You are on page 1of 24

Chapter 17 - Accounting and Reporting for the Federal Government

Accounting for Governmental Nonprofit 16th


Edition by Reck Solution Manual
Contact me here sellertbsm2014@hotmail.com to
download the Solution Manual
INSTANTLY!!!
PRICE FOR THE TEST BANK, SOLUTION MANUAL
AND BOOK PDF:
Test Bank 20$ USD
Solution Manual 20$ USD
BooK PDF 30$ USD

CHAPTER 17: ACCOUNTING AND REPORTING FOR THE FEDERAL


GOVERNMENT

OUTLINE

Number Topic Type/Task Status


(re: 15/e)

Questions:
17-1 Federal financial management responsibilities Identify New
17-2 Federal GAAP hierarchy Compare New
17-3 Conceptual framework Describe 11-3
17-4 Accounts used in federal accounting Explain 11-4
17-5 Net position and net assets Compare 11-5
17-6 FASAB compared to GASB Contrast 11-6
17-7 Federal funds Identify, compare New
17-8 Stewardship assets Define, compare New

17-1
Chapter 17 - Accounting and Reporting for the Federal Government

17-9 Budgetary accounts used by federal agencies Identify 11-9


17-10 Performance accountability report Explain, identify New

Cases:
17-1 Agency PAR and audit report Calculate, explain New
17-2 FASAB Internet New
17-3 U.S. Government-wide financial statement audit Internet, evaluate 11-3 revised

Exercises/Problems:
17-1 Various Multiple Choice 11-1 revised
17-2 Fund balance with U.S. Treasury Compute 11-2
17-3 Agency financial statements, continuation of 17-2. JE 11-3
17-4 Statement of net cost JEs, FS 11-4
17-5 Statement of budgetary resources Prepare FS 11-5, revised
17-6 Transactions and statement of financing JEs, FS 11-6
17-7 Financial statement analysis Analysis New

17-2
Chapter 17 - Accounting and Reporting for the Federal Government

CHAPTER 17: ACCOUNTING AND REPORTING FOR THE FEDERAL


GOVERNMENT

Answers to Questions

17-1. Although the three principals of the Joint Financial Management Improvement Program
(JFMIP) have the authority for establishing sound financial management policy and
oversight, the principals have delegated the responsibility to the Office of Management
and Budget’s Office of Federal Financial Management, the Office of Personnel
Management, and the Chief Financial Officers Council. The delegation occurred in 2004,
once the principals of the JFMIP were satisfied with the operations of the FASAB.
JFMIP no longer meets as a stand-alone organization. (The three principals of the JFMIP
are the Comptroller General, the Secretary of the Treasury, and the Director of Office of
Management and Budget.)

17.2. The GAAP hierarchies for the federal government and state and local governments are
quite similar. One major difference is that federal authoritative guidance comes from
FASAB while state and local government authoritative guidance is issued by GASB.
There are also some differences in the type of outside guidance accepted as authoritative
by the two standard-setting bodies. Both hierarchies have been codified by the respective
standard-setting bodies, the FASAB and the GASB.

There are four categories of principles with the highest level (category a) being the
statements and interpretations issued by the respective standard-setting bodies. Category
a principles can also be found in the FASB or AICPA pronouncements if made applicable
to state and local governments by the GASB. The category b principles include the
Technical Bulletins issued by the respective standard-setting bodies. AICPA Industry and
Accounting Guides are also considered category b principles if made applicable to federal
entities by the FASAB or state and local governments by the GASB. The GASB can also
make AICPA Statements of Position applicable. Category c principles are different for the
two hierarchies. Technical Releases of the Accounting and Auditing Policy
Committee of the FASAB are considered category c for federal entities;
whereas, AICPA Practice Bulletins made applicable by GASB are considered
category c for state and local governments. Category d guidance is the
same, consisting of implementation guides issued by the respective standard-
setting bodies, as well as widely accepted practices.

17.3. The conceptual framework for the federal government is at about the same stage as that
for state and local governments, even though the GASB was established six years earlier.
The FASAB has issued six concepts statements, and the GASB five. Statement of
Federal Financial Accounting Concepts (SFFAC) No. 1 identifies the users of federal
financial information and their information needs, and establishes the objectives of
financial reporting for the federal government, much like GASB Concepts Statement No.
1. SFFAC No. 2 provides criteria for determining the reporting entity and provides
guidance on the nature of the financial statements to be prepared and their form and
content. The GASBS 14 (a reporting standard rather than a concepts statement) provides

17-3
Chapter 17 - Accounting and Reporting for the Federal Government

Ch. 17, Answers, 17- 3 (Cont’d)

comparable criteria to SFFAC No. 2 for defining the reporting entity. SFFAC No. 3
describes the Management Discussion & Analysis as does GASBS No. 34. SFFAC No. 4
for the federal government describes five intended audiences and qualitative
characteristics for the consolidated financial report of the U. S. Government, as does the
GASB’s Concepts Statement No. 1 for state and local governments. SFFAC No. 5
describes the elements of financial statements, similar to GASB’s Concepts Statement 4
titled “Elements of Financial Statements.” Recently issued SFFAC No. 6 is similar to the
GASB’s Concepts Statement 3 on communication methods in general purpose external
financial reporting.

17.4. The account name Estimated Revenues used by state and local governments is a
budgetary account representing the government’s estimate of the amount of revenue
expected to be realized during the year. Federal agencies use the account Other
Appropriations Realized in their budgetary track to capture the amount Congress has
appropriated to an agency for the upcoming year. Other Appropriations Realized is for
basic operating appropriations, rather than appropriations earmarked for specific
purposes. Other Appropriations Realized is closer in meaning to Appropriations of state
and local governments than it is to Estimated Revenues.

A federal agency uses the account Fund Balance with U.S. Treasury in its proprietary
track as an asset that represents the balance available to the agency at the Department of
Treasury. This account would be most similar to cash and cash equivalents at the state
and local government level. Fund Balance with U.S. Treasury will be reduced
throughout the year by the dollar value of checks drawn. See Illustration 17-12 for a
comparison of these terms. Because they are budgetary accounts, Estimated Revenues
and Other Appropriations Realized have more in common with each other than either one
does with Fund Balance with the U.S. Treasury.

17.5. Agree, in part. The net position account on the balance sheet of a federal agency
represents the difference between assets and liabilities, as net position does for a state or
local government. However, net position is classified into two categories: unexpended
appropriations and cumulative results of operations, which are different than the
classifications of net position for a state or local government. Unexpended
appropriations is the amount of the entity’s appropriations represented by undelivered
orders and unobligated balances. Cumulative results of operations is measured since the
inception of the activity as the net difference between expenses/losses and financing
sources, which includes appropriations, revenues, and gains.

17-6. Agree, in part. It is true that the FASAB sets standards for external financial reporting for
federal agencies; however, its mission is considerably broader than GASB’s mission in
that it also sets standards for internal management accounting and performance
measurement. For example, FASAB’s objectives for external financial reporting are
designed to assist users in evaluating budgetary integrity, operating performance,
stewardship, and adequacy of systems and controls. The audiences for federal financial

17-4
Chapter 17 - Accounting and Reporting for the Federal Government

Ch. 17, Answers, 17-6 (Cont’d)

reports include Congress, federal executives, program managers, as well as citizens and
their intermediaries. Although the GASB does provide guidance in presenting
information on service efforts and accomplishments, its mission and activities to date
have been primarily focused on external financial reporting and governmental GAAP.

17.7. The two groups of funds used by federal government entities are federal funds and trust
funds. There are three federal fund types—General Fund, special funds, and revolving
funds. The General Fund is similar in intent to the General Fund of state and local
governments. It receives all revenue and other receipts not earmarked (or identified) for
a specific purpose. General appropriations are made from the General Fund. Special
funds are established for a specific non-business-type purpose. These funds are most
similar to a special revenue fund used by state and local governments. Revolving funds
are established for business-type activities making them similar to the proprietary funds
of state and local governments.

The second fund group is trust funds. There are two types of trust funds—trust funds and
deposit funds. Trust funds are established when a law or statute indicates that funds must
be used for a specific purpose. Frequently, the purpose benefits those external to the
federal government, similar to trust funds of state and local governments. However, this
is not always the case. In some instances the trust funds of the federal government
actually benefit the government, making the funds similar to special revenue funds at the
state and local government level. The second type of trust fund is a deposit fund.
Deposit funds hold receipts on behalf of others, making them similar to agency funds at
the state and local government level.

17.8. Stewardship assets are of two types—heritage assets and stewardship land. Heritage
assets have historical or natural significance; cultural, artistic, or educational significance;
or are architecturally significant. Stewardship land is land that is not used by the federal
government for operating purposes.

General property, plant and equipment (PP&E) of the federal government is used for
operating purposes and as such is accounted for in the same manner as PP&E of state and
local governments, not-for-profit entities, and for-profit entities. The costs of the assets
are capitalized and if the asset is depreciable, depreciation expense is recorded
periodically. Stewardship assets, however, are not recorded. Rather they are noted on the
financial statements with disclosures in the notes to the financial statements. The note
disclosure should provide information on major categories of heritage assets, multi-use
heritage assets, and stewardship land. Additionally, changes in stewardship assets should
be provided, including physical units added and withdrawn during the year; methods of
acquisition and withdrawal; and condition information

17-5
Chapter 17 - Accounting and Reporting for the Federal Government

Ch. 17, Answers (Cont’d)

17.9. The budgetary accounts required by the U.S. Government Standard General Ledger are:
 Other Appropriations Realized—the account that represents the agency’s available
resources for the year. This account normally has a debit balance.

 Budgetary accounts that explain where funds are in the spending cycle—
Unapportioned Authority, Apportionments, Allotments, Commitments, Undelivered
Orders, and Expended Authority. These budgetary accounts normally have a credit
balance and when summed will add to the Other Appropriations Realized.

 The use of the Commitments account is optional, though highly recommended.

Budget authority flows down through the accounts in the sequence given in Illustration
17-11. This sequence is the same as the order provided in the second bullet point that
lists the accounts explaining where funds are in the spending cycle.

17.10. A PAR is the consolidated performance and accountability report prepared annually by
most federal agencies. It contains several components including:
 An agency head message—analogous to a transmittal letter.
 A management’s discussion and analysis.
 Performance report—provides information on the agency’s success in achieving the
goals in its strategic plan and performance budget.
 Financial statements—there are seven reports, two (statement of social insurance and
statement of net changes in social insurance amounts) of which are only prepared by a
limited number of agencies. The other five statements are the balance sheet,
statement of net costs, statement of changes in net position, statement of budgetary
resources, and statement of custodial activity.
 Other accompanying information—includes summary statements and information
from the Inspector General concerning any serious management and performance
challenges.

Solutions to Cases

17-1. The information provided in the solution is based on NASA’s 2010 financial statements.
Numbers presented are in millions of dollars.

a. The portion of NASA’s assets that is represented by PP&E is 52.6 percent


($9,635/$18,328). As you can see, and would be expected, a considerable portion of
NASA’s assets are PP&E. Two major depreciable assets reported are the International
Space Station and the Space Shuttle.

NASA operated with a negative change in net assets in both 2010 (-$2,080) and 2009
(-$3,251). Although the total change was not as negative in 2010 as in 2009, the
agency’s net position dropped from $19,536 in 2009 to $14,015 in 2010, a decline of
28.3 percent.

17-6
Chapter 17 - Accounting and Reporting for the Federal Government

Ch. 17, Solutions, Case 17-1 (Cont’d)

b. NASA’s audit was conducted by Ernst & Young. Given the large number of agencies
and organizations of the federal government that require audits, it is common for the
government to contract with public accounting firms for audits of federal agencies.
Since NASA is a federal entity, generally accepted government audit standards issued
by the Comptroller General, Government Accountability Office are used to conduct
audits of NASA.

c. Ernst & Young identified ineffective internal controls related to the accounting for
property, plant and equipment (PP&E) and operating materials and supplies in 2009.
Given the large investment in PP&E, ineffective internal controls would have a
significant impact on the quality of the financial information presented. Although
NASA has corrected many problems, the effect has carried into 2010. Due to the
2009 inadequacies in internal controls the auditor was not able to obtain sufficient
competent evidential support for amounts on the 2010 statement of net costs and
changes in net position. In particular, several beginning balances could not be relied
upon due to the problems identified in 2009. Thus, the negative changes in net assets
identified in part a may actually be larger or smaller than reported.

Based on the 2010 audit, there should not be ongoing problems with the NASA audit.
Ernst & Young implies that NASA has addressed the internal control problems and
the only reason the 2010 audit was qualified was due to lack of reliance on beginning
balance amounts. This assumes no new problems develop or are identified during
subsequent audits.

17-2. The information provided in the solution is current as of July 1, 2011.

a. According to the FASAB Web site the mission of the FASAB is “to develop
accounting standards after considering the financial and budgetary information needs
of congressional oversight groups, executive agencies, and the needs of other users of
federal financial information.”

b. There are nine members of the FASAB. Three of the members represent the FASAB
sponsors (principals), coming from the Government Accountability Office (GAO),
Department of Treasury, and Office of Management and Budget (OMB). Each
sponsor selects its own representative. The other six members are to be nonfederal
individuals from the general financial community, accounting and auditing
community, or academia. Nonfederal members are appointed by the sponsors. The
chair of the FASAB is a nonfederal member appointed by the sponsors.

c. The FASAB is funded by the three sponsors.

d. Given the funding source and the method of selecting members, it could be argued
that the FASAB is not independent in appearance. The sponsors are affected by the
decisions of the FASAB and as members of the FASAB, the sponsors are in a position
to influence the standards issued. To pass a standard two-thirds of the board

17-7
Chapter 17 - Accounting and Reporting for the Federal Government

Ch. 17, Solutions, Case 17-2 (Cont’d)

members must approve. Technically, the composition of the board makes it possible
for the nonfederal members to override the decisions of the sponsors; however, all
nonfederal members would need to be in agreement. Finally, two of the sponsors
(principals), the Comptroller General and the Director of the Office on Management
and Budget, have veto power over any FASAB statement if they act within the 90 day
review period for final statements.

e. The answer to this assignment will change, given that the project agenda is on-going.
At the time the textbook went to print active projects included:

 AICPA Omnibus—examines adopting guidance for accounting and financial


reporting issues that were previously only in the professional auditing literature.
 Application of the Liability Definition—reconsiders accounting and reporting for
long-term commitments of the federal government that could potentially result in
a net outflow of resources.
 FASB Reporting by Federal Entities—reconsiders reporting by federal entities
that primarily apply accounting standards issued by the FASB.
 Measurement Attributes Concepts Statement—examines providing guidance on
the selection of measurement attributes in future federal financial reporting
standards.
 Financial Report Concepts Statement—revisits the reporting model described in
SFFAC No. 2, Entity and Display
 Federal Entity Concepts Statement—examines defining the boundaries of the U.S.
Government reporting entity and the component reporting entities.
 Deferred Maintenance & Asset Impairment—develops guidance for reporting
information about deferred maintenance and asset impairment.
 Earmarked Funds—evaluates existing standards, identifying areas where actual
results from the standard on earmarked funds do not match the board’s
expectations.
 Natural Resources—develops reporting requirements to enhance accountability
for and stewardship over federal natural resources.
 Stewardship Investments—determines the appropriate categorization of the final
stewardship category.

f. The FASAB standards are not proprietary. Anyone can access the standards at the
FASAB Web site www.fasab.gov. This is unlike the FASB Codification, which is
accessed through subscription, or the GASB Codification which can be purchased in
hardcopy or electronic form.

17.3. The FY 2010 report for the U. S. government is available at


www.fms.treas.gov/fr/index.html. The 2011 report should be available in December of
2011. The answers to these questions are based on the FY 2010 (i.e., October 1, 2009 –
September 30, 2010) report.

17-8
Chapter 17 - Accounting and Reporting for the Federal Government

Ch. 17, Solutions, Case 17-3 (Cont’d)

a. The Comptroller General of the GAO was not able to render an opinion; therefore, he
reported a disclaimer of opinion because he was unable to determine the reliability of
significant portions of the consolidated financial statements due to

“certain material weaknesses in internal control over financial reporting and other
limitations on the scope of our work…” (pg. 28)

b. Three major deficiencies were identified in the audit report. They were “(1) serious
financial management problems at the Department of Defense (DOD) that have
prevented DOD’s financial statements from being auditable, (2) the federal
government’s inability to adequately account for and reconcile intragovernmental
activity and balances between federal agencies, and (3) the federal government’s
ineffective process for preparing the consolidated financial statements” (pg. 29).

The audit report identifies five material weaknesses. They indicate that the federal
government was unable to:

 Satisfactorily determine that property, plant, and equipment and inventories and
related property, primarily held by DOD, were properly reported.
 Reasonably estimate or adequately support amounts reported for certain liabilities.
 Support significant portions of the reported total net cost of operations, most
notably related to DOD, and adequately reconcile disbursement activity at certain
federal entities.
 Adequately account for and reconcile intragovernmental activity and balances
between federal entities.
 Ensure that the federal government’s accrual-based consolidated financial
statements were (1) consistent with the underlying audited entities’ financial
statements, (2) properly balanced, and (3) in conformity with GAAP.
 Identify and either resolve or explain material differences between (1) certain
components of the budget deficit reported in Treasury’s records that are used to
prepare the Reconciliation of Net Operating Cost and the Unified Budget Deficit,
the Statement of Changes in Cash Balance from Unified Budget and Other
Activities, and the Fiscal Projections for the U.S. Government, and (2) related
amounts reported in federal entities’ financial statements and underlying financial
information and records. (pg. 225)

c. Twenty federal agencies out of 24 required to report under the CFO Act received
unqualified opinions in FY 2010, as did eight of 11 additional significant reporting
agencies. The list of agencies is included in the annual financial report of the U.S.
government. The management’s discussion and analysis reports on this topic in a
section titled “Financial Statement Audit Results.”

d. No. The Comptroller General disclaimed an opinion on the statement of social


insurance, unlike 2007, 2008, and 2009 when the statement received a clean audit
opinion. The reason the statement did not receive a clean opinion was primarily

17-9
Chapter 17 - Accounting and Reporting for the Federal Government

Ch. 17, Solutions, Case 17- 3 (Cont’d)

due to uncertainties related to the achievement of cost reduction growth in Medicare.


A review of the statement of social insurance will show that projected expenditures
exceed expected revenue for all programs. However, for Medicare (parts A and B)
there is a large reversal in the trend of increasingly large deficits. In 2009 the
combined parts A and B deficit was estimated at $30,935 billion. For 2010 the
statement indicates a combined deficit of $20,420 billion. This represents a significant
expected cost savings, the uncertainty of which contributes to the Comptroller
General’s concerns.

Note to Instructor: The annual report of the U.S. government is certainly


provocative and likely to result in a spirited discussion among students. We suggest
you focus on the tremendous accounting challenges in auditing the largest
organization in the world, and stress the positive aspects of how far federal agencies
have come in the few years since audit requirements were enacted.

Solutions to Exercises and Problems

17-1. 1. b. 6. b.
2. a. 7. a.
3. c. 8. d.
4. d. 9. b.
5. a. 10. c.

17-10
Chapter 17 - Accounting and Reporting for the Federal Government

Ch. 17, Solutions (Cont’d)

17-2.
a. COMPUTATION OF MISSING AMOUNTS: Debits Credits

PROPRIETARY ACCOUNTS
ACCOUNTS PAYABLE $ 2,300,000
ACCUMULATED DEPRECIATION 2,600,000
APPROPRIATIONS USED 4,500,000
OPERATING MATERIALS AND SUPPLIES $ 2,700,000
CUMULATIVE RESULTS OF OPERATIONS 10/1/13 7,700,000
OPERATING/PROGRAM EXPENSES 4,150,000
DEPRECIATION AND AMORTIZATION 1,150,000
PLANT AND EQUIPMENT 8,900,000
UNEXPENDED APPROPRIATIONS2014 2,100,000
TOTAL AMOUNTS GIVEN 16,900,000 19,200,000
FUND BALANCE WITH TREASURY2014 2,300,000 __________
TOTALSPROPRIETARY ACCOUNTS $19,200,000 $19,200,000

BUDGETARY ACCOUNTS
EXPENDED AUTHORITY2014 $ 4,500,000
APPORTIONMENTS2014 600,000

UNDELIVERED ORDERS2014 1,500,000


TOTAL AMOUNTS GIVEN $ -0- 6,600,000
OTHER APPROPRIATIONS REALIZED2014 6,600,000 ________ _
TOTALSBUDGETARY ACCOUNTS $ 6,600,000 $ 6,600,000

Note:
Unexpended Appropriations ($2,100,000) + Expended Authority ($4,500,000) =
$6,600,000 (original appropriation)

Appropriations Used ($4,500,000) + Unexpended Appropriations ($2,100,000) =


$6,600,000 (original appropriation)

17-11
Chapter 17 - Accounting and Reporting for the Federal Government

Ch. 17, Solutions, 17-2 (Cont’d)

b.
APPROPRIATIONS USED DURING FY 2014 $4,500,000
TOTAL EXPENSES DURING FY 2014 (Note A) 5,300,000
NET DECREASE IN CUMULATIVE RESULTS OF OPERATIONS $ 800,000

(NET DECREASE IN CUMULATIVE RESULTS OF OPERATIONS IS THE SAME AS


NET DECREASE IN ASSETS OTHER THAN FUND BALANCE WITH TREASURY IF
APPROPRIATIONS IS THE ONLY FINANCING SOURCE)

(Note A: Total expenses is the sum of Operating/Program Expenses of $4,150,000


and Depreciation and Amortization of $1,150,000.)

17-3. a.
Debits Credits

BUDGETARY
EXPENDED AUTHORITY2014 4,500,000
APPORTIONMENTS2014 600,000
OTHER APPROPRIATIONS REALIZED2014 5,100,000

PROPRIETARY
CUMULATIVE RESULTS OF OPERATIONS 5,300,000
OPERATING/PROGRAM EXPENSES 4,150,000
DEPRECIATION AND AMORTIZATION 1,150,000

APPROPRIATIONS USED 4,500,000


CUMULATIVE RESULTS OF OPERATIONS 4,500,000

17-12
Chapter 17 - Accounting and Reporting for the Federal Government

Ch. 17, Solutions, 17-3 (Cont’d)

b. FEDERAL AGENCY
BALANCE SHEET
AS OF SEPTEMBER 30, 2014

ASSETS
INTRAGOVERNMENTAL:
FUND BALANCE WITH TREASURY2014 $ 2,300,000
GOVERNMENTAL:
OPERATING MATERIALS AND SUPPLIES 2,700,000
PLANT AND EQUIPMENT (NET OF ACCUMULATED
DEPRECIATION OF $2,600,000) 6,300,000
TOTAL ASSETS $11,300,000

LIABILITIES
ACCOUNTS PAYABLE $ 2,300,000

NET POSITION
UNEXPENDED APPROPRIATIONS 2,100,000
CUMULATIVE RESULTS OF OPERATIONS 6,900,000
TOTAL NET POSITION 9,000,000
TOTAL LIABILITIES AND NET POSITION $11,300,000

17-13
Chapter 17 - Accounting and Reporting for the Federal Government

Ch. 17, Solutions (Cont’d)

17-4.
RURAL ASSISTANCE AGENCY
STATEMENT OF NET COST
FOR THE YEAR ENDED SEPTEMBER 30, 2014

FOOD BANK
COSTS $ 9,632,800
LESS: EARNED REVENUE 2,611,900
NET COST 7,020,900

HOUSING SERVICES
COSTS 7,438,500
LESS: EARNED REVENUE 1,237,400
NET COST 6,201,100

CREDIT COUNSELING
COSTS 2,391,000
LESS: EARNED REVENUE 87,000
NET COST 2,304,000

TOTAL
COSTS 19,462,300
LESS: EARNED REVENUE 3,936,300
NET COST OF OPERATIONS $15,526,000

17-14
Chapter 17 - Accounting and Reporting for the Federal Government

Ch. 17, Solutions (Cont’d)

17-5. FEDERAL ANTIQUITIES ADMINISTRATION


STATEMENT OF BUDGETARY RESOURCES
FOR THE 11 MONTHS ENDED AUGUST 31, 2014

BUDGETARY RESOURCES:
BUDGET AUTHORITY (Note A):
APPROPRIATIONS RECEIVED (Note A) $4,894,855
TOTAL BUDGETARY RESOURCES $4,894,855
STATUS OF BUDGETARY RESOURCES:
OBLIGATIONS INCURRED (Note B) $4,144,855
UNOBLIGATED BALANCES (Note C) 750,000
TOTAL STATUS OF BUDGETARY RESOURCES $4,894,855

CHANGE IN OBLIGATED BALANCE:


OBLIGATED BALANCE, BEGINNING OF THE PERIOD $ 1,210,210
OBLIGATIONS INCURRED (Note B) 4,144,855
OUTLAYS (Note D) (4,690,934)
UNPAID OBLIGATIONS, END OF PERIOD (Note E) $ 664,131

Note A: Total budgetary resources are given by the balance of Other


Appropriations Realized of $4,894,855.
Note B: Expended authority of current year of $3,480,724 plus $664,131
obligated budgetary authority for undelivered orders at 8/31/14.
Note C: Unobligated balances is the sum of allotments and commitments.
Note D: Outlays equals expended authority, and is also equal to the decrease in
fund balances with the U.S. Treasury during the periodthe equivalent
of cash disbursed.
Note E: Obligated balance at year-end is equal to undelivered orders.

17-15
Chapter 17 - Accounting and Reporting for the Federal Government

Ch. 17, Solutions (Cont’d)

17-6. a. FLOOD CONTROL COMMISSION


GENERAL JOURNAL
Debits Credits
1. BUDGETARY
OTHER APPROPRIATIONS
REALIZED2014 7,000,000
UNAPPORTIONED AUTHORITY2014 7,000,000
PROPRIETARY
FUND BALANCE WITH TREASURY2014 7,000,000
UNEXPENDED APPROPRIATIONS2014 7,000,000

2. BUDGETARY
UNAPPORTIONED AUTHORITY2014 7,000,000
APPORTIONMENTS2014 7,000,000

3. BUDGETARY
APPORTIONMENTS2014 1,000,000
ALLOTMENTS2014 1,000,000

4. BUDGETARY
ALLOTMENTS2014 970,000
UNDELIVERED ORDERS2014 970,000

5. BUDGETARY
UNDELIVERED ORDERS2014 170,000
EXPENDED AUTHORITY2014 170,000

17-16
Chapter 17 - Accounting and Reporting for the Federal Government

Ch. 17, Solutions, 17-6 (Cont’d)


FLOOD CONTROL COMMISSION
GENERAL JOURNAL
Debits Credits
PROPRIETARY
OPERATING/PROGRAM EXPENSES 170,000
DISBURSEMENTS IN TRANSIT2014 170,000

DISBURSEMENTS IN TRANSIT2014 170,000


FUND BALANCE WITH TREASURY2014 170,000

UNEXPENDED APPROPRIATIONS2014 170,000


APPROPRIATIONS USED 170,000

6. BUDGETARY
UNDELIVERED ORDERS2014 395,000
EXPENDED AUTHORITY2014 395,000

PROPRIETARY
FURNITURE AND EQUIPMENT 180,000
OPERATING MATERIALS AND SUPPLIES 175,000
OPERATING/PROGRAM EXPENSES 40,000
ACCOUNTS PAYABLE 395,000

UNEXPENDED APPROPRIATIONS2014 395,000


APPROPRIATIONS USED 395,000

7. BUDGETARY
UNDELIVERED ORDERS2014 183,000
EXPENDED AUTHORITY2014 183,000

17-17
Chapter 17 - Accounting and Reporting for the Federal Government

Ch. 17, Solutions, 17-6 (Cont’d)


FLOOD CONTROL COMMISSION
GENERAL JOURNAL
Debits Credits
PROPRIETARY
OPERATING/PROGRAM EXPENSES 183,000
ACCRUED FUNDED PAYROLL AND
BENEFITS 183,000

UNEXPENDED APPROPRIATIONS2014 183,000


APPROPRIATIONS USED 183,000

8. PROPRIETARY
ACCOUNTS PAYABLE 189,000
ACCRUED FUNDED PAYROLL AND
BENEFITS 183,000
DISBURSEMENTS IN TRANSIT2014 372,000

DISBURSEMENTS IN TRANSIT2014 372,000


FUND BALANCE WITH TREASURY2014 372,000

9. BUDGETARY
UNDELIVERED ORDERS2014 40,000
EXPENDED AUTHORITY2014 40,000

PROPRIETARY
OPERATING/PROGRAM EXPENSES 40,000
ACCRUED FUNDED PAYROLL
AND BENEFITS 30,000
ACCOUNTS PAYABLE 10,000

17-18
Chapter 17 - Accounting and Reporting for the Federal Government

Ch. 17, Solutions, 17-6 (Cont’d)


FLOOD CONTROL COMMISSION
GENERAL JOURNAL
Debits Credits

OPERATING/PROGRAM EXPENSES 60,000


OPERATING MATERIALS AND SUPPLIES 60,000

DEPRECIATION AND AMORTIZATION 2,500


ACC. DEPRECIATIONFURN. AND EQUIP. 2,500

UNEXPENDED APPROPRIATIONS2014 40,000


APPROPRIATIONS USED 40,000

10. BUDGETARY
EXPENDED AUTHORITY2014 788,000
OTHER APPROP. REALIZED2014 788,000

PROPRIETARY
CUMULATIVE RESULTS OF OPERATIONS 495,500
OPERATING/PROGRAM EXPENSES 493,000
DEPRECIATION AND AMORTIZATION 2,500

APPROPRIATIONS USED 788,000


CUMULATIVE RESULTS OF OPERATIONS 788,000

17-19
Chapter 17 - Accounting and Reporting for the Federal Government

Ch. 17, Solutions, 17-6 (Cont’d)

b. FLOOD CONTROL COMMISSION


BALANCE SHEET
OCTOBER 31, 2014

ASSETS
INTRAGOVERNMENTAL:
FUND BALANCE WITH TREASURY2014 $6,458,000
GOVERNMENTAL:
OPERATING MATERIALS AND SUPPLIES 115,000
FURNITURE AND EQUIPMENT, NET OF
ACCUMULATED DEPRECIATION OF $2,500 177,500
TOTAL ASSETS $6,750,500

LIABILITIES
ACCOUNTS PAYABLE $ 216,000
ACCRUED FUNDED PAYROLL AND BENEFITS 30,000
TOTAL LIABILITIES
COVERED BY BUDGETARY RESOURCES 246,000

NET POSITION
UNEXPENDED APPROPRIATIONS 6,212,000
CUMULATIVE RESULTS OF OPERATIONS 292,500
TOTAL NET POSITION 6,504,500
TOTAL LIABILITIES AND NET POSITION $6,750,500

17-20
Chapter 17 - Accounting and Reporting for the Federal Government

Ch. 17, Solutions, 17-6 (Cont’d)

c. FLOOD CONTROL COMMISSION


STATEMENT OF CHANGES IN NET POSITION
FOR THE MONTH ENDED OCTOBER 31, 2014

CUMULATIVE
RESULTS OF UNEXPENDED
OPERATIONS APPROPRIATIONS

BEGINNING BALANCES $ 0 $ 0

BUDGETARY FINANCING SOURCES:


APPROPRIATIONS RECEIVED 7,000,000
APPROPRIATIONS USED 788,000 (788,000)
TOTAL FINANCING SOURCES 788,000 6,212,000
NET COST OF OPERATIONS (Note A) (495,500) _________

ENDING BALANCES $ 292,500 $6,212,000

Note A: Operating/program expenses of $493,000 + depreciation and


amortization of $2,500.

17-21
Chapter 17 - Accounting and Reporting for the Federal Government

Ch. 17, Solutions, 17-6 (Cont’d)

d. FLOOD CONTROL COMMISSION


STATEMENT OF BUDGETARY RESOURCES
FOR MONTH ENDED OCTOBER 31, 2014

BUDGETARY RESOURCES:
BUDGET AUTHORITY (Note A) $7,000,000
STATUS OF BUDGETARY RESOURCES:
OBLIGATIONS INCURRED (Note B) $ 970,000
UNOBLIGATED BALANCES AVAILABLE (Note C) 6,030,000
TOTAL STATUS OF BUDGETARY RESOURCES $7,000,000
CHANGE IN OBLIGATED BALANCE:
OBLIGATIONS INCURRED 970,000
OUTLAYS (Note D) (572,000)
OBLIGATED BALANCE, END OF PERIOD (Note E) $ 428,000

Note A: Total budgetary resources are the total appropriations for the year, or
$7,000,000.
Note B: Obligations incurred equals expended budgetary authority of $788,000
(see Entry 10A) plus the remaining balance of Undelivered
Orders2013 of $182,000 ($970,000 - $788,000), or $970,000. In this
case, since the Flood Control Commission obligates prior to all
expenditures of budgetary authority, the amount incurred also is simply
the amount obligated by the credit to Undelivered Orders2014 (see
Entry 4).
Note C: Total budgetary resources of $7,000,000 less amount obligated of
$970,000 (see Note B) equals $6,030,000.
Note D: Outlays also equals the decrease in Fund Balances with the U.S.
Treasury during the periodthe equivalent of cash disbursed.
Note E: Obligated balances at year-end include Undelivered Orders ($182,000)
and Accounts Payable and other accrued liabilities ($246,000), or
$428,000 in total.

17-22
Chapter 17 - Accounting and Reporting for the Federal Government

Ch. 17, Solutions (Cont’d)

17-7.
a. FINANCIAL CAPABILITY
(1) INDIVIDUAL INCOME TAXES/TOTAL REVENUES: 78.2%
($1,732.90/$2,216.50)

(2) DEBT LOAD ($7,054.50+$201.20/$4,296.00): 168.9%

b. FINANCIAL PERFORMANCE
(1) INTERPERIOD EQUITY ($2,216.50/$4,296.00): 0.52

c. FINANCIAL POSITION
(1) NON-EARMARKED FUNDS/TOTAL REVENUES: -6.37
(-$14,119.70/$2,216.50)
(2) QUICK RATIO ($428.6/$72.9) or ($428.6/$237.2)*: 5.88 or 1.81
(3) CAPITAL ASSET CONDITION ($811.60/$1,538.40)**: 0.53

* Since it is difficult to identify current portions of long-term debt, only


somewhat identifiable current liabilities were used in the calculation. Just
Accounts Payable was used in the first calculation and Accounts Payable
plus Benefits Due and Payable were used in the second calculation.
** The total gross capital asset value was adjusted for non-depreciable assets
(construction in progress and land).

d. All but two measures indicate that the federal government is in poor financial
condition. The quick ratio is well over one using either calculation, indicating
sufficient cash to pay current liabilities, assuming current liabilities are
correctly identified. Additionally, the capital asset condition ratio of 0.53
indicates that there is sufficient life remaining in capital assets.

The federal government relies heavily on individual income taxes. Debt load
is extremely high by any benchmark used. Illustration 10-7 indicates that for
local governments a load greater that 35% is extremely high. Interperiod
equity is poor given that only 52% of net costs are covered by current period
revenues. Finally, the negative net position indicates that there are no

17-23
Chapter 17 - Accounting and Reporting for the Federal Government

Ch. 17, Solutions, 17-7 (Cont’d)

reserves on which to draw to help address the interperiod equity situation.


The financial statements of the federal government reflect the financial
concerns expressed by Congress, the President, and citizens.

17-24

You might also like