Explain Changes in Net Position © Dale R Geiger 2011 Terminal Learning Objective • Task: Explain Changes in Net Position Over a Period of Time • 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: • Prepare Statement of Budgetary Resources • Demonstrate proprietary reporting • Prepare basic proprietary financial statements © Dale R Geiger 2011 Do federal agencies keep two sets of books? © Dale R Geiger 2011 Two Types of Accounts • Budgetary Accounts track budgetary activities and resources • Appropriations, Obligations, Expenditures • Proprietary Accounts track financial activities and resources • Liabilities and payment of liabilities • Assets and payments received • Expenses and revenues © Dale R Geiger 2011 Budgetary Reporting • Statement of Budgetary Resources Open Appropriations = Expenditures + + Unobligated Obligations Balance & Other Budgetary Resources = Status of Budgetary Resources • Budgetary Resources consist of: • Prior Year Unobligated Balance • Current Year Appropriations • Collections â Dale R Geiger 2011 Budgetary Reporting Statement of Budgetary Resources Open Appropriations = Expenditures + + Unobligated Obligations Balance & Other Budgetary Resources = Status of Budgetary Resources • Budgetary Resources consist of: • Prior Year Unobligated Balance Current Year Appropriations Collections â Dale R Geiger 2011 Statement of Budgetary Resources • The fictional Training Appropriation Fund received appropriations of $2720 • Purchase orders in the amount of $1280 were issued • Goods received were $824 (estimated and actual) • Task: Prepare the Statement of Budgetary Resources © Dale R Geiger 2011 Statement of Budgetary Resources • What items represent the Budgetary Resources? • What items represent the Status of Budgetary Resources? • How much are the expenditures? • How much of the obligations was left outstanding? • What is the unobligated balance? © Dale R Geiger 2011 Statement of Budgetary Resources Budgetary Resources: Appropriations $2720 Status of budgetary resources: Obligations (unfilled orders) Expended appropriations Unobligated Balance Total © Dale R Geiger 2011 $456 824 1440 $2720 Statement of Budgetary Resources Budgetary Resources: Appropriations $2720 Status of budgetary resources: Obligations (unfilled orders) Expended appropriations Unobligated Balance Total $456 824 The purpose of this report is to show that all budgetary resources are accounted for © Dale R Geiger 2011 1440 $2720 10 Balance Sheet • • • • Similar to the Statement of Financial Position Assets = Liabilities + Net Position If Assets < Liabilities, Net position will be negative Net position = Unexpended appropriations + cumulative results of operations © Dale R Geiger 2011 37 Balance Sheet • The fictional Training Appropriation Fund has $2600 in its balance with the Treasury • Equipment (net of depreciation): $380 • Liabilities: $512 • From Statement of Change in Net Position: • Cumulative results of operations: $572 • Unexpended Appropriations: $1896 • Task: Prepare the Balance Sheet © Dale R Geiger 2011 38 Balance Sheet Assets: Balance with the Treasury Equipment (net of depreciation) Total Assets $2600 380 $2980 Liabilities and Net Position: Liabilities Unexpended Appropriations Cumulative results of Operations Total Liabilities and Net Position $512 1896 572 $2980 © Dale R Geiger 2011 39 Balance Sheet Assets: Balance with the Treasury Equipment (net of depreciation) Total Assets $2600 380 $2980 Liabilities and Net Position: Liabilities Unexpended Appropriations Cumulative results of Operations Total Liabilities and Net Position $512 1896 572 $2980 © Dale R Geiger 2011 This statement lists the assets of the entity and shows how they were financed: (borrowing) (appropriations) (operations) 40 Check on Learning • Which statement shows the cost to the government of providing a particular program or service? • Which statement explains the changes in the Net Position of the entity? © Dale R Geiger 2011 41 Why is it important to be familiar with External Reports? • External Reporting is the primary objective of most accounting systems • Cost accounting information is drawn from the same accounting system • Understanding the basis of the accounting data permits a meaningful translation to useful cost information © Dale R Geiger 2011 42 Issues with Budgetary Accounting • Focus is on obligations and expenditures • Ordering and receiving goods not reflect actual use of resources • 99.9% philosophy of financial management • All of the money will be spent, yet does not necessarily reflect the true cost of operations © Dale R Geiger 2011 43 Governmental Reporting Spreadsheet Enter data to record budgetary activity © Dale R Geiger 2011 44 Governmental Reporting Spreadsheet Prepare the Statement of Budgetary Resources © Dale R Geiger 2011 45 Governmental Reporting Spreadsheet Budgetary Resources equal Status of Budgetary Resources © Dale R Geiger 2011 46 Governmental Reporting Spreadsheet Prepare Statement of Net Cost © Dale R Geiger 2011 47 Governmental Reporting Spreadsheet Net cost flows into the Statement of Change in Net Position, Cumulative Results of Operations © Dale R Geiger 2011 48 Governmental Reporting Spreadsheet The Statement of Change in Net Position shows changes in both Cumulative Results of Operations and Unexpended Appropriations © Dale R Geiger 2011 49 Governmental Reporting Spreadsheet The Balance Sheet shows Assets and Liabilities as well as the new balances in Unexpended Appropriations and Cumulative Results of Operations © Dale R Geiger 2011 50 Practical Exercise © Dale R Geiger 2011 51 ... Statement of Net Cost Costs – Earned Revenues = Net Cost • Statement of Changes in Net Position Financing Sources – Net Cost = Change in Net Position • Balance Sheet Assets = Liabilities + Net Position. .. = Net Cost • Statement of Changes in Net Position Financing Sources – Net Cost = Change in Net Position • Balance Sheet Assets = Liabilities + Net Position • Uses the Accrual Basis of Accounting... Accounting â Dale R Geiger 2011 12 Proprietary Reporting • Statement of Net Cost Costs – Earned Revenues = Net Cost • Statement of Changes in Net Position Financing Sources – Net Cost = Change in Net