If you have not read an agency financial report for a Government agency before, some of the terms may be confusing. This frequently asked questions section will help you better understand GSA’s AFR. For more detailed information to reference, the Government Accountability Office (GAO) offers a glossary of terms, the Treasury provides guidance on government accounting and reporting, and the Office of Management and Budget’s (OMB) Circular A-136 lists AFR requirements.
- Why does GSA prepare an agency financial report?
The Chief Financial Officer Act of 1990 requires GSA to prepare annual reports containing audited financial statements and performance reporting. OMB provides detailed guidance regarding the contents and formats to be used for these annual reports. Following that guidance, GSA prepares this AFR and a separate Agency Performance Report.
- What are the key parts of an AFR?
Agency financial reports can be daunting to read and understand. You can get a big picture understanding of GSA by reviewing the following parts of the AFR:
- The Auditors' report provides the context behind the audit testing performed and the results of that testing, including whether they found the financial statements materially correct in accordance with U.S. Generally Accepted Accounting Principles (GAAP).
- Financial statements provide the financial results for the year and include:
- the balance sheet,
- the statement of net cost
- the statement of changes in net position, and
- the statement of budgetary resources.
- Notes to the financial statements provide additional details and context concerning the balances reported in the financial statements.
- The management’s discussion and analysis section is where agency leadership provides general background about the agency—including the organizational structure, the missions and activities of our major programs’, with their financial and performance results—and identifies factors that may affect the agency’s operations. As discussed in the Auditor’s Report, it is important to note that this section of the AFR is not audited by the independent auditors to reach any opinion on its accuracy or completeness.
- Other information is where you can find other relevant information about the agency, including the agency’s compliance with laws and regulations. This section of the AFR is also not audited by the independent auditors.
- Why are Government financial statements different from commercial companies'?
With the unique missions and purposes of Federal agencies, financial reporting focuses on elements such as stewardship over assets, responsibilities for various liabilities, the cost of program activities, and the budgetary control process. Because of these unique operations, there is also a distinct set of accounting standards applicable to Federal Government reporting.
One difference between commercial companies and Federal agencies is that the Federal agencies do not exist to generate profit. In fact, unlike GSA, most Federal activities do not generate revenues to fund program operations, and instead depend upon authorization and appropriation acts to provide the financial resources to operate.
According to GAO, the objectives of Federal financial reports are for agencies to demonstrate their accountability, provide useful information, and help internal users of financial information to improve the Government’s management. You should bear in mind that our goal is to demonstrate good financial stewardship over the assets entrusted to us, whereas readers of private industry financial statements may have an interest in investing in a company and want assurances that the information provided is timely, accurate, and can be relied upon to assess their investment value.
- Does GSA follow generally accepted accounting principles (GAAP)?
Yes, GSA follows the requirements of GAAP for Federal financial reporting. The Federal Accounting Standards Advisory Board is designated by the American Institute of Certified Public Accountants as the source of GAAP for Federal reporting entities, and issues the accounting standards and principles for the United States Government.
- How to read a balance sheet?
The balance sheet shows the agency’s assets and liabilities at a fixed point in time. Most of the terms on the balance sheet are familiar to users of financial statements, (e.g., assets, such as accounts receivable, property, and equipment; and liabilities, such as accounts payable and actuarial liability). On a Federal balance sheet, there are a number of unique terms, like “Fund Balance with Treasury” and “Intragovernmental Liabilities.” The Fund Balance with Treasury is akin to a bank account balance; the fund balances represent the amount of money in the agency’s accounts within the U.S. Treasury that is available to spend for the purposes Congress approved the funds for intragovernmental liabilities result from business activities conducted between two Federal Government entities
- How to read a statement of net cost?
The statement of net cost shows the results of operations for GSA’s major business areas. It displays revenues earned during the fiscal year for goods and services provided to customers and subtracts expenses incurred to operate our programs to arrive at net cost. A commercial company would call this type of document an income statement. As a reflection that most Federal programs generate little to no resources on their own, expenses are offset by revenues to determine the net cost for the agency.
- What is a statement of changes in net position?
The statement of changes in net position is similar to a statement of changes in equity for a commercial firm. The statement reflects the impact that the sources and uses of resources have on the financial position of each fund. During FY 2020, GSA generated resources from operations (the net revenues or cost from the Statement of Net Cost), received appropriations, used appropriations, and transferred funds or property to (or from) the Treasury and other Federal agencies
- What is a statement of budgetary resources?
The statement of budgetary resources is unique to the Federal Government, displaying the key components of the budgetary control process. The statement shows the various sources of budgetary authority and resources provided to fund agency activities; how much of the total resources were used during the year; and how much was left unspent at the end of the year. Private industry has no similar statement or set of requirements to establish and control budgets in this manner, but there are similarities with budgeting concepts used and reported by U.S. State and local governments.
- What are appropriations?
Appropriation means a provision of law (not necessarily in an appropriations act) authorizing the expenditure of funds for a given purpose. This term is often used to describe the amount of money received or approved for the stated purposes. For a more detailed explanation of appropriations and the Federal budget process, you can read OMB’s guidance document, Circular A-11 Preparation, Submission and Execution of the Budget.
- What are obligations?
In Federal budgeting and financial management, an obligation means a binding agreement that will result in outlays, immediately or in the future. For example, an agency incurs an obligation when it places an order, signs a contract, purchases a service, or takes other actions that require the Government to make payments to the public or from one Government account to another.
- What are unobigated balances?
The unobligated balance is the portion of total budget authority provided as financial resources, where no actions have been taken to spend or obligate funding to pay for goods or services, nor bind the Government to pay liabilities. Limitations in laws also create further categorization of unobligated balances into amounts being “available” to spend on new obligations, “unavailable” due to various limitations, or “expired” and no longer available for new obligations.
Congress often provides agencies with funds to obligate or spend in one fiscal year (starting October 1 and ending September 30). These funds are referred to as a one-year appropriation, and the budget authority expires and can no longer be used to incur new obligations after September 30 of the year the appropriation was made.
Congress may also provide agencies with authority to obligate funds over 2 or more years, referred to as multi-year funds, or may not limit the amount of time funding remains available, known as no-year funds.
- What are outlays?
An outlay is a payment to liquidate an obligation (other than the repayment of debt principal or other disbursements that are “means of financing” transactions). On the statement of budgetary resources, gross outlays generally are equal to cash disbursements, and net outlays are the sum of gross outlays reduced by cash collections received. Outlays are a primary measure of Government spending.
- What are cumulative results of operations?
Cumulative results of operations are a component of net position on balance sheets, and they represent the historical total for a fund—summing revenues, expenses, gains, losses, transfers of assets and liabilities from other agencies, and other financing sources provided to a fund since its inception. It is similar in concept to retained earnings for a commercial firm.