Section 3, Chapter 1 - Federal Budgeting and Financial Reporting

Question 1

How much does the federal government spend annually to meet if citizens needs?

Answer 1

$4 trillion-$6 trillion

Question 2

What causes federal budgets to vary?

Answer 2

increased needs during times of crisis, such as war, natural, disasters, and pandemics

Question 3

What are the three budget process phases?

Answer 3

1. Formulation of the president’s budget.
2. Congressional action on the budget.
3. Budget execution.

Question 4

When does planning for fiscal year begin?

Answer 4

Approximately 18 months before the fiscal year begins

Question 5

What does fiscal year refer to?

Answer 5

An entities accounting.

The federal government fiscal year begin on October 1 and ends on September 30

Question 6

What does the budget of the US government (also known as the presidents budget) consist of?

Answer 6

Several volumes that set for the president financial proposals with recommended priorities for the allocation of resources by the government

Question 7

What is the primary focus of the presidents budget?

Answer 7

The budget year— the next fiscal year for which Congress needs to make appropriations

It also covers at least four years following the budget year to show the effect of the budget decisions over the long-term

The actual amount for the previous fiscal year and the estimated amounts for the current fiscal year and the estimated amount for the current year are presented for comparison purposes

Question 8

What are the steps in the formulation phase?

Answer 8

1. Budget and fiscal policy guidelines are provided to agencies.
2. Agencies confer with OMB and others within the executive office of the president and prepare agency requests
3. Agency requests are submitted to OMB.
4. OMB analyzes requests, identifies issues and confer with officials to resolve issues.
5. Agency proposals are finalized in a comprehensive package is prepared.
6. The president’s budget is submitted to Congress.

Question 9

How does the president begin the process of formulating in the budget?

Answer 9

Establishing general budget and fiscal policy guidelines, usually by the spring of each year, about nine months before the president transmits the budget to Congress and about 18 months before the fiscal year begins 

Question 10

What OMB policy provides budget instructions regarding submission requirements, formats, due dates, and processes?

Answer 10

OMB Circular A-11

Question 11

What does OMB do based on OMB Circular A-11?

Answer 11

Works with federal agencies to establish specific policy directions, and planning levels for the agencies

Specific policy direction covers both the budget year and at least the following four years to guide the preparation of agency budget requests

Question 12

What is done during the formulation of the budget?

Answer 12

• The president, the Director of OMB, and other officials in the executive office of the president, exchange information, proposals and evaluations, bearing on public decisions with the secretaries of the department, and the heads of other government agencies

Question 13

What decisions influence the upcoming budget?

Answer 13

• decisions reflected in the previous enacted, budget and reactions to the last proposed budget influence decisions concerning the upcoming budget
• Projections of the economic outlook, prepared, jointly by the council of economic advisors, OM B, and the US department of treasury

Question 14

When do agencies submit their budget request to OMB?

Answer 14

Early fall

Question 15

What does OMB do when they receive budget request from agencies?

Answer 15

• Analyst reviewed them and identify issues that OMB officials need to discuss with the agencies
• OMB and the agencies resolve many issues. However, others require involvement of the president and White House policy officials.
• during this phase of the process, OMB passes back to the agency amount it will recommend to the president, agencies, consent, appeals, and OMB resolves appeals prior to finalizing the proposals

Question 16

When is the decision-making process usually completed?

Answer 16

By late December, a little more than nine months before beginning of the budget year

At that time, the final stage of developing the detailed budget data, and the preparation of the budget document documents begin

Question 17

The executive branch decision-makers must consider the effects of economic and technical assumptions on the budget estimates. What do some of these key assumptions include?

Answer 17

• growth in gross domestic product (GDP)
• Shares of wages and salaries in GDP
• The rate of inflation
• The unemployment rate
• Interest rates
• The number of people eligible for various benefits programs

Question 18

What do economic and technical assumptions affect?

Answer 18

The government spending and receipts

Small changes the assumptions can affect budget estimates by billions of dollars

Statutory limitations on changes, and receipts and outlets may also influence the budget decisions

Question 19

The budget formulation process involves the simultaneous consideration of what?

Answer 19

• The resources needed of individual programs
• The priorities for allocating resources among the programs, agencies and functions of the federal government
• The total outlays and receipts that are appropriate in relation to the current and prospective economic conditions
• Any constraints that are in force?

Question 20

What does the Budget and Accounting Act of 1921 specify?

Answer 20

That the president is to transmit the proposed budget of estimated expenditures and receipts to Congress no later than the first Monday in February of each year for the following fiscal year, which begins October 1

This gives Congress eight months before the fiscal year begins to act on the budget

Question 21

What does Article 1, Section 9, clause 7 of the constitution provide?

Answer 21

No money, shall drawn from the treasury, but inconsequence of appropriations made by law; in a regular statement of receipts and expenditures with all public money shall be published from time to time

This means Congress must act to provide federal agencies with authority to spend money

Question 22

What does congress do with the presidents budget proposals?

Answer 22

• Congress considers the presidents budget proposals and approves them, modifies, or disapprove them
• it can change funding levels, eliminate programs, or add programs not requested by the president
• It can add or eliminate taxes and other sources of receipts, or make other changes that affect the amount of receipts collected

Question 23

How are budgetary decisions made by Congress presented?

Answer 23

A number of individual appropriations are enacted

It’s not presented in a single enacted budget

Question 24

What are the two steps they give a program the ability to operate?

Answer 24

1. Authorization.
2. Appropriation

Question 25

What is authorization?

Answer 25

Congress establishes and sets the requirements for a program or activity

Authorization by itself, does not provide the ability for an agency to incur obligations (in order for an agency to begin spending, Congress has to appropriate funds)

Question 26

In order for an agency to begin spending, what was congress do?

Answer 26

Appropriate funds

Although some authorizing legislation provide a permanent operation

Question 27

Can Congress authorize the program without appropriating funds?

Answer 27

Yes

Question 28

What does the Congressional Budget Impoundment and Control Act of 1974 require?

Answer 28

Congress must first arrive at a budget resolution before preparing the appropriations

Question 29

What is a budget resolution?

Answer 29

• A concurrent resolution on the budget meaning that both the Senate and the house agree
• The resolution is not a law and is not submitted to the president for approval

Question 30

What does a budget resolution do?

Answer 30

• It sets levels for total receipts and budget authority and outlays, both in total and by functional category
• set levels for the budget deficit for surplus and debt
• Provides the framework within which congressional committees, prepare appropriation bills, and other spending and receipts legislation

Question 31

When must a budget resolution be passed?

Answer 31

By April 15

Question 32

What must be done if the budget resolution has not been passed by April 15?

Answer 32

The appropriation process should start on May 15

Question 33

In the report on the budget resolution, what do the budget committee allocate?

Answer 33

The amount of budget authority and outlaya within the functional category totals to the house and senate appropriation committees

The two appropriation committees are required to allocate amounts of budget authority and outlays among their respective committees

Question 34

How many appropriation acts does Congress traditionally produce every year?

Answer 34

12

Question 35

What do annual appropriation act do?

Answer 35

• Provides funding for federal agencies, operating expenses, programs, and other specific purposes
• enacts changes each year in other laws that affect spending and receipts

Question 36

What is budget authority?

Answer 36

• The authority provided by law to incur financial obligation that will result in outlays of federal government funds
• Congress typically does not vote on the level of outlays (spending) directly, but rather on budget authority

Question 37

Outlays during the year result from what?

Answer 37

They mostly result from current years budget authority, but also contain disbursements, based on prior years budget authority

Question 38

Where are appropriation bills traditionally initiated?

Answer 38

In the house

Question 39

What do appropriation subcommittees do?

Answer 39

Hold hearings and review detailed budget, justification materials, prepared by the agencies within the subcommittees jurisdiction

Question 40

What happens after a subcommittee drafts a bill?

Answer 40

The committee in the whole house must approve the bill, usually with amendments to the original version

Question 41

What is done after the house approves the bill?

Answer 41

It forward it to the Senate, where similar review is underway

Question 42

What is done if the Senate disagrees with the house on particular matters in the bill?

Answer 42

• The two bodies form a conference committee to resolve the differences
• The conference committee revises the bill and returns it to both bodies for approval

Question 43

Who forms a conference committee?

Answer 43

Members of both bodies

Question 44

What happens when both the Senate and house agreed to our revised bill?

Answer 44

Congress sends it to the president for approval or veto

The president can approve or veto only the entire bill he cannot approve or veto selected parts of the bill

Question 45

What are some congressional actions that provide budget authority?

Answer 45

• authorizing legislation
• Budget resolution
• Appropriation bills
• Conference committees
• Presidential approval
• Continuing resolution

Question 46

What is authorizing legislation?

Answer 46

Substantive legislation that sets up or continues the operation of a federal program or agency, either indefinitely, or a specific period of time, or that sanctions a particular type of obligation or expenditure within a program

Question 47

Between FY 1977 and FY 2022, how many times did Congress and the president not complete action on a majority of the regular appropriation by the start of the fiscal year?

Answer 47

91% of the time

Question 48

What happens if appropriations are not enacted by October 1?

Answer 48

Progress usually enacts a joint resolution called a continuing resolution

Question 49

What is a continuing resolution?

Answer 49

• Similar to an appropriation bill. It provides authority to the affected agencies continue operations at some specified level up to a specific date, or until regular appropriations aren’t enacted.
• A continuing resolution has funded a portion or all of the government for the entire year, in some years
• They are a law that must present to the president for approval or veto

Question 50

What happens if the government fails to pass a budget or continuing resolution?

Answer 50

Government agencies are required by law to shut down operations with exceptions for activities, deemed essential until Congress passes a continuing resolution the president approves

Shutdown can last days to several weeks

Question 51

How much do appropriations control total spending in a typical year? What controls the rest of the spending?

Answer 51

• Annual appropriations control spending for the majority of the federal programs, but they only control 1/3 of the total spending in a typical year
• Permanent laws, established and authorizing legislation, control the rest of the spending

Question 52

What do permanent laws for spending include? What are the permanent laws called?

Answer 52

• interest the government pays on public debt
• Major programs, such as Social Security, Medicare and Medicaid, unemployment, insurance, and federal employee retirement

These are referred to as mandatory spending

Question 53

What percentage of the budget is discretionary spending?

Answer 53

1/3

Question 54

What does Congress use to implement the constraints on revenue and spending?

Answer 54

The reconciliation process

Question 55

What is the reconciliation process? And what is it designed to do?

Answer 55

• A two-step process designed to bring existing law governing mandatory spending in conformity with the most recently adopted concurrent resolution on the budget
• A streamlined way to improve the budget by decreasing spending, or increasing taxes with limited debate

Question 56

What law established reconciliation?

Answer 56

The Congressional Budget and Impoundment Control Act of 1974

Question 57

What is an example of the reconciliation process?

Answer 57

Bill is considered through the reconciliation process may not be debated for more than 20 hours, and either the house or Senate, and are not subject to filibuster in the Senate

The exemption from filibuster is particularly important, because it means a simple majority vote of 51 rather than a 60 is needed to stop at filibuster, is sufficient for the Senate to pass a bill and reconciliation. Because of the streamline process reconciliation is limited to certain type of bills

Question 58

What is the first step in the reconciliation process?

Answer 58

The language found in the concurrent resolution on the budget instructing house in Senate committees to determine and recommend changes in laws, or bills that will achieve the constraints established in the concurrent resolution on the budget

The instructions to the committee specify the amount of spending reductions or revenue changes. A committee must attain and leave to the discretion of the committee, specific changes to laws or bills that must be made.

Question 59

What is the second step in reconciliation?

Answer 59

A combination of the various instructed committee recommendations into an omnibus reconciliation bill

Once the omnibus reconciliation bill has been passed by both the house in the Senate, it is sent to the president for approval or veto.

Question 60

What is the reconciliation bill called if only one pair of committees is involved?

Answer 60

If only one pair of committees is involved, the resulting bill is referred to as a reconciliation bill rather than an omnibus bill.

Question 61

Who has the initial responsibility for tracking an appropriation?

Answer 61

Treasury

There is a need to track any budgetary activity against the appropriation

Question 62

What must be done before an agency can begin spending?

Answer 62

An agency cannot begin spending until treasury issues, an appropriation warrant

Question 63

What does a treasury warrant signify?

Answer 63

The treasury warrant signifies that an account has been established in the treasury, equal to the amount of the appropriation

Question 64

What do Treasury Account Symbols (TAS) represent?

Answer 64

• individual appropriation receipt and other fund accounts for entities and bureaus
• They are the cornerstone for each reporting the government’s financial transactions, and are assigned to each each account after its fund group is identified
• important information regarding the account such as the agency responsible for the account

Question 65

Who assigns receipt and expenditures accounts to a fund group? and what are the accounts based based on?

Answer 65

• OMB and treasuries fiscal service
• Fund groups are based on their characteristics as well as the nature of the transaction they support

Question 66

Why are fund groups important?

Answer 66

They are important for budgetary reporting, because different fund groups are authorized to receive and use funds in different ways

Question 67

What are some different fund accounts?

Answer 67

• General fund expenditure accounts
• Consolidated working fund accounts
• Management fund accounts
• Revolving fund accounts
• Special fund expenditure accounts
• Trust fund expenditure accounts
• Trust, revolving/trust, non-revolving fund

Question 68

What do general fund expenditure accounts record?

Answer 68

Amounts appropriated by Congress for the general support of the government

Question 69

What are consolidated working fund accounts used for?

Answer 69

To receive (and subsequently disperse) advance payments from other entities or bureau through provisions of law

Question 70

What are management fund accounts?

Answer 70

Working fund accounts, authorized by law to facilitate accounting for the administration of intragovernmental activities, other than a continuing cycle of operations

Question 71

What are revolving fund accounts?

Answer 71

Accounts used to record funds authorized by specific provisions of law to finance, a continuing cycle of business type operation. The receipts are credited directly to the revolving fund as offsetting collections in our available for expenditure, without further action by Congress.

Question 72

How are revolving fund account receipts classified?

Answer 72

1. Public enterprise funds where receipts come primarily from sources aside the government.
2. Intra-governmental funds were receipts, primarily from other appropriations or funds.

Question 73

What are special fund expenditure accounts used for?

Answer 73

To record amounts appropriate from special fund receipts. Entities may spend these receipts for special programs, according to specific provisions of law.

Question 74

What are trust fund expenditure accounts used for?

Answer 74

To record amount appropriate from trust, fund receipts. Entities may expend these receipts for specific purposes or programs, according to the terms of the trust agreement or statute.

Question 75

What were trust revolving fund/trustnon-revolving fund accounts, established for

Answer 75

Established when a statute authorizes such funds

Question 76

What is the format for TAS fund groups?

Answer 76

The format varies among fund groups

Example, expenditure account symbol consist of eight or more digits. Using the string TAS format the first three digits, identify the entity responsible for the account using the agency identifier. The next digits or character represent the period of avail availability for obligation. The last four digits identify the group.

Question 77

What would be the example for various parts of a TAS for buildings and facilities for the department of agriculture?

Answer 77

1. 012 department of agriculture (three part identifier)
2. 2022. FY 22 annual your account. 22/23 FY 22/23 multi year account. X no year appropriation. ( period of availability)
3. 0117 buildings and facilities (fund group)

Question 78

Who is in charge of preventing overspending appropriations? (as required in the anti-deficiency act)

Answer 78

The president, but they delegated this authority to OMB who has established the apportionment process

Question 79

What is an apportionment?

Answer 79

The distribution of amounts available for obligation in an appropriation

It’s a portion of an agencies budget authority

Question 80

What laws can provide the resources that can be apportioned?

Answer 80

• permanent laws (mandatory appropriations)
• One of the 12 appropriation act
• A supplemental appropriation act
• Continuing resolution

Question 81

When are reapportionments made?

Answer 81

When there are changes to a previously approved apportionment

Question 82

What are the various divisions that can be used to apportion an appropriation?

Answer 82

1. Category A apportionments (operating apportionments by time period, usually quarter)
2. Category B apportionments (include program, activity or project
3. Category AB apportionments (combination of program, project, or activity and time)
4. Category C apportionments (future year only; for multi year/no year accounts)

Question 83

What does OMB require agencies to do for the apportionment process?

Answer 83

Agencies are required to submit spending plans, and apportionment request on SF 132, apportionment and reapportionment schedule

Question 84

What policy outlines the guidelines for preparing the requests for apportionment and reapportionment?

Answer 84

OMB Circular A-11, preparation, submission, and execution of the budget

Question 85

What does the apportionment system help?

Answer 85

It helps ensure funds are available to cover the operations for the entire year

Question 86

Why would agencies request OMB to reapportion funds?

Answer 86

To accommodate changing circumstances

Question 87

Some funds are exempt from apportionment. What exempts fund from apportionment? And what is an example of one that is exempt?

Answer 87

• The law establishing a fund may exempt it from the apportionment, or the OMB Director may exempt a fund
• example: funds used to pay judgments against an agency are not subject to apportionment. Also funds are exempt from the apportionment if the funds are expired, fully obligated, or used to transfer funds to other funds (intra-governmental transfers)

Question 88

What are allotments and sub allotments?

Answer 88

Used by agencies to distribute their spending authority to organizational units and locations

Appropriations are made to agencies that operate through many organizational units and at many locations. allotments get it to those locations/units

Question 89

What are supplemental appropriations?

Answer 89

Supplemental appropriations are enacted when the government needs to spend more money than Congress has appropriated for the fiscal year, because of circumstances, not anticipated, when the budget was formulated and appropriations enacted for that fiscal year

Example: more money may be needed for assistance with a natural disaster

Question 90

What are deferrals or rescissions?

Answer 90

Proposed by the president when there are changes in circumstances that reduce the need for certain spending for which Congress has appropriated funds

Under the congressional budget and control act of 1974, the president cannot simply spend/impound appropriations

Question 91

What are deferrals?

Answer 91

Temporary withholdings of budget authority that take affect immediately unless overturned by an act of Congress.

Question 92

When can the president defer funds?

Answer 92

• Only to provide for contingencies to achieve savings made possible through changes and requirements, or greater efficiency of operations
• or as otherwise specified provided in law

The president cannot defer funds for policy reasons

Question 93

What are rescissions?

Answer 93

Permanent cancellation of budget authority taken into effect only if Congress passes a law approving them

The law may only approve part of a rescission. If Congress does not pass such a law, within 45 days of continuous session, the president must make the funds available for spending.

Question 94

What reasons can the president propose a rescission?

Answer 94

Any reason

Question 95

In total, how many funds that the president has proposed for rescission has Congress rescinded?

Answer 95

1/3

Question 96

Once funds are appropriated, the ability to spend the appropriate funds for something depends on what three things?

Answer 96

1. The PURPOSE of the obligation or expenditure of the funds must be consistent with the appropriation.
2. The obligation (although not necessarily the expenditure) must occur within the TIME limits applicable to the appropriation
3. The obligation and expenditure must be within the AMOUNT Congress has established.

Question 97

What does the most fundamental statute dealing with the appropriation funds (31 USC Section 1301(a)) state?

Answer 97

Appropriations shall be applied only to the objects, for which appropriations were made, except otherwise provided by law

Question 98

What does 31 USC Section 1301(a) require for appropriation funds?

Answer 98

• Congress controls the purpose to which government funds are applied
• it’s prohibited to charge authorized items to a wrong appropriation and unauthorized items to any appropriation
• Further rules, prohibit transfers between appropriations without statutory authority, because it violates the purpose of giving appropriation and augments the amount of the receiving appropriation

Question 99

What are some time periods used for appropriations?

Answer 99

1. One year or annual.
2. Multiyear.
3. No year.

Question 100

What are one year/annual appropriations?

Answer 100

• The typical appropriation for current operations.
• established for a one year period, usually the same as the fiscal year. However, some preparations are made available for different period than the fiscal year (appropriation for training that begins July 1)

Question 101

What are multi year appropriations? What words identify multi appropriations?

Answer 101

• funds available for more than one year but for a definite time period
• Primarily associated with construction projects, major procurement of military ships, aircraft, vehicles, or weapon, systems, or research, development, test, and evaluation programs
• “ available until September 30, 20XX”

Question 102

What are no year appropriations? What words signify no year appropriations?

Answer 102

• funds available until the purpose for which the program was established is completed when there are no more recipients
• Identified as “ available until expended”

Example: Social Security and Medicaid involved no year appropriations. Revolving funds also have no year appropriations since spending is based on generating revenue.

Question 103

What are definite appropriations?

Answer 103

Legislation specifically states the amount they can spend

Most appropriations are for a definite amount

Question 104

What are indefinite appropriations?

Answer 104

• Appropriations for an indefinite amount
• Amount that can be spent based on factors such as the total benefits do to eligible recipients and/or program related collections (such as offset collections or tax receipts)

Example: the amount that can be spent for Social Security is a total benefit payments due to eligible recipients up to the amount available from tax rec receipts and interest earnings deposited in a trust fund available for Program expenditures

Question 105

What are the three periods that make up the lifecycle of an appropriation?

Answer 105

1. Current.
2. Expired.
3. Closed.

Question 106

What is the minimum life cycle of an appropriation?

Answer 106

Six years

Question 107

What occurs in the current year life cycle of an appropriation?

Answer 107

• The total appropriation is available for the establishment of new obligations

Question 108

How long is the current period for:
- One year/annual appropriations
- Multi year appropriations
- no year appropriations

Answer 108

• One year/annual appropriations— the current period is one year usually the fiscal year October 1 through September 30
• Multi year appropriations— the current period begins the first day of the fiscal year and extends into the last day of the fiscal year, specified in the appropriations act
• No year appropriations— the appropriation is available for new obligations indefinitely. There would be no expired period

Question 109

What life cycle period can obligations be liquidated?

Answer 109

Obligations can be liquidated (expenditure/disbursement) during the current period the expired period

Question 110

What occurs in the expired period of the lifecycle of an appropriation?

Answer 110

• when the fiscal year ends for an annual or multi year appropriation, the un obligated amount cannot be used to make new obligations. The agency has five years to make payments against those amounts that have been obligated.
• Un obligated amount can be used if needed and within the established scope to defray expenditures associated with obligations (example: an agency obligated $1000 for purpose and fines. It underestimated the amount by $50. The obligated amount can be used to pay the $50)

Question 111

What is the term used for the use of un obligated balances from an expired period?

Answer 111

An upward adjustment

Question 112

What occurs in the closed/canceled period of the appropriations life cycle?

Answer 112

After five years, an ag agency can no longer make any payments against obligations, or use the obligated amounts

Any remaining obligated or unobligated balances should be canceled

No further obligation or expenditure against the account is permitted (for no year, appropriations, agency heads must request that the appropriation be canceled)

Question 113

The budget records, money collected by the government agencies, two different ways. Depending on the nature of the activity generating the collection, they are recorded as what?

Answer 113

1. Receipts (which are compared in total to net outlay and calculating the surplus or deficit)
2. Off setting collections or receipts (which are deducted from gross outlays to produce net outlays)

Question 114

Receipts are collections that result from what?

Answer 114

• The governments exercise of its sovereign power to tax or otherwise compel payment
• Corporate and personal income taxes and payroll taxes
• excise taxes
• Compulsory user charges
• Custom duties
• Court fines
• Certain license fees
• Deposits of earnings by the federal reserve system

Question 115

Offsetting collections and receipts result from what two kinds of transactions?

Answer 115

1. Businesslike or market oriented activities with the public.
2. Intragovernmental transactions.

Question 116

What are business like or market oriented activities with the public?

Answer 116

Sales type activities with the public, such as sales of maps, sales of land, or remit fees for recreational areas

These collections are deducted from gross budget, authority and outlets, instead of being added to the receipts so that the budget totals represent governmental rather than market, activity

Question 117

What are intra-governmental transactions?

Answer 117

Payment for goods or services provided by one government entity to another

Example: GSA receives rental payments for Office space it provides to other agencies. These collections are deducted from gross budget authority and outlays so that the budget totals measure the transactions of the government with the public.

Question 118

What is budget authority?

Answer 118

The authority provided in law to enter into legal obligations that were result in immediate or future outlays of government funds

Question 119

What forms can budget authority take?

Answer 119

• appropriations
• Authority to borrow
• Contract authority
• Spending authority from offset collections
• Object class

Question 120

How are appropriations provided?

Answer 120

Provided in annual appropriation acts or permanent law, permit agencies to incur obligation, and make payment

Question 121

What does the authority to borrow provide?

Answer 121

Usually provided in permanent law, permit agencies to incur obligations, but requires them to borrow fund, usually from the general fund of the treasury, to make payment

Question 122

What does contract authority permit?

Answer 122

Usually provided in permanent law, permits agency to incur obligations in advance of a separate appropriation of cash for payment, or in anticipation of the collection of receipts that can be used for payment

Question 123

What does spending authority from offsetting collections permit agencies to do?

Answer 123

usually provided in permanent law, permits agencies to credit offsetting collections to an expenditure account, incur obligations, and make payment using the offsetting collections

Question 124

What are object classes?

Answer 124

Categories used in budget preparation with the classify obligation by the items or services purchased by the federal government

Question 125

What are major object classes and their corresponding numbers?

Answer 125

10 - personnel compensation and benefits
20 - contractual services and supplies
30 - acquisition of assets
40 - grants and fixed charges
90 - other

Question 126

What does use of object class allow for?

Answer 126

Allow presentation of obligation according to their purpose, rather than the result of service

Example: the wage obligations of a federal employee who is paid to construct a building are classified as “ personnel compensation and benefits” but the contractual obligations for the purchase of a building classified as “ acquisition of assets”

Question 127

Object class information is mandated by law, 31 USC 1104(b). What does this require the president’s budget to do?

Answer 127

Present obligations by object class for each budgetary account

Object classes are subdivided into smaller classes, such as military or civilian personnel compensation and benefits

Question 128

What does Article I, Section 9, clause 7 require?

Answer 128

• no money Shelby drawn from the treasury, but in consequence of appropriations made by law; and a statement of receipts and expenditures of all public money shall be published from time to time
• This mandates that all spending of the federal government derives from appropriations passed by Congress
• unless in appropriation is cited, no payment can be made
• Treasury, publishes, monthly statement, the details, the receipts and outlays of the federal government

Question 129

What does Article I, Section 8, clause 2 do?

Answer 129

Gives Congress the power “to money on the credit of the United States”

Congress does not, itself, borrow money, but limits the executive branch through the public debt limit (the public debt limit is raised from time to time through legislation establishing a limit)

Question 130

What happened to prior to the passage of the anti-deficiency act?

Answer 130

It was not unusual for agencies to use up their appropriations well in advance of the end of the fiscal year and to go back to Congress requesting additional appropriations

Question 131

What was the purpose of the anti deficiency act?

Answer 131

To prevent agencies from spending more than what was appropriated

Question 132

What did the antideficiency act lead to?

Answer 132

• OMB apportion appropriations quarterly, Program, or any other means specified
• A detailed requirement for officials to authorize and approve transactions and report violations

Question 133

What does anti-deficiency act require agencies to do?

Answer 133

Control spending and provide penalties for overspending

Question 134

The Anti-deficiency act agencies are not allowed to do what?

Answer 134

• Purchase services and merchandise before appropriations are enacted, and accounts are apportioned
• Enter into contracts that exceed the appropriation for the year or the apportioned by OMB whichever is lower
• accept volunteer services
• Pay bills when there is no balance available in the appropriation or fund account

Question 135

Each agency is required to establish, by regulation, the system of administrative controls of funds that do what?

Answer 135

• restrict both obligation and expenditure from each account to the lower the amount apportioned by OMB or the amount available for obligation and/or expenditure
• enables the head of the agency to identify the person responsible for violating the act

Question 136

What did the Budget and Accounting Act of 1921 do?

Answer 136

• created the bureau of budget (now OMB) and the general accounting office (now GAO)
• provided for the president to submit a single proposed budget to Congress and assigned GAO the role of investigating “ all matters relating to the receipt, dispersement, and application of public laws” and to “ make a recommendations, login to greater economy or efficiency in public expenditures”
• provides the legal basis for the presidential budget
• Define roles of the president and agencies in the process
• assigns responsibilities for governmental accounting, auditing, and financial reporting

Question 137

What was the overall objective of the Budget and Accounting Act of 1921?

Answer 137

To improve evaluations of federal government programs and activities by better identifying sources of funding, and how the funding was applied

Question 138

What did the Supplemental Appropriations Act of 1950 do?

Answer 138

• defined what constitutes a legal obligation against an appropriation
• required each agency to report its liquidated obligations and unobligated appropriations remaining at the end of the year

Question 139

What did the Budget and Accounting Procedures Act of 1950 do?

Answer 139

• included both budgetary and financial accounting requirements
• Authorized and directed the president to evaluate and develop plans for organization, coordination, and management of the executive branch. Overall was required to consider the need for efficient and economical service.
• Established many responsibilities

Question 140

What responsibilities did the Budget and Accounting Procedures Act of 1950 establish?

Answer 140

• Full disclosure of financial results of operations, including information, needed for effective management and controls over budget execution, property, and other assets
• GAO determine the extent to which accounting and financial reporting fulfill the specified purposes
• GAO prescribe the principles, standards, and related requirements for accounting to be observed by executive branch agencies
• GAO to conform to GAO standards and requirements
• GAO audit financial transactions

Question 141

What did the Congressional Budget and Impoundment Control Act of 1974 do?

Answer 141

• changed the way Congress performs its duties with respect to budget enactment
• Established budget committees in each of Congress and required them to coordinate and agree on revenue and expenditure levels through concurrent budget resolution
• Established the CBO provide advice to Congress from independent professionals
• Established procedures to underscore Congress’ control over impoundment of funds by the executive
• Change the fiscal year of the federal government from July 1 to June 30 to October 1 to September 30, starting in 1976

Question 142

What does the CBO do to the president budget after it submitted to OMB?

Answer 142

Re-estimates it by estimating the current service baseline, estimates/scores cost of the legislation, and conducts special studies

Question 143

What did the Budget Enforcement Act of 1990 (amending the Balanced Budget and Emergency Deficit Control Act of 1985—Gramm-Rudman-Hollings—and the Congressional Budget and Impoundment Control Act of 1974) do?

Answer 143

• affected the way Congress went about enacting the budget
• Tried to control spending, at a time when federal government had large budget deficits as well as projections, indicating the deficits would continue with no end in sight
• divided spending between discretionary and mandatory

Question 144

What was discretionary spending?

Answer 144

The salaries and other operating expenses of government agencies provided by annual appropriation acts

Question 145

What was mandatory spending?

Answer 145

The budget authority and outlays resulting from permanent laws— that is, primarily the entertainment programs (Social Security, Medicare, Medicaid)

Question 146

What do governments provide under entitlement programs? What type of appropriations are they?

Answer 146

• provides benefits (according to formulas and benefits schedules) to recipients meeting eligibility requirements
• Usually permanent and indefinite

Question 147

What did the Budget Enforcement Act of 1990 do regarding discretionary and mandatory spending?

Answer 147

• constrained discretionary spending differently from mandatory spending and receipts
• ## Established caps or limits for each three discretionary categories (domestic, defense, international) — these categories very from year to year due to amendments to the act

Question 148

How do caps or limits on discretionary categories work?

Answer 148

• in addition to the initial caps, the act imposed limits on future growth for each category
• could be adjusted for emergencies, changes in concepts or definitions, or subsequent legislation
• if Congress passed appropriations, that, in the opinion of the Director of OMB, would’ve caused a cap on discretionary spending to be breached or exceeded, the president would be required to issue an order to sequester (reduce the funding authority in order to cut spending to the level of caps)

Question 149

What was done instead of establishing caps for mandatory spending and receipts?

Answer 149

All laws enacted through 2002, affecting mandatory spending or receipts to be enacted on a pay as you go basis.

This meant that if a lot would have increased the deficit or reduced the surplus during the five-year period considered in the budget process then another law would have been enacted to offset the effect. The offset would be either a reduction in spending, an increase in receipt, or a combination of the two

Question 150

What does the Federal Credit Reform Act of 1990 govern?

Answer 150

Federal credit programs making direct loans and loan guarantees

Question 151

What does the Federal Credit Reform Act of 1990 do?

Answer 151

• Prescribe a special budget treatment to measure the cost of direct loans and loan guarantees
• Has a direct influence on the financial accounting for direct loans and loan guarantees

Question 152

When do loan guarantees arise?

Answer 152

When the federal government assumes the default risk associated with loans provided by lending institutions to certain classes of individuals or entities

The cost to the federal government is a subsidy cost that arises from favorable interest interest rates, granted to borrowers and defaults. Congress must provide budget of authority equal to the subsidy cost and annual preparation act before the program can make direct loans or loan guarantees. Outlays in the amount of the subsidy cost are recorded when the direct or guaranteed loan is dispersed.

Question 153

The accounting standards for direct loans and loan guarantees aligned, the financial reporting closely with the required budgetary treatment. Therefore, the accounting standards provide what?

Answer 153

• loans dispersed, and outstanding, or to be recognized as assets at the present value of their estimated net cash inflows. The difference between the outstanding principle of the loans, and the present value of their net cash inflows just recognized as a subsidy cost allowance on the balance sheet, and as an expense on the statement of net cost.
• guaranteed loans outstanding are to be recognized as a liability in the amount of the present value of estimated net cash outflows of the loan guarantees. The face value of the guaranteed loans, outstanding and the amount guaranteed are disclosed in the notes of the financial statements.

Question 154

What does the Government Performance and Results Act of 1993 do/require?

Answer 154

• emphasizes managing for results, emphasizing what a program, accomplishes, and how well, the accomplishments match the program’s purpose, and objectives
• Requires agencies to prepare strategic plans, annual performance plans containing measurable performance goals, and annual performance reports

Question 155

Can budget request be built upon annual performance plan?

Answer 155

Yes

Question 156

What can some performance goals encompass?

Answer 156

Efficiency or cost effectiveness, which requires determination of the cost of achieving the goals

Question 157

Can agencies fulfill the performance reporting requirements by combining the annual performance report with the annual financial report required by the CFO act?

Answer 157

Yes

Question 158

What did the Government Performance and Results Act Modernization Act of 2010 do/require?

Answer 158

• established a new framework aimed at taking a more crosscutting, an integrated approach to focusing on results and improving government performance
• Required the OMB, in accordance with agencies, to develop long-term, outcome, oriented goals for a limited number of crosscutting policy areas (every four years)
• on an annual basis, OMB is to provide information on how these long-term crosscutting goals will be achieved

Question 159

What does the Statutory Pay-As-You-Go Act of 2010 require?

Answer 159

• Requires that all new legislation changing, taxes, fees, or mandatory expenditures, taken together, must not increase projected deficits

This requirement is enforced by the threat of automatic, across-the-board, cut, and select mandatory programs in the event that legislation taken as a whole, does not meet the PAYGO standard established by law

Question 160

What laws do PAYGO apply to?

Answer 160

Laws enacted after February 12, 2010 that would alter revenues and mandatory spending or collections

Although it is simplest to describe the PAYGO principal, as barring legislation, that would increase projected deficits, the act, which is permanent, would continue to apply, even if the budget were in surplus

Question 161

What did the Budget Control Act of 2011 do you/require? When was it enacted?

Answer 161

• enacted on August 2, 2011
• in addition to increasing the debt limit, it contains measures intended to reduce the depth that by at least $2.1 trillion over the FY 2012 to FY 2021 period
• Includes statutory caps on discretionary spending, and the establishment of a joint select committee on deficit reduction to identify further budgetary savings of at least $.2 trillion over the year.

Question 162

Why did the BCA likely fail?

Answer 162

• The committee failed to identify the required savings and as such, in January 2013, a budget sequester resulted. In other words, the money that would have otherwise been spent was held back and used instead of deficit reduction. This sequester affected all non-exempt federal programs with equal savings coming from defense spending and non-defense spending.
• in subsequent years, legislation was adopted to modify the spending limits and enforcement mechanisms of BCA as decisions were made on each fiscal years appropriation. Made it unlikely that the $.2 trillion deficit reductions would be realized by fiscal year 2021.

Question 163

If a proprietary or fiduciary fund, sell an asset, what is reflected on the statement?

Answer 163

Only again or loss is reflected on the operating statement

The same as true for the government wide level

Question 164

What is the gain or loss on a sale of an asset?

Answer 164

The difference between the carrying value and the proceeds of the sale

Question 165

Government sell a vehicle for $2000. The current carrying value of assets $3000 representing a cost of $4000 and accumulate depreciation of $1000

What would the journal entry be at the time of sale?

Answer 165

DR: cash $2,000
DR: accumulated depreciation, $1000
DR: plus on sale of asset $1000
CR: capital asset $4000

Question 166

Where are the entire proceeds of the sale of a capital acid reported for governmental funds?

Answer 166

All of the proceeds are reported as other financing sources

In this example, the amount reported would be $2000

Question 167

For a current or advanced refunding of bonds, what does the government need to amortize?

Answer 167

The difference between the reacquisition price in the caring amount of the old debt

Question 168

For a current or advanced refunding of bonds, what is the amortization period?

Answer 168

The remaining life of the old debt or the life of the new debt (whichever is shorter)

Question 169

For a current or advanced refunding of bonds, how should amortization be reported?

Answer 169

As a component of interest expense, using a systematic and rational method such as straight line

Question 170

For occurrent, refunding or in advance, refunding up bonds, how should the difference between the acquisition price and the net carrying amount of the old debt be reported?

Answer 170

Either as a deferred inflow of resources, or a deferred outflow of resources

It should be recognized as a component of interest in systematic and rational manner over the remaining life of the old debt, or the length of the new debt (whichever is shorter)

Question 171

Are tax exempt advance refunding bonds allowed?

Answer 171

No, they are no longer allowed under federal law due to the tax cuts and jobs act of 2017

However, taxable refund transactions continue to occur

The government may use the proceeds to invest and earn arbitrage, which may generate the liability to the federal government

Since the transaction does not involve the use of current financial resources, there are no entries for governmental fund

Question 172

What does the proceeds from long-term obligations represent?

Answer 172

An influence of financial resources

However, they are not revenues and are reported separately and governmental funds as an “ other financing source”

Question 173

The proceeds from debt include several items— the face amount of the issue premium or discount. The entry includes each item as appropriate.

a government issues a 20 year $25 million general obligation bond. Cost more $300,000 and the bold had a premium of $250,000. What is the Journal injury to record the proceeds of the bond issue?

Answer 173

DR: cash $24,950,000
DR: expenditure— bond issuance cost $300,000
CR: other financing sources— bond premium $250,000
CR: other financing sources— face of bond issue $25,000,000

Question 174

When is the premium and issue costs on a long term obligation recognized?

Answer 174

The premium and issue costs involved the flow of current financial resources, so they are recognized when the transaction occurs

Question 175

Does a lease involve a flow the resources?

Answer 175

Yes

Question 176

What happens when the government is a lessee?

Answer 176

The lessor typically receives the deposit from the government, and then periodic payments are made by the government in accordance with the terms of the agreemen

Question 177

What do governmental funds record for leases?

Answer 177

Both an “other financing source” and an expenditure are recorded

Question 178

What is the amount of the lease based on?

Answer 178

The present value of the minimum lease payments, or the fair value of an asset (whichever is lower)

Question 179

My government entered into a five-year agreement with a company to lease equipment, and the present value of the minimum lease payments was $250,000

What journal entry would report the transaction?

Answer 179

DR: expenditures—capital outlay $250,000
CR: other financing source— lease $250,000

Question 180

What does the sale of capital assets result in?

Answer 180

An inflow of resources to a government fund

Question 181

Since assets are not capitalized in the funds, there is no need to compare the amount of proceeds to the book value of asset. What would the proceeds sale be reported as?

Answer 181

Another financing source

Question 182

Government has an auction and sells several vehicles. The proceeds from the sale are $50,000. What is the journal entry for the sale of the capital asset?

Answer 182

DR: cash $50,000
CR: other financing sources— sale of assets $50,000

Question 183

What is done if the proceeds from the sale of a capital asset differs from the economic gain or loss on the sale?

Answer 183

There will be a reconciling item between governmental funds and governmental activities

Question 184

Governments often take advantage of declines in interest rates. The government issues, a new debt for the sole purpose of buying out the old debt. How does this advantage the government?

Answer 184

It’s is lower service payment

Question 185

What are the two types of refunding?

Answer 185

1. Current refunding.
2. Advance refunding.

Question 186

What is done in a current refunding?

Answer 186

The new debt is immediately used to buy back the old debt

Question 187

What is done in an advanced refunding?

Answer 187

The proceeds are turned over to an escrow agent who invest in them and pays the principal and interest at the future time as bonds come due, or until the bonds can be called and retired

Question 188

How are the proceeds from the refunding reported?

Answer 188

As an “ other financing source”

Question 189

How is the use of refunding proceeds reported?

Answer 189

As an “ other financing use”

Question 190

What does the use of refunding indicate?

Answer 190

It indicates if the proceeds were used immediately (other financing—current refunding) turned over to an escrow agent (other financing use— payment to escrow agent)

Question 191

Governments frequently transfer financial resources among funds. How are transfers and transfers out of governmental funds reported?

Answer 191

They are reported separately

For example, the general fund may transfer resources to a debt service fund to pay principal and interest on general long-term obligations

Question 192

What are interfund services provided and used?

Answer 192

They are reciprocal interfund activity in the one fund pays for goods or services provided by another fund. Thus, an exchange takes place.

Question 193

How are interfund services provided and used recognized?

Answer 193

Like any other exchange transaction— the fund, providing the goods or services, recognizes a revenue, and the fund receiving the goods or services recognizes an expenditure or expense as appropriate

Question 194

Internal service funds are specifically created to provide goods and services to other units within the government. What happens when goods or services are provided? What did they record and what does the other unit record?

Answer 194

When goods or services are provided, the internal service fund, sends a bill which is paid for by the other unit

The internal service fund records revenue, and other records an expenditure or expense

Question 195

Transfers among funds are non-reciprocal activities. What are some reasons why transfers are made?

Answer 195

• to enable payments to be made from debt service funds
• to provide a subsidy to an enterprise fund
• to provide start-up funding, which will not be reimbursed, to an internal service fund.

Question 196

What are transfers into and out of proprietary funds reported after?

Answer 196

They are reported after non-operating income (expense)

Question 197

In the government-wide financial statements, transfers are also reported to governmental and business type activities. What should the transferred in amount equal?

Answer 197

Transferred in amount should equal transferred out amount

Question 198

A transfer of resources from the primary government to a discreetly presented component unit is not reported as a transfer. What do the primary government and component unit report?

Answer 198

Primary government reports a program expense

The component unit reports a contribution

Question 199

What does an interfund reimbursement involve?

Answer 199

Involves the repayment to a fund for expenditures or expenses paid on another fund’s behalf.

As a result, this is different from interfund services provided and used.

Question 200

The general fund may have an appropriation to pay the employers share of retirement for all funds. Other funds reimburse the general fund. Assume the amount paid by the general fund was $100,000. Of this amount, $15,000 was billed to special revenue funds and $10,000 was billed to enterprise funds.

What do the general fund, special revenue, fund, and enterprise fund record?

Answer 200

• Special revenue funds record expenditures of $15,000
• Enterprise funds record expenditures of $10,000
• general funds do not record revenue of $25,000. Instead it records the reduction of the expenditure since the $25,000 did not involve the general fund.

Question 201

What did the Fiscal Responsibility Act of 2023 do?

Question 202

What did the Fiscal Responsibility Act of 2023 do?

Question 203

What did the Fiscal Responsibility Act of 2023 do?

Answer 203

H