Reconciling a Working Capital Fund’s Budgetary and Proprietary Ledgers
A Defense Finance and Accounting Service accountant is closing the first quarter for a working capital fund activity. The proprietary trial balance shows Fund Balance with Treasury (USSGL 1010) of $4,200,000; Accounts Payable (2110) of $860,000; Revenue from Sales (5200) of $1,900,000; Cost of Goods Sold (7300) of $1,450,000; Inventory (1540) of $620,000; and Unexpended Appropriations (3100) of $2,300,000. The accountant finds a $75,000 disbursement recorded in the proprietary accounts but not in the budgetary accounts, and a $40,000 collection recorded as a deposit in transit but not yet reflected in Fund Balance with Treasury. A $120,000 obligation for an undelivered order was recorded in the prior year and remains valid; no expense has been recorded. The accountant also discovers that a $50,000 purchase exceeded the available obligation authority by $8,000. The activity is self-sustaining, and the accountant must prepare a reconciliation, determine the correct balances, and decide whether an Anti-Deficiency Act violation must be reported.
1. What is the effect of the $75,000 unmatched disbursement and the $40,000 collection on Fund Balance with Treasury and on the budgetary-versus-proprietary reconciliation?
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The $75,000 disbursement has already reduced proprietary Fund Balance with Treasury, but because no budgetary entry was made, the budgetary ledger still shows the related authority as available. The reconciliation will therefore show a $75,000 difference: proprietary FBWT is lower than the budgetary records imply. The $40,000 collection recorded as a deposit in transit but not in FBWT means the proprietary asset is understated by $40,000; it should be reclassified from the suspense or deposit-in-transit account to FBWT when the deposit clears. Correct FBWT is therefore approximately $4,240,000, assuming the $75,000 disbursement is valid and properly recorded in proprietary accounts. The reconciliation must separately identify the $75,000 as an unmatched disbursement requiring a budgetary entry and the $40,000 as a timing difference, not net them together as an unexplained variance.
2. Prepare the correcting entries and explain how the $120,000 undelivered order should be treated.
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For the $75,000 disbursement, the proprietary entry already exists (debit the appropriate expense or asset and credit FBWT). The missing budgetary entry should reduce available budgetary resources and record the status of the funds, using the activity’s established USSGL budgetary accounts. The exact accounts depend on the transaction, but the entry must align the budgetary ledger with the proprietary disbursement. For the $40,000 collection, debit Fund Balance with Treasury and credit the deposit-in-transit or suspense account once the deposit is confirmed. For the $120,000 undelivered order, no expense should be recorded until the goods or services are received. The obligation remains valid and should stay in the undelivered-order balance; it is not an error merely because no expense has been recorded. The accountant should verify that the obligation has not expired and that it reconciles to the open-order report.
3. Is the $8,000 overobligation an Anti-Deficiency Act violation? What must the accountant do?
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Yes, if the $50,000 purchase created an obligation exceeding available obligation authority by $8,000, that is an Anti-Deficiency Act violation. The accountant must not conceal or reclassify the overobligation. The accountant should record the transaction accurately, document the available authority and the excess, notify the activity’s funds-control officer and agency head, and support the required administrative investigation and report. The agency must report the violation through the prescribed channels. Corrective action includes freezing further obligations against the affected authority, determining whether additional lawful authority exists, and implementing controls to prevent recurrence. The $75,000 unmatched disbursement should also be reviewed to determine whether it reflects an unrecorded obligation or an unauthorized disbursement; if so, it may be a separate ADA issue requiring the same reporting discipline.