Explain Changes in Net Position © Dale R. Geiger 20111.
-
Upload
avice-hunt -
Category
Documents
-
view
219 -
download
1
Transcript of Explain Changes in Net Position © Dale R. Geiger 20111.
Terminal Learning ObjectiveTerminal 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 2
Do federal agencies keep two sets of Do federal agencies keep two sets of books?books?
© Dale R. Geiger 2011 3
Two Types of AccountsTwo 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 4
Budgetary ReportingBudgetary Reporting
• Statement of Budgetary Resources
• Budgetary Resources consist of:• Prior Year Unobligated Balance• Current Year Appropriations• Collections
Expenditures + OpenObligations
+ UnobligatedBalance
Appropriations& Other
=
Budgetary Resources = Status of Budgetary Resources
© Dale R. Geiger 2011 5
Budgetary ReportingBudgetary Reporting
• Statement of Budgetary Resources
• Budgetary Resources consist of:• Prior Year Unobligated Balance• Current Year Appropriations• Collections
Expenditures + OpenObligations
+ UnobligatedBalance
Appropriations& Other
=
Budgetary Resources = Status of Budgetary Resources
© Dale R. Geiger 2011 6
Statement of Budgetary ResourcesStatement 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 7
Statement of Budgetary ResourcesStatement 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 8
Statement of Budgetary ResourcesStatement of Budgetary Resources
Budgetary Resources:Appropriations $2720
Status of budgetary resources:Obligations (unfilled orders) $456Expended appropriations 824Unobligated Balance 1440
Total $2720
© Dale R. Geiger 2011 9
Statement of Budgetary ResourcesStatement of Budgetary Resources
Budgetary Resources:Appropriations $2720
Status of budgetary resources:Obligations (unfilled orders) $456Expended appropriations 824Unobligated Balance 1440
Total $2720The purpose of this report is to show that
all budgetary resources are accounted for
© Dale R. Geiger 201110
Check on LearningCheck on Learning
• What is the basic equation for the Statement of Budgetary Resources?
• What items represent the Status of Budgetary Resources?
© Dale R. Geiger 2011 11
Proprietary ReportingProprietary Reporting
• Statement of Net CostCosts – Earned Revenues = Net Cost
• Statement of Changes in Net PositionFinancing Sources – Net Cost = Change in Net Position
• Balance SheetAssets = Liabilities + Net Position
• Uses the Accrual Basis of Accounting
© Dale R. Geiger 2011 12
Proprietary ReportingProprietary Reporting
• Statement of Net CostCosts – Earned Revenues = Net Cost
• Statement of Changes in Net PositionFinancing Sources – Net Cost = Change in Net Position
• Balance SheetAssets = Liabilities + Net Position
• Uses the Accrual Basis of Accounting
© Dale R. Geiger 2011 13
Proprietary ReportingProprietary Reporting
• Statement of Net CostCosts – Earned Revenues = Net Cost
• Statement of Changes in Net PositionFinancing Sources – Net Cost = Change in Net Position
• Balance SheetAssets = Liabilities + Net Position
• Uses the Accrual Basis of Accounting
© Dale R. Geiger 2011 14
Proprietary ReportingProprietary Reporting
• Statement of Net CostCosts – Earned Revenues = Net Cost
• Statement of Changes in Net PositionFinancing Sources – Net Cost = Change in Net Position
• Balance SheetAssets = Liabilities + Net Position
• Uses the Accrual Basis of Accounting
© Dale R. Geiger 2011 15
Proprietary ReportingProprietary Reporting
• Statement of Net CostCosts – Earned Revenues = Net Cost
• Statement of Changes in Net PositionFinancing Sources – Net Cost = Change in Net Position
• Balance SheetAssets = Liabilities + Net Position
• Uses the Accrual Basis of Accounting
© Dale R. Geiger 2011 16
Other Financing SourcesOther Financing Sources
• Increase Net Position • Prevent Revenues and Expenditures from
being counted twice in the same entity• Transfers of cash from other funds in the same
government• Unreimbursed services provided by another
governmental segment or entity
• Cash inflows from long term borrowing
© Dale R. Geiger 2011 17
Proprietary vs. BudgetaryProprietary vs. Budgetary
• The budgetary accounts use the budgetary basis:
Once the goods are received, the budgetary accounting process is finished and the proprietary accounts take over
Plan Order ConsumeReceive Pay
Commitment Obligation Expenditure
© Dale R. Geiger 2011 18
Proprietary vs. BudgetaryProprietary vs. Budgetary
• The proprietary accounts use the accrual basis:
• When goods are received liability recorded• When payment is made liability satisfied• When goods are consumed expense
Plan Order ConsumeReceive Pay
Asset & Liability Remove Liability Expense
© Dale R. Geiger 2011 19
Lacy’s Proprietary ActivitiesLacy’s Proprietary Activities
• Lacy purchases supplies on account at the grocery store (she RECEIVES GOODS)
• The EXPENDITURE is the final activity in the budgetary accounts
• In the proprietary accounts:• An asset is recorded: Supplies represent future
benefit – they can be used to make and sell lemonade• A liability is recorded: Lacy has an obligation to pay
the bill in the future
© Dale R. Geiger 2011 20
Lacy’s Proprietary ActivitiesLacy’s Proprietary Activities
• When Lacy pays the grocery bill:• In the proprietary accounts:• Cash (an asset) decreases• The liability is removed because Lacy has satisfied
her obligation
© Dale R. Geiger 2011 21
Lacy’s Proprietary ActivitiesLacy’s Proprietary Activities
• When Lacy uses the supplies to make and sell lemonade
• In the proprietary accounts:• Supplies (asset) decrease• An expense is recorded
Plan Order ConsumeReceive Pay
Asset & Liability Remove Liability Expense
© Dale R. Geiger 2011 22
Check on LearningCheck on Learning
• What activity ends the involvement of the budgetary accounts in the purchasing process?
• What activity constitutes an expense in the proprietary accounts?
© Dale R. Geiger 2011 23
Statement of Net CostStatement of Net Cost
• Most federal agencies generate revenues that are insignificant in comparison to expenses
• Revenues are generally reimbursements for costs incurred on behalf of other federal agencies
• Expenses – Revenues = Net Cost
© Dale R. Geiger 2011 24
Statement of Net CostStatement of Net Cost
• Salaries and personnel costs for the fictional Training Appropriation Fund for the year were $398
• Other expenses amounted to $40• Miscellaneous revenues of $186 were
collected • Task: Prepare the Statement of Net Cost
© Dale R. Geiger 2011 25
Statement of Net CostStatement of Net Cost
Salaries and personnel costs $398Other expenses 40Total Costs $438Less: Miscellaneous revenues 186Net Cost $252
© Dale R. Geiger 2011 26
Statement of Net CostStatement of Net Cost
Salaries and personnel costs $398Other expenses 40Total Costs $438Less: Miscellaneous revenues 186Net Cost $252
The purpose of this statement is to show the cost to the government of providing this program or service.
© Dale R. Geiger 2011 27
Statement of Change in Net PositionStatement of Change in Net Position
• Shows how the activities of the period affect the Net Position of the entity
• Net Position consists of:Cumulative Results of Operations
+Unexpended Appropriations
• The changes in the two categories are calculated separately
© Dale R. Geiger 2011 28
Statement of Change in Net PositionStatement of Change in Net Position
Cumulative Results of Operations:
Appropriations used+ Other financing sources- Net Cost= Net Change+ Beginning= Ending
Unexpended Appropriations:
Appropriations received - Appropriations used= Net Change+ Beginning= Ending
© Dale R. Geiger 2011 29
Statement of Change in Net PositionStatement of Change in Net Position
Cumulative Results of Operations:
Appropriations used+ Other financing sources- Net Cost= Net Change+ Beginning= Ending
Unexpended Appropriations:
Appropriations received - Appropriations used= Net Change+ Beginning= Ending
Proprietary activity© Dale R. Geiger 2011 30
Statement of Change in Net PositionStatement of Change in Net Position
Cumulative Results of Operations:
Appropriations used+ Other financing sources- Net Cost= Net Change+ Beginning= Ending
Unexpended Appropriations:
Appropriations received - Appropriations used= Net Change+ Beginning= Ending
Budgetary activity© Dale R. Geiger 2011 31
Statement of Change in Net PositionStatement of Change in Net Position
• The fictional Training Appropriation Fund is a new entity, so beginning net position is zero
• Appropriations were $2720, and Expenditures were $824 (from Statement of Budgetary Resources)
• Net cost of operations is $252 (from Statement of Net Cost)
© Dale R. Geiger 2011 32
Statement of Change in Net PositionStatement of Change in Net Position
Cumulative Results of Operations
Unexpended Appropriations
Appropriations -- $2720Appropriations Used $824 (824)Less: Net Cost (252) --Net change 572 1896Add Beginning: -0- -0-Ending: $572 $1896
© Dale R. Geiger 2011 35
Statement of Change in Net PositionStatement of Change in Net Position
Cumulative Results of Operations
Unexpended Appropriations
Appropriations -- $2720Appropriations Used $824 (824)Less: Net Cost (252) --Net change 572 1896Add Beginning: -0- -0-Ending: $572 $1896
© Dale R. Geiger 2011 36
Balance SheetBalance 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 SheetBalance 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 SheetBalance SheetAssets:Balance with the Treasury $2600 Equipment (net of depreciation) 380Total Assets $2980
Liabilities and Net Position:Liabilities $512Unexpended Appropriations 1896 Cumulative results of Operations 572Total Liabilities and Net Position $2980
© Dale R. Geiger 2011 39
Balance SheetBalance SheetAssets:Balance with the Treasury $2600 Equipment (net of depreciation) 380Total Assets $2980
Liabilities and Net Position:Liabilities $512Unexpended Appropriations 1896 Cumulative results of Operations 572Total Liabilities and Net Position $2980
This statement lists the assets of the entity and shows how they were financed:
(borrowing)
(appropriations)
(operations)
© Dale R. Geiger 2011 40
Check on LearningCheck 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 Why is it important to be familiar with External Reports?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 AccountingIssues with Budgetary Accounting
• Focus is on obligations and expenditures• Ordering and receiving goods do 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 SpreadsheetGovernmental Reporting Spreadsheet
Enter data to record budgetary activity
© Dale R. Geiger 2011 44
Governmental Reporting SpreadsheetGovernmental Reporting Spreadsheet
Prepare the Statement of Budgetary Resources
© Dale R. Geiger 2011 45
Governmental Reporting SpreadsheetGovernmental Reporting Spreadsheet
Budgetary Resources equal
Status of Budgetary Resources
© Dale R. Geiger 2011 46
Governmental Reporting SpreadsheetGovernmental Reporting Spreadsheet
Prepare Statement of Net Cost
© Dale R. Geiger 2011 47
Governmental Reporting SpreadsheetGovernmental Reporting Spreadsheet
Net cost flows into the Statement of Change in Net Position, Cumulative Results of Operations
© Dale R. Geiger 2011 48
Governmental Reporting SpreadsheetGovernmental 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 SpreadsheetGovernmental 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