Section 3- Part 5-8 Flashcards
Operations
Roles of Financial Managers
Internal Controls
Role of Financial Managers
Role of Financial Managers Operations refer to all activities needed to achieve program objectives. During operations, actual government services are delivered.
During operations, government managers and employees use policies and procedures to guide daily decisions and activities. Clearly defined roles and responsibilities, coupled with feedback and assessment, help government components achieve program objectives.
Internal Controls- GAO
GAO defines internal control as an integral component of an organization’s management that provides reasonable assurance that the following objectives are being achieved:
* effectiveness and efficiency of operations;
* reliability of reporting for internal and external use; and
* compliance with applicable laws and regulations.
State and local governments also establish internal controls to achieve comparable objectives.
Internal Controls
The U.S. Government Accountability Office (GAO) publishes a guide to internal controls titled “Standards for Internal Control in the Federal Government”—also known as the “Green Book.” The GAO guidelines parallel internal controls in the private sector and are useful at all levels of government.
Financial Managers- Control Techniques
They track funding by program and object codes and ensure individual line-item amounts are not exceeded. However, good financial managers avoid over-compartmentalization of funds, which would restrict management flexibility without a compensating benefit.
Budgetary authority should follow lines of management responsibility, with funds apportioned and allotted along the chain of command. A common practice is the
“management reserve”—each level in the chain of command retains a small portion of budgetary authority before allotting it to lower levels. These reserve funds provide some operational flexibility for authorized purposes.
Enhancement of Internal Controls
Internal controls can also be enhanced through technical features of financial or business systems. These business systems may be physically located in-house and managed by the agency information technology organization (e.g. CIO); or, user access to the service may be provided by a shared service provider, who provides a similar service to multiple agencies.
Accounting- Purpose of Accounting
The system of accounting we use today was first codified in 1494, two years after Columbus sailed to America.8 Accounting survives because of its fundamental contribution to management. It helps to ensure reliability and integrity of financial information. The double-entry accounting method provides added assurance since each transaction is supported by a corresponding offset (debits are matched to credits).
Financial Accounting
Financial accounting is designed to serve the needs of external users and is the form of accounting that leads to preparation of external financial reports. It tracks the effects of financial events on the financial position and results of operations of the entity.
Financial accounting is used to determine results of operations (revenues and expenses) and changes in net position (assets, liabilities and fund balance.)
Financial Accounting is guided by:
Financial accounting is guided by formal standards. State and local entities use standards issued by the Governmental Accounting Standards Board (GASB), while the national government uses standards issued by the Federal Accounting Standards Advisory Board (FASAB). Both organizations maintain Internet websites with useful information.
Budgetary Accounting
Budgetary accounting helps entities remain within the legal budget. A budgetary accounting system tracks commitments (requisitions), obligations (encumbrances), and expenditures by purpose, time and amount. To facilitate this process, the elements of the budgetary accounting system will parallel the organization of the budget. The more complicated the budget, the more complicated the budgetary accounting system.
Managerial Accounting
Officials use managerial accounting (sometimes called cost accounting) to gauge the cost-effectiveness of operations and improve efficiency. Managerial accounting combines financial and nonfinancial data. Judgment is required in selecting appropriate measures for a managerial or cost accounting system.
Since managerial accounting is meant to serve internal needs, it is more flexible than financial accounting and not subject to the same strict, external standards.
Reporting (chapter)
Standard setting bodies
External Reports
-Financial
-Nonfinancial
-Mixed Format
Internal Reports
Reporting
Reporting is one of the most important activities of government. The primary purpose of reporting in the management cycle is to communicate accomplishments attained and resources expended. Reporting is essential to accountability.
Through external reports, governments demonstrate accountability to citizens and other stakeholders, such as bondholders. Internal reports are also crucial. They help government officials make timely and effective decisions. Guidelines for government reports differ, depending on whether they are external or internal and whether they are subject to GAAP, or generally accepted accounting principles.
GPEFR
General-purpose external financial reports (GPEFR) are the prime vehicle for demonstrating government accountability. Examples of GPEFR used in the government include the statement of net assets and statement of activities. They are similar to the balance sheet and income statement used in the private sector.
GASB
Governmental Accounting Standards Board, defines GAAP for state and local governments; tribal governments; and U.S. territories, trusts and commonwealths (such as Guam, Puerto Rico and the Northern Marinas Islands).
