Sec 1, Ch 1 - Govt. Accounting, Financial Reporting, Budgeting Flashcards
Name the 4 types of accountability.
1) Operational
2) Fiscal
3) Legal
4) Performance
Where does the government derive most of their resources?
By levying taxes
Name one difference governments differ from the private sector. (Multiple answers acceptable)
1) Governments do not make money/profit
2) No shareholders
3) Provide services to the public
Why is the budget process important for governments?
Governments are legally bound to the budget and it establishes spending authorizations and specifies restrictions on the use of resources
What is the primary control device in government?
The budget process
The primary mechanism in which governments measure and demonstrate accountability
Financial Reporting
What is the cornerstone of financial reporting?
Accountability
Performance Accountability
Ensuring governments act in an efficient, effective, and economic manner
Fiscal Accountability
Associated with the raising of resources to accomplish objectives
Operational Accountability
The stewardship of public resources
What does the executive and legislative branch rely on to demonstrate accountability?
Financial Reporting
Legal Accountability
The need to comply with laws, rules, and regulations
The notion of assessing whether the government’s financial position improved or deteriorated over the period
Interperiod Equity
What is the primary accountability mechanism that allows Congress to monitor the financial effects of spending?
Debt Ceiling
Give an example of Intergenerational Equity
Social Security
Users of Financial Reports (5)
1) Legislatures and oversight groups
2) Citizens
3) Investors and creditors
4) Managers
5) Media
The legislature establishes this to see if actual expenditures were within authorized levels
Budgetary Appropriations
Why do tax payers care and concentrate about accountability?
They want to ensure operating results and the safeguarding of public tax payer $
Why do investors/creditors use financial reports?
To determine compliance with contractual agreements related to debt issues
To determine if they wish to purchase government debt instruments
Why does the media care about financial reports?
It publicizes requests for public input on developing priorities of government operations
Why are financial reports important to managers?
To determine the government is operating within budgetary parameters, restrictions, laws/regulations, and public policy
Financial reporting assists users in doing what two (2) things?
1) Ensure accountability
2) Help make economic, social, and politic decisions
What do governments supplement with financial reports to determine if programs are operating effectively?
Supplemental financial reports with performance measures
Two types of financial reports and respective examples?
1) Point-in-time Reports, ex. Balance sheet
2) Period Reports, ex. Operating Statement
What is a point-in-time report?
Provides current information as of a certain date
What is a period report?
A report that covers the entire fiscal year or reporting period
Consist primarily of the audited financial statements, including notes to the FS, required supplemental information, and other accompanying information
General Purpose External Financial Reports (GPEFR)
What are the six (6) reporting characteristics?
1) Understandability
2) Reliability
3) Relevance
4) Timeliness
5) consistency
6) Comparability
True or False: Financial Reports are the only source of information that may be needed by users to make decisions
False
What type of laws ensure facilitation of obtaining data from their governments?
Freedom of Information laws, or “Sunshine Laws”
What are “sunshine laws”?
Implies the government should operate openly, or in the “sunshine”
What website was created to allow citizens to monitor progress of awarding funds to stimulate the economy and create jobs?
American Recovery and Reinvestment Act (Recovery.gov)
What is the Federal Open Government Initiative?
An effort by the Federal government to create a level of openness in government.
What are the five (5) purposes of the DATA Act?
1) Expand the Federal Funding Accountability and Transparency Act of 2006 to track federal funding effectively
2) Establish government-wide standards
3) Simplify reporting
4) Improve the quality of data
5) Apply approaches developed
When was the Securities and Exchange Commission (SEC) established?
1934 after the collapse of the stock market in 1929
What does FASB stand for and what are they responsible for?
Financial Accounting Standards Board; vested with the authority to establish accounting and reporting standards for private sector companies, including not-for-profit entities
What are the two missions of GASB?
1) Set and improve standards of state/local accounting and financial reporting
2) Guide and educate the public and users of financial reports
What are the five (5) GASB rules of procedures to guide its activities?
1) Establishment of a task force to provide feedback on an issue
2) Publishing documents for public comment
3) Distributing an exposure draft for comment
4) Conducting public hearings on due process documents
5) Issuing a final standard
What is the FASAB?
Federal Accounting Standards Advisory Board; sets the standards by improving federal financial reporting by issuing federal accounting standards and guidance to external users
What are the six (6) rules of procedures for FASAB?
1) Identify accounting issues
2) Prepare documents
3) Release preliminary documents
4) Release exposure draft
5) Vote
6) Issue final pronouncement
What do Due Process Procedures accomplish?
Ensures a timely, thorough, and open study of accounting and financial reporting issues.
What are four (4) documents used to enable due process before issues of a final standard?
1) Discussion Memorandum (DM)
2) Invitation to Comment (ITC)
3) Preliminary Views (PV)
4) Exposure Draft (ED)
What is a Discussion Memorandum?
Outlines the results of research efforts of staff and defines the account and reporting issues for a particular project
What is an Invitation to Comment?
Contains elements of the discussion memorandum; allows respondents to comment on a research report.
What is a Preliminary View?
The board’s initial proposal for an accounting and reporting standard
What is an Exposure Draft?
The last due process document; in the format of the final standard, constituents have opportunity for comments.
What is a Statement?
Sets forth the accounting and reporting standard that should be followed by preparers and auditors of financial statements
What is a Concept Statement?
Describes the concepts the board will use as a framework to evaluate existing standards.
What are Interpretations or Technical Bulletins?
Clarifies points that may be ambiguous in a prior standard
What Statement provides the hierarchy for FASAB?
Statement of Federal Financial Accounting Standards, SFFAS 34
What is the FASAB hierarchy listed in descending order of authority?
Category a) Officially established FASAB accounting principles
Category b) FASAB technical bulletins
Category c) Technical releases of the Accounting and Auditing Policy Committee of FASAB
Category d) Implementation guides published by FASAB staff
What Statement provides the hierarchy for GASB accounting principals?
GASB Statement No. 76, The Hierarchy of Generally Accepting Accounting Principles for State/Local Governments
What do public officials use to raise revenues?
Sovereign power of government
