define governmental operating activities © dale r. geiger 20111

Define Governmental Define Governmental Operating ActivitiesOperating Activities

© Dale R. Geiger 2011 1

Terminal Learning ObjectiveTerminal Learning Objective

• Task: Define governmental operating activities• Condition: You are a cost advisor technician with

access to all PCAM course handouts, readings, and spreadsheet tools, and awareness of Operational Environment (OE)/Contemporary Operational Environment (COE) variables and actors.

• Standard: with at least 80% accuracy• Describe timing differences between cash-based,

budgetary and accrual accounting methods• Identify key budgetary inputs and outputs from GFEBS • Record operating transactions


What’s the Difference?What’s the Difference?

• Consider the purchasing sequence:

When does the Accounting System “count” the cost?

Plan Order ConsumeReceive Pay


Why a Different Method of Why a Different Method of Accounting?Accounting?

• Different entities have different external reporting requirements• Individuals report income on a cash basis• Governmental entities report activities on a

budgetary basis • Businesses, revolving funds and the proprietary

governmental accounts report activities on an accrual basis




Commitment Obligation Expenditure




Asset & Liability Remove Liability Expense


Check on LearningCheck on Learning

• Which method of accounting records the cost when cash is paid?

• Which method of accounting records the cost when goods are received?


Review: Budgetary Terminology Review: Budgetary Terminology

• Appropriation• Authorization to spend

• Obligation• Order placed; Appropriation is no longer available to

be spent• Expenditure• Goods or services received; Appropriation used up

• Unobligated Balance• What is left in the envelope; Appropriation still

available to be spent


Fund AccountingFund Accounting

• Governmental entities account for activities using Funds

• A Fund is a separate Accounting Entity within the larger governmental entity• Has its own self-balancing set of accounts• Produces its own separate financial statements• Ensures segregation of monies for specific

purposes


Budgetary AccountingBudgetary Accounting

• The following equation:

• Can be restated as:

Expenditures + OpenObligations

+ UnobligatedBalance

Appropriations& Other

=

Appropriations - OpenObligations

- ExpendituresUnobligated Balance

=

Budgetary Resources = Status of Budgetary Resources








=


- OpenObligations

- Expenditures=


Highlights Unobligated Balance to help managers avoid overspending







=


- OpenObligations

- Expenditures=


Highlights budgetary resources to promote accountability to external users


GFEBS Open Obligation ReportGFEBS Open Obligation Report



• What is the budgetary accounting equation?• What is the smallest budgetary unit in GFEBS

for which financial statements can be produced?


Lacy’s Lemonade StandLacy’s Lemonade Stand

• Lacy Simmons receives a $200 appropriation from the family and starts a lemonade stand

• Record the appropriation in the table below:

Description Approp & Other

Obligations(-)

Expenditures(-)

Unobligated Balance



• Lacy Simmons receives a $200 appropriation from the family and starts a lemonade stand

• Record the appropriation in the table below:


Obligations(-)

Expenditures(-)

Unobligated Balance

Appropriation +200 +200

Balance 200 200



• Orders flyers from the print shop at an estimated cost of $10


Obligations(-)

Expenditures(-)

Unobligated Balance

Balance forward 200 200



• Orders flyers from the print shop at an estimated cost of $10


Obligations(-)

Expenditures(-)

Unobligated Balance

Balance forward 200 200

Orders Flyers +10 -10

Balance 200 10 190



• Buys a pitcher, a juicer and a table at a yard sale for $20


Obligations(-)

Expenditures(-)

Unobligated Balance

Balance forward 200 10 190



• Buys a pitcher, a juicer and a table at a yard sale for $20


Obligations(-)

Expenditures(-)

Unobligated Balance

Balance Forward 200 10 190

Buys Table & Utensils +20 -20

Balance 200 10 20 170



• Receives the flyers and pays the bill for $10


Obligations(-)

Expenditures(-)

Unobligated Balance

Balance forward 200 10 20 170



• Receives the flyers and pays the bill for $10


Obligations(-)

Expenditures(-)

Unobligated Balance

Balance Forward 200 10 20 170

Receives flyers -10 +10

Balance 0 20 180

Pays Bill +10 -10

Balance 200 0 30 170



• Pays Bert $5 to pass out flyers


Obligations(-)

Expenditures(-)

Unobligated Balance




• Pays Bert $5 to pass out flyers


Obligations(-)

Expenditures(-)

Unobligated Balance


Pays Bert +5 -5

Balance 200 0 35 165



• Purchases supplies: cups $15; napkins $5; lemons, $25; sugar, $10 and ice, $10


Obligations(-)

Expenditures(-)

Unobligated Balance




• Purchases supplies: cups $15; napkins $5; lemons, $25; sugar, $10 and ice, $10


Obligations(-)

Expenditures(-)

Unobligated Balance


Purchases supplies +65 -65

Balance 200 0 100 100



• First day’s sales: $15 in cash and $20 in IOUs

• Collections from customers increase Lacy’s spending authority


Obligations(-)

Expenditures(-)

Unobligated Balance




• First day’s sales: $15 in cash and $20 in IOUs

• Collections from customers increase Lacy’s spending authority


Obligations(-)

Expenditures(-)

Unobligated Balance


Cash Collections +15 +15

Balance 215 0 100 115



• Receives $5 cash toward the IOUs


Obligations(-)

Expenditures(-)

Unobligated Balance




• Receives $5 cash toward the IOUs


Obligations(-)

Expenditures(-)

Unobligated Balance


Cash Collections +5 +5

Balance 220 0 100 120



• Purchases $40 in supplies on account at the grocery store


Obligations(-)

Expenditures(-)

Unobligated Balance




• Purchases $40 in supplies on account at the grocery store


Obligations(-)

Expenditures(-)

Unobligated Balance


Purchased supplies +40 -40

Balance 220 0 140 80



• Makes cash sales of $50


Obligations(-)

Expenditures(-)

Unobligated Balance




• Makes cash sales of $50


Obligations(-)

Expenditures(-)

Unobligated Balance


Cash Sales +50 +50

Balance 270 140 130


Statement of Net CostStatement of Net Cost

Expenditures:Supplies $105Utensils 20Advertising 15Total Expenditures $140Less Revenues: 70Net Cost $70


What about Cash Basis?What about Cash Basis?

• How does Lacy’s Lemonade Stand measure up on a cash basis?Cash collections: $70Less Cash Payments:Supplies $65Utensils 20Advertising 15Total payments: $100Net Loss $30



• When will an expenditure be recorded under budgetary accounting rules?

• How does the collection of cash affect the budgetary equation?


Practical ExercisePractical Exercise


Budgetary Accounting SpreadsheetBudgetary Accounting SpreadsheetEnter Lacy’s transaction data to track her unobligated balance


Budgetary Accounting SpreadsheetBudgetary Accounting Spreadsheet

This spreadsheet permits tracking multiple sub-appropriations


Practical ExercisePractical Exercise


define governmental operating activities © dale r. geiger 20111

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