stars cfo act system changes

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Department of the Navy Office of the Assistant
Secretary of the Navy (Financial Management and
Comptroller)
How to Read the Department of the Navy Financial
Statements
Presented to General Fund Conference 2005
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Reading Financial Statements

• Why are we preparing financial statements?
• What is this thing called Financial Statements?
• Who cares?
• How will the future look?
• When will we get there?

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Why are we preparing financial statements?

• In the not-too-distant past -
• Current financial reporting practices of the
  Federal Government do not accurately disclose the
  current and probable future cost of operating and
  investment decisions, including the future need
  for cash or other, resources, do not permit
  adequate comparison of actual costs among
  executive agencies, and do not provide the timely
  information required for efficient management of
  programs. CFO Act, 1990 Section 102(a)6
• OMB defines the content structure and identifies
  the reporting entities
• Subsequent legislation built on the foundation
  laid by the CFO Act
• Requirement that financial statements be prepared
  per Federal GAAP and be audited

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What is this thing?
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The Department of the Navy (DON) Reporting
Entities
Message from the Secretary of the Navy..3
Message from the Assistant Secretary of the Navy
(Financial Management Comptroller)..5

• Receives direct appropriations from Congress to
  replenish the fund
• Supports overall department operations
• Includes Operation and Maintenance Military
  Personnel, Family Housing Procurement Military
  Construction and Research, Development, Test,
  and Evaluation

Managements Discussion and Analysis..7

• Department of the Navy General Fund
• Principal Statements..51
• Notes to the Principal Statements..63
• Supporting Consolidating/Combining
  Statements...117
• Required Supplementary Stewardship
  Information...131
• Required Supplementary Information.139
• Other Accompanying Information149

• Classified as a revolving fund
• An appropriation or transfer of funds finances
  the initial cost of goods and services
• Goal is to break even over time
• Includes Base Support Supply Management Depot
  Maintenance Research and Development and
  Transportation

• Navy Working Capital Fund
• Principal Statements151
• Notes to the Principal Statements163
• Supporting Consolidating/Combining
  Statements203
• Required Supplementary Information.231
• Other Accompanying Information237

Audit Opinions239
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Overview of the Report

• Messages from our leaders discuss, at a high
  level, the organizations mission, performance
  results, and financial condition
• Managements Discussion and Analysis
• Designed to discuss the vital few matters that
  would provide a taxpayer with an understanding of
  the reporting entity and its financial condition
• Presents both program and financial performance,
  systems, controls, legal compliance, and
  financial position and financial condition
• Derived from the published budget, speeches,
  Presidents Management Agenda, etc.

The Managements Discussion and Analysis, in
conjunction with Note 1, should give any reader
all the information needed to understand the
entity, its business environment, and its
accounting policies.
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The Financial Statements
Statement of Custodial Activity Not Applicable
to DON
one of the six basic financial statements (OMB
Bulletin No. 01-09, Form and Content of Agency
Financial Statements)
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U.S. Standard General Ledger (USSGL)

• 1000 Assets
• 2000 Liabilities
• 3000 Net Position
• 4000 Budgetary
• 5000 Revenue and Other Financing Sources
• 6000 Expenses
• 7000 Gains/Losses/Miscellaneous Items
• 8000 Memorandum

http//www.fms.treas.gov/ussgl/index.html
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Basic Balance Sheet Format
Assets Liabilities Net Position
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USSGL Assets

• 1000 Assets
• Account / Series Account Title
• 1010 Fund Balance with Treasury
• 1100 Cash
• 1300 Receivables
• 1400 Advances and Prepayments
• 1500 Inventory and Related Property
• 1600 Investments
• 1700, 1800 General Property, Plant, and
  Equipment
• 1900 Other Assets

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USSGL Liabilities and Net Position

• 2000 Liabilities
• Account / Series Account Title
• 2100 Accrued Liabilities Other
• 2200 Accrued Liabilities Payroll and Benefits
• 2300, 2400 Unearned Revenue (Advances)
• 2500 Debt
• 2600 Actuarial Liabilities
• 2900 Other Liabilities
• 3000 Net Position
• Account / Series Account Title
• 3100 Unexpended Appropriations
• 3310 Cumulative Results of Operations

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Basic Balance Sheet Format

• Another important concept is the difference
  between intragovernmental and public.
• Intragovernmental data represents financial
  information between federal government entities.
• Public data represents financial information
  between the DON and the public (i.e.
  non-governmental, private parties).

Assets Liabilities Net Position
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The Essential Footnotes Assets

• Assets, Note 2
• Fund Balance with Treasury, Note 3
• Investments, Note 4
• Accounts Receivable, Note 5
• Other Assets, Note 6
• Cash and Other Monetary Assets, Note 7
• Loans Receivable, Note 8
• Inventory and Related Property, Note 9
• General Property, Plant and Equipment, Note 10
• These notes are only applicable for the DON
  General Fund

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Footnotes Support the Financial Statements
FY 2004 DON Annual Financial Report DON General
Fund, Note 3 Pg 75-77
NWCF is a revolving fund. Therefore, it only
reports amounts on Line 1.B.
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Footnotes Support the Financial Statements
Notice how the footnote numeric tables provide
additional detail to support the financial
statement.
FY 2004 DON Annual Financial Report DON General
Fund Balance Sheet Pg 54 Note 5
Pg 79-81
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Footnotes Support the Financial Statements
FY 2004 DON Annual Financial Report DON General
Fund, Note 9 Pg 85-88

• Inventory and Related Property is the largest
  component of the NWCFs assets (see FY 2004 DON
  Annual Financial Report, NWCF Note 9, pg 178-183)
• DON GF does not have inventory, but rather
  Operating Materials Supplies (OMS)

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Footnotes Support the Financial Statements
FY 2004 DON Annual Financial Report DON General
Fund, Note 10 Pg 89-93

• General Property, Plant and Equipment (PPE) is
  the largest component of DON GF total assets

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Statement of Net Cost

• Reports the gross operating cost and related
  exchange revenue for the agency
• Displays all costs, less earned revenues by
  responsibility segment and program
• Reflects the bottom-line net cost to operate the
  entity

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Statement of Net Cost

• Program costs (expenses to produce exchange
  revenue)
• Less earned revenue
• Net program costs
• Other costs incurred and not assigned to programs
• Other revenue not assigned to programs
• Net cost of operations

FY 2004 DON Annual Financial Report DON General
Fund, Note 19 Pg 109-111
Also found on the Statement of Financing and
Statement of Changes in Net Position.
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Statement of Changes in Net Position

• Reports how the net cost of operations was
  financed
• Displays nonexchange revenues, appropriations
  used, and other financing sources

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Statement of Changes in Net Position

• Net cost of operations
• Financing sources
• Appropriated, transfers, and imputed
• Net results of operation
• Prior period adjustments
• Change in unexpended appropriations
• Change in net position
• Beginning net position
• Ending net position

FY 2004 DON Annual Financial Report DON General
Fund, Pg 56-57
Also found on the Statement of Net Cost and
Statement of Changes in Net Position. Also
found on the Balance Sheet.
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Statement of Budgetary Resources

• Focuses on budgetary resources (BR) and the
  status of those resources
• Relates directly to the budgetary accounting
  process
• Equation Sources of BR Status of BR
• Budgetary resources are recorded in USSGL
  accounts 4100 to 4399
• Status of budgetary resources are recorded in
  USSGL accounts 4400 to 4999

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Statement of Budgetary Resources

• Resources
• Appropriations and other authorities
• Reimbursable
• Status of Resources
• Obligated, Direct and Reimbursable
• Unobligated, Available and Unavailable
• Outlays
• Net obligations
• Collections and reimbursements

FY 2004 DON Annual Financial Report DON General
Fund, Pg 58-59
Budgetary Resources Status of Budgetary
Resources
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Statement of Financing

• Reconciles obligations incurred with the net cost
  of operations
• Provides a link between budgetary and proprietary
  accounting

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Statement of Financing

• Obligations and nonbudgetary
• Obligations
• Collections
• Imputed financing
• Resources that do not fund operations
• Change in undelivered orders
• Assets purchased during the period
• Costs that do not require resources
• Depreciation
• Financing sources yet to be provided
• Unfunded liabilities
• Net cost of operations

FY 2004 DON Annual Financial Report DON General
Fund, Pg 60-61
Also found on the Statement of Net Cost and
Statement of Changes in Net Position.
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The Financial Statements Recap
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The Financial Statements Recap (contd)
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Financial Statement Reconciliation

• Inter-relationships among the statements
• Net Cost of Operations is reported on the SNC,
  SNP, and the SOF
• Total Net Position is reported on the BS and the
  SNP
• Financial Statements and monthly/budgetary
  reports
• Standard Form-133 (SF-133), Accounting Report
  (Monthly) 1307 (AR(M) 1307), and DD 725
• Financial statements and the footnotes
• Comparative period analysis

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Supporting Disclosures

• Supporting Consolidating/Combining Statements
• The General Fund displays the Navy and Marine
  Corps separately
• The NWCF segregated into activity groups
• Both have a Component Level

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Supporting Disclosures (contd)

• Required Supplementary Stewardship Information
  (RSSI)
• Only for the General Fund Heritage Assets,
  Stewardship Land, and RD Investment
• Required Supplementary Information (RSI)
• The General Fund includes the Disaggregated
  Statement of Budgetary Resources
• Both entities include
• The cost of deferred maintenance and sustainment
• Detailed information about intra-governmental
  transactions
• Other Accompanying Information
• Appropriation reference for the the legislative
  authority to conduct business, or carry out the
  mission

These elements are only produced at fiscal year
end.
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Supporting Disclosures (contd)

• In addition to the elements mentioned on the
  previous slide, the RSI has three parts A, B,
  and C. These parts should reconcile with other
  components of the annual financial report.
• Part A, DoD Intragovernmental Asset Balances
• Part B, DoD Intragovernmental Entity Liabilities
• Part C, DoD Intragovernmental Revenue and Related
  Costs
• Lets take a closer look at Part A for the DON
  GF.
• Total Fund Balance with Treasury reported should
  reconcile with amounts reported on the balance
  sheet, Note 2, and Note 3. However, Part A and
  Note 3 do not separate the amount by entity and
  non-entity.
• Total Accounts Receivable reported here should
  reconcile with the amounts reported on the
  balance sheet and in Note 5.
• Total Investments as reported by the DON GF
  should reconcile with the amount reported in Note
  4.
• Total Other Assets reported should reconcile with
  amounts reported as Other Assets-Intragovernmental
  .

FY 2004 DON Annual Financial Report DON General
Fund, RSI Part A Pg 145
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Who Cares? The Audit Opinions

• The final pages of the annual financial
  report are designated for the audit opinion.
• Disclaimer of Opinion basically, the auditors
  cant tell where to start
• Unqualified Opinion buy stock in the DON
• Qualified Opinion except for a few glitches,
  were on target
• Adverse Opinion running amuck

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How does the Future Look?

• Future Vision
• Edit out that statement At times, the Department
  is unable to implement all elements of the
  financial accounting standards due to financial
  management system limitations see FY 2004 DON
  Annual Financial Report, pg 49
• Limited data collected outside our financial
  systems focus on analysis rather than
  compilation
• Increase visibility and accountability for
  operational managers

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When will we get there?

• DON Financial Improvement Plan designed to get
  us to clean by FY 2007
• Command level statements
• Repair broken processes
• Prepare for audit

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Questions?
DON General Fund Steve Sninsky phone
202.685.6733 steve.sninsky_at_navy.mil Navy
Working Capital Fund Lessie Turner phone
202.685.6738 lessie.turner_at_navy.mil FMO
Website http//www.fmo.navy.mil