Accounting and Financial Reporting
Domain 3 tests whether you can follow a dollar through the books: budgetary and proprietary double entry, the financial statements and their notes, and the standards - FASAB's SFFAS and Treasury's USSGL - that govern them.
Two sets of books, one ledger
Budgetary accounts track authority and its status (obligations, expenditures, available balances) and feed the Statement of Budgetary Resources (SBR). Proprietary accounts record assets, liabilities, costs, and net position and feed the Statement of Net Cost, Balance Sheet, and Statement of Changes in Net Position. Both sets post for the same transaction and both must stay in balance.
Typical flow for a $100,000 fixed-price award: the obligation is recorded as Undelivered Orders - Obligations, Unpaid (USSGL 4801) against available authority; on acceptance, 4801 is reversed, an accrued expenditure (4901) plus proprietary cost and a vendor liability are recorded; payment debits the liability and credits Fund Balance with Treasury (1010).
Recognition rules
- Liabilities are recognized when probable and measurable (SFFAS 5); contingent items are disclosed in notes.
- Property, plant, and equipment is capitalized at the FASAB threshold (generally $250,000 for general PP&E), then tested for impairment.
- Net cost is program cost less exchange revenue; imputed financing - costs another agency pays on the entity's behalf - is reported as a financing source.
- Fund Balance with Treasury is reconciled monthly to Treasury records; unexplained differences are documented and cleared.
Worked example
A supply unit buys $400,000 of spare parts, accepts delivery in the last week of the fiscal year, and pays the following month. The obligation was recorded at award. At acceptance the entity records an accrued expenditure and a $400,000 liability, so the expense and the balance sheet carry the cost in the year of acceptance, not the year of payment. October payment reduces cash and the liability and creates no new obligation.
Traps that cost marks
Treating disbursement as the expense event, reporting an unpaid vendor bill as undelivered, omitting the SBR note on legal availability, capitalizing below threshold, and leaving Fund Balance with Treasury differences unexplained at year-end.