True False

2. The Chief Financial Officer Act of 1990 establishes an office of federal financial management within the OMB, headed by a controller appointed by the President, establishes a chief financial officer position within each major federal department and agency, requires the development of a 5-year financial plan by OMB, and requires some federal agencies to provide audited financial statements. True False

3. The objectives of federal financial reporting are to assist report users in evaluating budgetary integrity, operating performance, stewardship, and adequacy of systems and controls. True False

4. Federal departments and agencies should utilize the U.S. Government Standard General Ledger as the account structure for their accounting systems. True False

5. Current FASAB standards distinguish intragovernmental assets from governmental assets and entity assets from nonentity assets. True False

6. Fund balances of a federal agency's various funds are reported in the fund equity section of the agency's balance sheet. True False

11-1


7. Federal government accounting standards require the measurement of expenses rather than expenditures. True False

8. Unexpended appropriations is the component of net position in a federal agency balance sheet that represents the amount of appropriations still available for obligation, or which has been obligated but not yet expended. True False

9. Cumulative results of operations is the component of net position in a federal agency balance sheet that represents the amount of appropriations still available for obligation, or which has been obligated but not yet expended. True False

10. The federal budgetary term "commitment" is synonymous with "encumbrance" as used in state and local government terminology. True False

11. The financial statements of the U.S. government are prepared using generally accepted accounting principles promulgated by the Governmental Accounting Standards Board. True False

12. Federal government agencies prepare a management's discussion and analysis (MD&A) to be included in their general purpose federal financial report. True False

13. The three perspectives from which the federal government can be viewed are organizational, budget, and line-item. True False

11-2


14. Objectives that are identified by SFFAS No. 1 for federal financial reporting include budgetary integrity, operating performance, transparency, but not stewardship. True False

15. Beneficial investments of the federal government in items such as nonfederal physical property, human capital, and research and development on the financial statements are called heritage assets. True False

16. At the present time, the conceptual framework for the federal government and its agencies does not provide definitions of the basic elements of the financial statements. True False

Multiple Choice Questions

17. Which of the following federal officials is a "principal" of the Joint Financial Management Improvement Program who considers and approves or disapproves accounting and reporting standards recommended by the Federal Accounting Standards Advisory Board? A. Chair of the Federal Accounting Standards Advisory Board.B. Secretary of the Interior.C. Comptroller General.D. Director of the Congressional Budget Office.

18. FASAB has identified four major user groups of federal financial reports, they are A. Congress, executives, program managers, and citizens.B. Congress, executives, citizens, and bond rating agencies.C. Congress, program managers, foreign governments, and citizens.D. Congress, program managers, bond rating agencies, and political parties.

11-3


19. The "net position" of a federal agency may include all of the following components, except. A. Unexpended appropriations.B. Cumulative results of operations.C. Appropriations represented by undelivered orders and unobligated balances.D. Fund balance with U.S. Treasury.

20. Which of the following is not an objective identified in FASAB Statement of Accounting and Reporting Concepts No. 1? A. To assist report users in evaluating budgetary integrity.B. To assist report users in evaluating the extent to which tax burdens have changed.C. To assist report users in evaluating stewardship.D. To assist report users in evaluating operating performance.

21. Which of the following statements most accurately describes the dual-track accounting system used in federal agency accounting? A. Recording internal budgetary transactions along with financial transactions with external parties.B. Use of double-entry accounting.C. Maintaining self-balancing sets of proprietary and budgetary accounts and recording the effects of transactions on both available budgetary resources and proprietary accounts, the latter measured on the accrual basis to better promote agency management.D. Keeping separate books, one on a tax basis and the other on a GAAP basis.

22. In federal government accounting, recording the estimated amount of equipment prior to actually placing an order or entering into a contract is called a(an) A. Obligation.B. Apportionment.C. Commitment.D. Allotment.

11-4


23. A certain federal agency placed an order for office supplies at an estimated cost of $14,400. Later in the same fiscal year these supplies were received at an actual cost of $14,800. Assume commitment accounting is not used by this agency. When the order is placed the required journal entry (or entries) will affect the accounts shown in what net amounts? A. Budgetary accounts: $14,400; Proprietary accounts: $14,400B. Budgetary accounts: $14,400; Proprietary accounts: $0C. Budgetary accounts: $14,400; Proprietary accounts: $14,800D. Budgetary accounts: $0; Proprietary accounts: $0

24. A certain federal agency placed an order for office supplies at an estimated cost of $14,400. Later in the same fiscal year these supplies were received at an actual cost of $14,800. Assume commitment accounting is not used by this agency. When the order is received the required journal entry (or entries) will affect the accounts shown in what net amounts? A. Budgetary Accounts: $14,400; Proprietary Accounts: $14,400B. Budgetary Accounts: $14,400; Proprietary Accounts: $14,800C. Budgetary Accounts: $400; Proprietary Accounts: $14,800D. Budgetary Accounts: $0; Proprietary Accounts: $14,800

25. Which of the following accounts used in state and local government accounting is most like the federal budgetary account "Undelivered Orders"? A. Reserve for Encumbrance.B. Expenditures.C. Appropriations.D. Encumbrances.

26. Which of the following financial statements is not required by OMB Circular A-136? A. Statement of budgetary resources.B. Statement of cash flows.C. Balance sheet.D. Statement of changes in net position.

11-5


27. One of the purposes of the Federal Financial Management Improvement Act of 1996 was to A. Establish a requirement that the financial statements of the federal government as a whole be audited.B. Improve the effectiveness of programs receiving federal funds.C. Establish generally accepted federal accounting principles.D. Rebuild the credibility and restore public confidence in the federal government.

28. Which of the following officials has shared responsibility under federal law for establishing and maintaining a sound financial structure for the federal government? A. Chief Financial Officer of the Congressional Budget Office.B. Chair of the Governmental Accounting Standards Board.C. Secretary of the Treasury.D. Chair of the Federal Accounting Standards Advisory Board.

29. The Comptroller General of the United States is the head of the: A. Office of the Management and Budget.B. Government Accountability Office.C. Congressional Budget Office.D. Federal Accounting Standards Advisory Board.

30. The required report or statements in the general purpose federal financial report that addresses forward-looking information regarding the possible effects of currently known demands, risks, and uncertainties, and trends in the federal entity is (are): A. Basic statements.B. Required supplemental information.C. Management discussion and analysis.D. Related notes to the financial statements.

31. Which of the following is an accurate list of the three perspectives from which the federal government can be viewed, as described in SFFAS No. 2 "Entity and Display?" A. Function, department, and program.B. Organizational, budget, and program.C. Budget, program, and line-item.D. Fund, activity, and account.

11-6


32. The management's discussion and analysis (MD&A) required in general purpose federal financial reporting is different than that required by GASB of state and local governments in that: A. Federal agencies should address the reporting entity's performance goals and results in addition to financial activities.B. It is outside the general purpose federal financial report and is optional, not required.C. It is a part of the basic financial statements.D. There are no significant differences.

33. Which of the following federal programs involve nonexchange transactions for which there is some accounting guidance on recording liabilities but for which much more research is needed? A. National parks.B. Social insurance.C. Post offices.D. Heritage assets.

34. Which of the following describes the usual flow of budgetary authority through the budgetary accounts of a federal agency? A. Apportionment, allotment, appropriation, commitment, obligation, expended appropriation.B. Allotment, commitment, obligation, expended appropriation, apportionment.C. Appropriation, apportionment, allotment, commitment, obligation, expended appropriation.D. Commitment, obligation, appropriation, apportionment, allotment, expended appropriation.

35. Which of the following statements is not true about the United States government-wide financial report? A. Since 1997, the financial statements of the U.S. government as a whole have been audited by the GAO.B. The majority of the 24 major federal agencies required to be audited have received unqualified audit opinions by the GAO.C. The Comptroller General of the United States has rendered a disclaimer of opinion on the U.S. Government's consolidated financial statements for as long as that office has audited these statements.D. The federal government received an unqualified opinion from the GAO on the most recent financial statements of the U.S. government as a whole.

11-7


36. Which of the following is required by OMB Circular A-136 in the basic financial statements? A. Statement of changes in net position.B. Statement of net assets.C. Statement of revenues, expenditures, and changes in fund balances.D. Statement of financing.

11-8


Short Answer Questions

37. The following are key terms in Chapter 11 that relate to accounting and financial reporting for federal agencies and the federal government:A. ApportionmentB. Budgetary resourcesC. Expended appropriationD. Governmental assetsE. Heritage assetsF. Intragovernmental assetsG. Stewardship investmentsH. Stewardship land

For each of the following definitions, indicate the key term from the list above that best matches by placing the appropriate letter in the blank space next to the definition.

11-9


Essay Questions

38. Explain the "dual-track" accounting system used by federal agencies and why it is needed.

39. Explain the components of net position.

40. Explain the GAAP hierarchy used by federal government agencies.

41. "Each federal government agency should maintain a General Fund and as many other funds defined by the GASB as are appropriate." Do you agree? Why or why not?

11-10


42. Describe the budgetary accounts used in federal agency accounting and the flow of budgetary authority through those accounts.

43. Identify the office, officer, or department of the United States federal government that is responsible for each of the following:A) Appropriations.B) Apportionments.C) Allotments.D) Obligations.

44. The Federal Monuments Commission began operations on October 1, 2011. Show in general journal form all entries that should be made in budgetary and proprietary accounts of the agency to record the following events:A. The Congress passed, and the President signed, a one-year appropriation for fiscal year 2012 for the Monuments Commission in the amount of $30,000,000.B. The OMB notified the agency of the following apportionments of the 2012 appropriation: first quarter, $8,000,000; second quarter, $8,000,000; third quarter, $7,000,000; and fourth quarter, $7,000,000.C. The Commission Director allotted $1,500,000 for the operations of October 2011.D. Commitments for goods and services not yet ordered or received were recorded in the amount of $1,300,000.E. Purchase orders and contracts for services were recorded for the month of October 2011 in the amount of $1,250,000.

11-11


45. Compute the missing amount in the following list of proprietary accounts of a federal government agency. Show all computations legibly with labels.

11-12


46. The Desert Conservation Agency was authorized by the United States Congress to commence operations on October 1, 2011. Record the following transactions in general journal form, as they should appear in the budgetary and proprietary accounts of the agency. For each entry indicate whether it affects the budgetary accounts or the proprietary accounts.A. The agency received official notice that its one-year appropriation passed by the Congress and signed by the President amounted to $350 million for operating expenses for the fiscal year and $100 million for acquisition of capital assets during the year.B. The Office of Management and Budget notified the agency that the entire appropriation had been apportioned.C. The head of the agency allotted $75 million for the first quarter's operating expenses, and $25 million for equipment to be ordered during the first quarter.D. Purchase orders and contracts for services recorded for the first quarter totaled $90 million (the agency does not record commitments prior to placing orders or entering into contracts).E. Total expenditures for the first quarter amounted to $70 million for operating expenses and $18 million for equipment, for which an obligation in the amount of $84 million had been previously recorded (see item D above). The expenditures were all paid from fund balance with U.S. Treasury.

47. Explain the process of financial reporting of the U.S. Government as a whole. Does the federal government receive an unqualified audit opinion?

48. Describe the purpose of a management's discussion and analysis (MD&A) in the general purpose federal financial report of a federal agency.

11-13


49. What is the difference between entity assets and nonentity assets?

50. Describe accounting for federal social insurance programs. Comment on the adequacy of current accounting standards in this area.

51. What is a Performance and Accountability Report (PAR)? Describe its purpose and contents.

11-14


Chapter 11 Accounting and Reporting for the Federal Government Answer Key

True / False Questions

1. Responsibility for setting accounting and reporting standards for federal agencies rests primarily with the Federal Accounting Standards Advisory Board. FALSE

Responsibility for setting accounting and reporting standards and for establishing and maintaining a sound financial management system for the federal government as a whole is vested in the three sponsors or "principals" of the FASAB: the Comptroller General, the Director of the Office of Management and Budget, and Secretary of the Treasury. While in most cases the recommendations of the FASAB are expected to be accepted by the foregoing three "principals," the recommendations are just that—recommendations.

Difficulty: EasyQuestion Type: Concept

2. The Chief Financial Officer Act of 1990 establishes an office of federal financial management within the OMB, headed by a controller appointed by the President, establishes a chief financial officer position within each major federal department and agency, requires the development of a 5-year financial plan by OMB, and requires some federal agencies to provide audited financial statements. TRUE

These are the requirements mandated by the CFO Act, as described in Chapter 11 under the caption "Director of the Office of Management and Budget."


11-15


3. The objectives of federal financial reporting are to assist report users in evaluating budgetary integrity, operating performance, stewardship, and adequacy of systems and controls. TRUE

These are the objectives identified in FASAB Statement of Accounting and Reporting Concepts No. 1, as discussed in Chapter 11.


4. Federal departments and agencies should utilize the U.S. Government Standard General Ledger as the account structure for their accounting systems. TRUE

Some federal departments and agencies were slow to adopt the Standard General Ledger; however, now it is expected to be in use by all agencies in order to ensure uniformity and standardization of financial information reported to central agencies of the U.S. Treasury Department.


5. Current FASAB standards distinguish intragovernmental assets from governmental assets and entity assets from nonentity assets. FALSE

Entity assets are combined with nonentity assets, although that was not the case in the past. Statement of Federal Financial Accounting Standards (SFFAS) No. 1 addresses these issues.

Difficulty: MediumQuestion Type: Concept

11-16


6. Fund balances of a federal agency's various funds are reported in the fund equity section of the agency's balance sheet. FALSE

The fund balances (net assets) of the various funds are reported in the net position section of an agency's balance sheet.


7. Federal government accounting standards require the measurement of expenses rather than expenditures. FALSE

While it is true that accounting standards for federal accounting require the measurement of expenses for assessing the cost of programs and activities, they also require the measurement of expenditures (although called expended appropriations) that are compared to appropriations for budgetary accounting purposes.


8. Unexpended appropriations is the component of net position in a federal agency balance sheet that represents the amount of appropriations still available for obligation, or which has been obligated but not yet expended. TRUE

OMB Circular A-136 requires that the components of net position be (1) unexpended appropriations, the amount of the entity's appropriations represented by undelivered orders and unobligated balances, and (2) cumulative results of operations.


11-17


9. Cumulative results of operations is the component of net position in a federal agency balance sheet that represents the amount of appropriations still available for obligation, or which has been obligated but not yet expended. FALSE

OMB Circular A-136 requires that the components of net position be (1) unexpended appropriations, and (2) cumulative results of operations, the net difference between expenses/losses and financing sources, including appropriations, revenues, and gains, since the inception of the activity. Cumulative results of operations also includes any other items that would affect the net position, including, the fair value of donated assets and assets (net of liabilities) transferred to or from other federal entities without reimbursement.


10. The federal budgetary term "commitment" is synonymous with "encumbrance" as used in state and local government terminology. FALSE

The federal budgetary term "commitment" means to reserve allotted budgetary authority in the amount of an order prior to the actual ordering of goods and services, whereas "encumbrance" in state and local government usage means an order has been placed. The additional "commitment" step is optional though recommended for federal agencies.


11. The financial statements of the U.S. government are prepared using generally accepted accounting principles promulgated by the Governmental Accounting Standards Board. FALSE

Federal GAAP is promulgated by the Federal Accounting Standards Advisory Board.


11-18


12. Federal government agencies prepare a management's discussion and analysis (MD&A) to be included in their general purpose federal financial report. TRUE

Statement of Federal Financial Accounting Concepts No. 3 requires an MD&A for federal agencies to be in compliance with federal GAAP.


13. The three perspectives from which the federal government can be viewed are organizational, budget, and line-item. FALSE

SFFAS No. 2 "Entity and Display" describe the three perspectives from which the federal government can be viewed as organizational, budget, and program.


14. Objectives that are identified by SFFAS No. 1 for federal financial reporting include budgetary integrity, operating performance, transparency, but not stewardship. FALSE

SFFAS No. 1 includes budgetary integrity, operating performance, and stewardship, but not transparency.


11-19


15. Beneficial investments of the federal government in items such as nonfederal physical property, human capital, and research and development on the financial statements are called heritage assets. FALSE

The term that describes beneficial investments of the federal government is stewardship investments.


16. At the present time, the conceptual framework for the federal government and its agencies does not provide definitions of the basic elements of the financial statements. FALSE

Statement of Federal Financial Accounting Concepts No. 5 "Definitions of Elements and Basic Recognition Criteria for Accrual-Basis Financial Statements" is the most recent concepts statement at the time of publication of this edition of the text. SFFAC No. 5 does define assets, liabilities, net position, revenues, and expenses, as well as establish that in order to be recognized on the face of a financial statement, an item must meet the definition of an element and be measurable.


Multiple Choice Questions

17. Which of the following federal officials is a "principal" of the Joint Financial Management Improvement Program who considers and approves or disapproves accounting and reporting standards recommended by the Federal Accounting Standards Advisory Board? A. Chair of the Federal Accounting Standards Advisory Board.B. Secretary of the Interior.C. Comptroller General.D. Director of the Congressional Budget Office.


11-20


18. FASAB has identified four major user groups of federal financial reports, they are A. Congress, executives, program managers, and citizens.B. Congress, executives, citizens, and bond rating agencies.C. Congress, program managers, foreign governments, and citizens.D. Congress, program managers, bond rating agencies, and political parties.


19. The "net position" of a federal agency may include all of the following components, except. A. Unexpended appropriations.B. Cumulative results of operations.C. Appropriations represented by undelivered orders and unobligated balances.D. Fund balance with U.S. Treasury.


20. Which of the following is not an objective identified in FASAB Statement of Accounting and Reporting Concepts No. 1? A. To assist report users in evaluating budgetary integrity.B. To assist report users in evaluating the extent to which tax burdens have changed.C. To assist report users in evaluating stewardship.D. To assist report users in evaluating operating performance.


11-21


21. Which of the following statements most accurately describes the dual-track accounting system used in federal agency accounting? A. Recording internal budgetary transactions along with financial transactions with external parties.B. Use of double-entry accounting.C. Maintaining self-balancing sets of proprietary and budgetary accounts and recording the effects of transactions on both available budgetary resources and proprietary accounts, the latter measured on the accrual basis to better promote agency management.D. Keeping separate books, one on a tax basis and the other on a GAAP basis.


22. In federal government accounting, recording the estimated amount of equipment prior to actually placing an order or entering into a contract is called a(an) A. Obligation.B. Apportionment.C. Commitment.D. Allotment.


23. A certain federal agency placed an order for office supplies at an estimated cost of $14,400. Later in the same fiscal year these supplies were received at an actual cost of $14,800. Assume commitment accounting is not used by this agency. When the order is placed the required journal entry (or entries) will affect the accounts shown in what net amounts? A. Budgetary accounts: $14,400; Proprietary accounts: $14,400B. Budgetary accounts: $14,400; Proprietary accounts: $0C. Budgetary accounts: $14,400; Proprietary accounts: $14,800D. Budgetary accounts: $0; Proprietary accounts: $0

Difficulty: MediumQuestion Type: Calculation

11-22


24. A certain federal agency placed an order for office supplies at an estimated cost of $14,400. Later in the same fiscal year these supplies were received at an actual cost of $14,800. Assume commitment accounting is not used by this agency. When the order is received the required journal entry (or entries) will affect the accounts shown in what net amounts? A. Budgetary Accounts: $14,400; Proprietary Accounts: $14,400B. Budgetary Accounts: $14,400; Proprietary Accounts: $14,800C. Budgetary Accounts: $400; Proprietary Accounts: $14,800D. Budgetary Accounts: $0; Proprietary Accounts: $14,800

Difficulty: MediumQuestion Type: Journal Entry

25. Which of the following accounts used in state and local government accounting is most like the federal budgetary account "Undelivered Orders"? A. Reserve for Encumbrance.B. Expenditures.C. Appropriations.D. Encumbrances.


26. Which of the following financial statements is not required by OMB Circular A-136? A. Statement of budgetary resources.B. Statement of cash flows.C. Balance sheet.D. Statement of changes in net position.


11-23


27. One of the purposes of the Federal Financial Management Improvement Act of 1996 was to A. Establish a requirement that the financial statements of the federal government as a whole be audited.B. Improve the effectiveness of programs receiving federal funds.C. Establish generally accepted federal accounting principles.D. Rebuild the credibility and restore public confidence in the federal government.


28. Which of the following officials has shared responsibility under federal law for establishing and maintaining a sound financial structure for the federal government? A. Chief Financial Officer of the Congressional Budget Office.B. Chair of the Governmental Accounting Standards Board.C. Secretary of the Treasury.D. Chair of the Federal Accounting Standards Advisory Board.


29. The Comptroller General of the United States is the head of the: A. Office of the Management and Budget.B. Government Accountability Office.C. Congressional Budget Office.D. Federal Accounting Standards Advisory Board.


11-24


30. The required report or statements in the general purpose federal financial report that addresses forward-looking information regarding the possible effects of currently known demands, risks, and uncertainties, and trends in the federal entity is (are): A. Basic statements.B. Required supplemental information.C. Management discussion and analysis.D. Related notes to the financial statements.


31. Which of the following is an accurate list of the three perspectives from which the federal government can be viewed, as described in SFFAS No. 2 "Entity and Display?" A. Function, department, and program.B. Organizational, budget, and program.C. Budget, program, and line-item.D. Fund, activity, and account.


32. The management's discussion and analysis (MD&A) required in general purpose federal financial reporting is different than that required by GASB of state and local governments in that: A. Federal agencies should address the reporting entity's performance goals and results in addition to financial activities.B. It is outside the general purpose federal financial report and is optional, not required.C. It is a part of the basic financial statements.D. There are no significant differences.


11-25


33. Which of the following federal programs involve nonexchange transactions for which there is some accounting guidance on recording liabilities but for which much more research is needed? A. National parks.B. Social insurance.C. Post offices.D. Heritage assets.


34. Which of the following describes the usual flow of budgetary authority through the budgetary accounts of a federal agency? A. Apportionment, allotment, appropriation, commitment, obligation, expended appropriation.B. Allotment, commitment, obligation, expended appropriation, apportionment.C. Appropriation, apportionment, allotment, commitment, obligation, expended appropriation.D. Commitment, obligation, appropriation, apportionment, allotment, expended appropriation.


35. Which of the following statements is not true about the United States government-wide financial report? A. Since 1997, the financial statements of the U.S. government as a whole have been audited by the GAO.B. The majority of the 24 major federal agencies required to be audited have received unqualified audit opinions by the GAO.C. The Comptroller General of the United States has rendered a disclaimer of opinion on the U.S. Government's consolidated financial statements for as long as that office has audited these statements.D. The federal government received an unqualified opinion from the GAO on the most recent financial statements of the U.S. government as a whole.


11-26


36. Which of the following is required by OMB Circular A-136 in the basic financial statements? A. Statement of changes in net position.B. Statement of net assets.C. Statement of revenues, expenditures, and changes in fund balances.D. Statement of financing.


11-27


Short Answer Questions

37. The following are key terms in Chapter 11 that relate to accounting and financial reporting for federal agencies and the federal government:A. ApportionmentB. Budgetary resourcesC. Expended appropriationD. Governmental assetsE. Heritage assetsF. Intragovernmental assetsG. Stewardship investmentsH. Stewardship land

For each of the following definitions, indicate the key term from the list above that best matches by placing the appropriate letter in the blank space next to the definition.

1. E, 2. F, 3. D, 4. A, 5. H, 6. B, 7. C


11-28


Essay Questions

38. Explain the "dual-track" accounting system used by federal agencies and why it is needed.

Federal government agencies' accounting systems are intended to facilitate the collection of information on the cost of agency activities to facilitate agency management as well as providing evidence of adherence to legal budgetary requirements. As illustrated in Chapter 11, federal agency accounting systems utilize a "dual-track" system—a proprietary track to provide information for agency management and a budgetary track to 1) ensure that available budgetary resources and authority are not overexpended or overobligated, and 2) to facilitate standardized budgetary reporting requirements.


39. Explain the components of net position.

Net position is the term used to describe the aggregate of the net assets of all an agency's funds. It consists of two components: unexpended appropriations and cumulative results of operations. Unexpended appropriations is the amount of the entity's appropriations represented by undelivered orders and unobligated balances. Cumulative results of operations are the net differences between expenses/losses and financing sources, including appropriations, revenues, and gains, since the inception of the activity, as well as the fair market value of donated assets and assets (net of liabilities) transferred to or from other federal entities without reimbursement.


11-29


40. Explain the GAAP hierarchy used by federal government agencies.

AICPA Statement on Auditing Standards No. 91 "Federal GAAP Hierarchy" establishes the following hierarchy of GAAP for the federal government:(a) FASAB statements and interpretations (SFFASs)(b) FASAB technical bulletins, AICPA industry audit and accounting guides, AICPA statements of position that are cleared by FASAB(c) AICPA AcSEC practice bulletins if cleared by the FASAB and technical releases of the AICPA(d) FASAB implementation guides and practices that are widely recognized in the federal government


41. "Each federal government agency should maintain a General Fund and as many other funds defined by the GASB as are appropriate." Do you agree? Why or why not?

Disagree. The FASAB, not the GASB, has authority to establish GAAP for federal agencies as indicated in Rule 203 of the AICPA (2000). There is only one General Fund for the entire federal government; each agency that is financed by the general taxing and revenue powers and general borrowings of the federal government operates a "general fund" which is, in reality, a subdivision of the federal General Fund. The JFMIP "principals" now have joint statutory duty to establish federal financial reporting standards by publishing standards recommended to them by the FASAB.


11-30


42. Describe the budgetary accounts used in federal agency accounting and the flow of budgetary authority through those accounts.

The budgetary accounts illustrated in Chapter 11 are appropriations, apportionments, allotments, commitments, obligations, and expended appropriations. As shown in Illustration 11-11 and illustrative transactions 1 through 15 in Chapter 11, the budgetary authority flows through the accounts in the sequence given above as the OMB notifies the agency of its approved appropriation, OMB apportions it to the agency, the agency head allots it within the agency, pre-order commitments are recorded, orders are placed, and goods are received.


43. Identify the office, officer, or department of the United States federal government that is responsible for each of the following:A) Appropriations.B) Apportionments.C) Allotments.D) Obligations.

Identification of key federal responsible officials.A) The Congress.B) The Office of Management and Budget.C) The agency head.D) The head of each department (program, activity, etc.) within an agency.


11-31


44. The Federal Monuments Commission began operations on October 1, 2011. Show in general journal form all entries that should be made in budgetary and proprietary accounts of the agency to record the following events:A. The Congress passed, and the President signed, a one-year appropriation for fiscal year 2012 for the Monuments Commission in the amount of $30,000,000.B. The OMB notified the agency of the following apportionments of the 2012 appropriation: first quarter, $8,000,000; second quarter, $8,000,000; third quarter, $7,000,000; and fourth quarter, $7,000,000.C. The Commission Director allotted $1,500,000 for the operations of October 2011.D. Commitments for goods and services not yet ordered or received were recorded in the amount of $1,300,000.E. Purchase orders and contracts for services were recorded for the month of October 2011 in the amount of $1,250,000.


11-32


45. Compute the missing amount in the following list of proprietary accounts of a federal government agency. Show all computations legibly with labels.

Difficulty: MediumQuestion Type: Calculation

11-33


46. The Desert Conservation Agency was authorized by the United States Congress to commence operations on October 1, 2011. Record the following transactions in general journal form, as they should appear in the budgetary and proprietary accounts of the agency. For each entry indicate whether it affects the budgetary accounts or the proprietary accounts.A. The agency received official notice that its one-year appropriation passed by the Congress and signed by the President amounted to $350 million for operating expenses for the fiscal year and $100 million for acquisition of capital assets during the year.B. The Office of Management and Budget notified the agency that the entire appropriation had been apportioned.C. The head of the agency allotted $75 million for the first quarter's operating expenses, and $25 million for equipment to be ordered during the first quarter.D. Purchase orders and contracts for services recorded for the first quarter totaled $90 million (the agency does not record commitments prior to placing orders or entering into contracts).E. Total expenditures for the first quarter amounted to $70 million for operating expenses and $18 million for equipment, for which an obligation in the amount of $84 million had been previously recorded (see item D above). The expenditures were all paid from fund balance with U.S. Treasury.

11-34



11-35


47. Explain the process of financial reporting of the U.S. Government as a whole. Does the federal government receive an unqualified audit opinion?

Starting in fiscal year 1997, consolidated financial statements of the U.S. Government and its 24 largest agencies (the CFO Act agencies) have been produced by the Financial Management Service of the Department of Treasury. They are audited by the Government Accountability Office. To date, most of the agencies have received unqualified audit opinions; however, the auditors have disclaimed an opinion on the government-wide statements. All 24 CFO Act agencies met the 45-day financial audit deadline (i.e., 45 days after the fiscal year end) for the fiscal year 2007.


48. Describe the purpose of a management's discussion and analysis (MD&A) in the general purpose federal financial report of a federal agency.

The management's discussion and analysis (MD&A) is an important vehicle for (1) communicating managers' insights about the reporting entity, (2) increasing the understandability and usefulness of the general purpose federal financial report, and (3) providing accessible information about the entity and its operations, service levels, successes, challenges, and future.


49. What is the difference between entity assets and nonentity assets?

Entity assets are those the reporting entity has authority to use in its operations. Nonentity assets are those held by the entity but which are not available for the entity to spend; for example, federal income taxes collected by the Internal Revenue Service for the U.S. government.


11-36


50. Describe accounting for federal social insurance programs. Comment on the adequacy of current accounting standards in this area.

SFFAS No. 17 provides guidance for reporting the liability for payments to recipients under the Social Security, Medicare, Railroad Retirement, Black Lung, and Unemployment insurance programs. In general, a liability (and expense) is recognized when payments are due and payable. Supplementary stewardship information is required. SFFAS No. 25 requires that all of these federal programs, except Unemployment Insurance, must present a Statement of Social Insurance (SOSI). The SOSI will present (1) the actuarial present value for the projection period of all future contributions and tax income received from or on behalf of current and future participants, (2) the actuarial present value for the projection period of estimated future scheduled expenditures paid to or on behalf of current and future participants, and (3) the actuarial present value for the projection period of the estimated future excess of contributions and tax income over future scheduled expenditures. Although these two statements of federal financial accounting standards have improved reporting for social insurance programs, this is a very complex area and there is still work to be done.

Difficulty: MediumQuestion Type: Analysis

51. What is a Performance and Accountability Report (PAR)? Describe its purpose and contents.

A PAR is a consolidated report prepared by federal agencies each year that includes (1) the annual performance report required by the Government Performance and Results Act (GPRA) of 1994, (2) the annual financial statements, (3) management reports on internal control and other accountability issues, and (4) the Inspector General's assessments of management and performance challenges. Revisions to the OMB Circular A-136 "Financial Reporting Requirements" in 2008 made such a report required after the successful experimentation of various agencies over the years in combining various reports (as they were encouraged to do under the Reports Consolidation Act of 2000). The objective of a PAR is to efficiently bundle required financial and performance management information to demonstrate accountability to the President, Congress, and the public.


11-37

chap 011

Documents

federal government agencies

federal government chapter

federal departments

federal agencies rests

major federal department

federal agency balance

federal agencys various

reporting standards