Slides determine different accounting methods

Determine Different Accounting Methods Used by Different Fund Types © Dale R Geiger 2011 Food for Thought • Does the way governmental activities are funded have an impact on how governmental activities are managed? • How? Why or why not? © Dale R Geiger 2011 Terminal Learning Objective •  Task: Determine Different Accounting Methods Used by Different Fund Types • Condition: You are a cost advisor technician with access to all regulations/course handouts, and awareness of Operational Environment (OE)/Contemporary Operational Environment (COE) variables and actors • Standard: with at least 80% accuracy • Identify different types of funds • Classify funds by funding mechanism • Classify funds by purpose © Dale R Geiger 2011 Review: Fund Accounting • Tracks flow of resources through funds • Characteristics of funds • Separate accounting entity within a larger government entity • Self-balancing set of accounts • Produces its own financial statements © Dale R Geiger 2011 Types of Funds • • • • • • General Fund Special Funds Trust Funds Revolving Funds Agency Funds Management or Working Funds © Dale R Geiger 2011 The General Fund • Revenue from general sources • Expended for general purposes • A government entity must have ONE general fund • The General Fund of the United States has many subsidiary appropriation funds • Each appropriation fund has budgetary accounts and proprietary accounts © Dale R Geiger 2011 Special Funds and Trust Funds • Account for resources designated for specific programs or activities • Typically financed by dedicated fees • Track expenditures for these specific purposes • Ex National Wildlife Refuge Fund • May be legally designated as trust funds • Ex Social Security’s Old Age and Survivors Insurance Fund © Dale R Geiger 2011 Learning Check • Name one characteristic of a fund • Which fund type accounts for resources designated for specific programs or activities? © Dale R Geiger 2011 Appropriated Fund Reporting • The General Fund, special funds, and trust funds are financed by appropriations • Budgetary resources are reported according to budgetary basis • Proprietary accounts are reported according to accrual basis © Dale R Geiger 2011 Non-Appropriated Funds • • • • Receive no appropriated funding Do not maintain budgetary accounts Do not use the obligation process Report according to the accrual basis © Dale R Geiger 2011 10 Learning Check • Which funding mechanism requires both the budgetary and the proprietary accounts? • Which funding mechanism does not require the obligation process? © Dale R Geiger 2011 11 Revolving Funds • Generate revenues by providing services to general public or to other government entities • Must set user fees to cover costs of providing services • Resources carry over or “revolve” from one period to the next (do not expire) • Ex U.S Postal Service © Dale R Geiger 2011 12 Deposit Funds • Account for resources that belong to other entities • Other government agencies • Other funds within the same agency • Non-federal entities • For every asset held there is an equal liability • Ex State income taxes withheld from federal employees’ payroll © Dale R Geiger 2011 13 Management or Working Funds • Provide goods and services to appropriated funded programs and departments • May pool appropriations from multiple reporting entities to accomplish a common purpose • Ex Bureau of Land Management Working Capital Fund © Dale R Geiger 2011 14 Learning Check • Which type of fund has an equal liability for every asset it holds? • Which type of fund provides goods and services to the general public or other governmental entities? © Dale R Geiger 2011 15 BLM Working Capital Fund • Read the case study: A Case Study in the Management and Accounting of Capital Assets: The Bureau of Land Management’s Working Capital Fund © Dale R Geiger 2011 16 BLM Working Capital Fund • What are capital assets? • Who are the customers of the Working Capital Fund? • What are the revenue sources? • How does this meet the definition of a working or management fund? © Dale R Geiger 2011 17 BLM Working Capital Fund • What services are provided? • How are appropriations “pooled”? • How did using the Working Capital Fund impact the customers of the fund? • • • • Understanding true cost of operations Dealing with political environment Choosing assets appropriate to operational needs Managing and maintaining assets © Dale R Geiger 2011 18 BLM Working Capital Fund • Under the accrual basis, capital assets are a cost of doing business in the periods the assets are used • The consumption of the useful life of a capital asset is called depreciation • Under the budgetary basis, the cost of a capital asset is an expenditure in the period it is purchased © Dale R Geiger 2011 19 Working Capital Fund Example: Accrual Basis • Performance reflects costs that are not cash flows of the period • A $100K truck depreciated straight line over years puts $20K cost into each year • Book value of the asset is reduced annually until zero value © Dale R Geiger 2011 20 Working Capital Fund Example: Budgetary Basis • Budgets recognizes 100% of asset in year of acquisition • A $100K truck depreciated • Is recognized as a $100K expenditure when bought Subsequent years see no effect â Dale R Geiger 2011 21 Working Capital Fund Example: Problems of Government • Annual performance is distorted • Asset acquisition becomes a big ticket item subject to political climate • Maintenance of asset sometime avoided on logic that asset has zero value © Dale R Geiger 2011 22 BLM Working Capital Fund Example: Behavior Impacts • Acquisition specifications became more conservative • As managers more clearly recognized tradeoffs with operating budgets • Maintenance was performed diligently • To stretch useful life Since already pre-paid (via allocation) â Dale R Geiger 2011 23 BLM Working Capital Fund Example: Bottom Line • Annual performance was more clear • Capital assets needs declined © Dale R Geiger 2011 24 ... Why or why not? © Dale R Geiger 2011 Terminal Learning Objective •  Task: Determine Different Accounting Methods Used by Different Fund Types • Condition: You are a cost advisor technician with... at least 80% accuracy • Identify different types of funds • Classify funds by funding mechanism Classify funds by purpose â Dale R Geiger 2011 Review: Fund Accounting • Tracks flow of resources... Fund Accounting • Tracks flow of resources through funds • Characteristics of funds • Separate accounting entity within a larger government entity • Self-balancing set of accounts • Produces