Discuss the conceptual framework of accounting for federal agencies and compare it to the conceptual framework established by the GASB for state and local governments.


The not-for-profit sector includes a vast number of entities providing various community services. Such entities usually service a mission such as providing emergency services, health services, education, etc. Many of the organizations are formed after personal experiences with a disaster, disease, etc. The Michael J. Fox foundation is such an organization that was formed by the entertainer after his medical diagnosis.
Three primary factors distinguish the not-for-profit sector from government entities. A state or local government does not elect or appoint the officers of the organization and cannot dissolve the organization. In addition, the not-for-profit organization does not have the ability to enact and enforce a tax levy.
The Financial Accounting Standards Board (FASB) provides primary guidance on principles for the not-for-profit entity. The financial reports of the not-for-profit entity include a minimum of three statements. The Statement of Financial Position, or Balance Sheet, reports the total assets, total liabilities, and net assets (the difference). The net assets are classified into three groups: unrestricted net assets, board-designated net assets (restricted or set aside by the board for a specific purpose, or temporarily restricted net assets (restrictions are placed on the assets by the donor). The statement of activities reports all changes in the net assets, by category. The statement of cash flows reports cash flows in the three categories as used by a business entity.  Some voluntary health and welfare organizations provide some services for a nominal fee. In addition to the above noted three statements, these entities must also prepare a statement of functional expenses. The expenses relate to the program, mission, or general and fundraising activities of the entity. The financial reports accompany the usual notes to provide all required disclosures.
Colleges and universities have their own unique reporting requirements. These institutions can be governmental or nongovernmental not-for-profit in nature and are often known as public or private. State governments often provide a significant portion of total revenues to public facilities while private institutions receive funds from tuition, gifts, and grants. Public institutions are required by GASB to follow the same reporting model utilized by state and local governments. The business-type activities model is primarily used. Private colleges and universities are required by FASB to report changes in net assets as a whole, just as not-for-profit organizations. The National Association of College and University Business Officers (NACUBO) provides additional guidance to colleges and universities in connection with issues unique to the industry. Information presented in accordance with NACUBO guidance must be identified.
All colleges and universities are generally subjected to the same financial audits as for-profit entities. General accepted auditing standards (GAAS) generally govern the audit. Many colleges and universities accept federal financial awards, and must also be audited under the standards outlined by the U.S. Government Accountability Office.
Institutions are supported by research grants and student loan funds from the federal government. Receipt of such funds can subject the institution to additional rules and requirements. Periodic activity reports, as well as a report at the end of the grant period, are generally required showing how the funds were used. These reports help hold the institution accountable.
Reck, J., Lowensohn, S., & Wilson, E. (2013). Accounting for governmental and nonprofit entities (16th ed.). McGraw-Hill Higher Education.
Select and research a local not-for-profit organization and a for-profit business. Document these two entities, discussing differences between the two organization types. Reference this week’s lecture to support your post.

Review the organization and financials of a chosen university. Describe some performance measures that might be used in assessing whether this university operates effectively. Using these measurements, how do you think the university is doing? Reference this week’s lecture to support your post.

The health care industry is an ever-changing sector of the economy. Health care organizations can be classified into for-profit or not-for-profit entities.  The financial reports of a health care entity include three statements: a balance sheet, a statement of operations, and a statement of cash flows.
\The balance sheet of a not-for-profit entity will include information regarding the liquidity of assets and liabilities and classify net assets into unrestricted, temporarily restricted, and permanently restricted. A governmental health care entity will classify the net position into investment in capital assets, restricted, and unrestricted. If the health care entity is a for-profit entity, an equity section will report stockholders’ equity as capital stock and retained earnings.
Not-for-profit entities have significant flexibility in displaying the results of operations. The results can be classified as operating and non-operating, earned and unearned, or recurring and nonrecurring. The report will include an indicator similar to income from continuing operations of a for-profit organization. The primary performance indicator components are unrestricted revenues, gains, and other support; expenses; and other income. Part two of the statement of operations contains a statement of changes in net assets. As the name implies, this statement discloses the change in net assets by category (unrestricted, temporary restricted, and permanently restricted).
The final statement required is the statement of cash flows. The direct method will report the cash flows categorized by operations, investing activities, and financing activities as seen in the for-profit sector. A governmental health entity statement will also include a section of cash flows from noncapital financing activities. The final section of the report reconciles the changes in net assets to net cash provided by operating activities.
The largest of the governmental entities is the Federal Government. Exhibit 17-1 of your text illustrates the many departments involved. The Federal Financial Management Improvement Act of 1996 was enacted by Congress to help improve accountability and credibility of the entity. The act requires each agency “implement and maintain financial management systems” in compliance with all applicable standards. Performance and accountability reports (PAR) are required to be submitted by the major agencies of the federal government. PAR consists of both an annual performance report and audited annual financial statements.
In order to improve accounting standards for the Federal Government, the Federal Accounting Standards Advisory Board (FASAB) was created. The board has issued six Statements of Federal Financial Accounting Concepts (SFFAC) which provide guidance on financial reporting for the Federal Government. FASAB’s web site, www.fasab.gov, provides detailed discussions of the standards.
The Department of the Treasury issues the annual “Financial Report of the United States Government” in accordance with FASAB standards. The PAR consists of an agency head message and four main sections.The agency head message discusses the mission, goals, and accomplishments of the department. A Management’s Discussion and Analysis will follow discussing the mission and structure of the agency; goals, objective, and results; financial statements; and control systems and compliance. The performance reports section will follow, discussing the actual performance and achievement of goals. The third section of the PAR will consist of the actual financial statements. The final section of the report includes information not previously covered. Summary tables include the type of audit opinion received and any material weaknesses and their status. Management’s assurances on internal controls are included in another table. The final section will also include a statement from the Inspector General regarding serious challenges facing the agency.
Reck, J., Lowensohn, S., & Wilson, E. (2013). Accounting for governmental and nonprofit entities (16th ed.). McGraw-Hill Higher Education.

The Financial Accounting Standards Board is the primary source of generally accepted accounting principles (GAAP) for all health care organizations. Do you agree with this statement? Why or why not? Reference this week’s lecture to support your post.

Discuss the conceptual framework of accounting for federal agencies and compare it to the conceptual framework established by the GASB for state and local governments. Review the financial statements of a federal department/agency and include a specific example of reporting that would differ from that of a state and local government and note the difference(s). Reference this week’s lecture to support your post.

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