Financial Reporting Review of the Federal Government
Unique Characteristics of the Federal Government That Necessitate Special Accounting and Reporting Practices
The federal government and its entities are required to be responsible to various stakeholders such as investors, creditors, other government units, elected members of Congress, and citizens, unlike the case of private entities. The process of monitoring financial reporting encompasses collecting and interpreting data through control functions undertaken using the provided financial reports. Essentially, financial reporting entails reporting information on financial performance, financial position, cash inflow, and outflows for a given fiscal period. According to Indayan (2020), every government should develop financial reports based on established standards by accounting to facilitate comparability and consistency. Further, financial reporting for the federal government should provide reliable and relevant information to meet the government’s accountability needs. Financial reports play an important role in ensuring various information needs by different parties are satisfied, encompassing budgetary requirements, liquidity needs, and compliance with set regulations.
Various unique characteristics of the federal government necessitate special accounting and reporting practices apart from the general ones mentioned above. First, the federal government has unique responsibilities that require special accounting and reporting practices. For example, the commitment to implement social incentives, Medicare benefits, and social security programs is unique to the federal government and thus needs special accounting and reporting practices. Second, the federal government has immense powers that call for special accounting and reporting practices. For instance, the federal government has powers to regulate businesses, tax them and print currency. Essentially, these are unique features that can only be associated with the federal government and require special accounting and reporting practices. Third, the federal government handles diverse and multiple resources that are not universal to other organizations and, thus, require special accounting. For example, it handles gold storage, military hardware, national parks, and monuments that are not handled by any other body. Notably, these are the unique aspects that call for special accounting and reporting.
The Audit Type Performed, the Issued Audit Opinion, and the Auditor’s Rationale for That Opinion on the Most Recent Federal Government Financial Statement
All financial reporting by governments should be subjected to independent auditing. Internal or external auditors can perform auditing. In the case of the federal government, an internal audit is performed concerning transactions between the federal, state, and local governments to ensure responsibility and accountability among these governments. Notably, the Government Accountability Office (GAO) is the agency that performs audit functions for the federal government (Clements, 2019). For the fiscal period that ended in 2020, the agency audited the federal government financial report and provided an audit opinion. The agency provided an opinion that federal agencies are subjected to various laws and standards, such as health and safety, employment, and appropriations. Further, the opinion asserted that the agency is tasked with ensuring compliance is met and that it is the primary focus in auditing financial reports. The audit entailed checking whether the federal government’s financial reports adhered to specific laws and regulations.
From the audit, it was established that there was non-compliance in some small cases. However, the agency asserted that the non-compliance events were small and not material enough to mislead any party that relied upon the reports to make a decision. Essentially, the reason behind this opinion was that the agency was tasked to assess the adherence of the federal government to established rules and regulations and offer an informed opinion. The opinion given that sufficient data was their primary objective in establishing if or not the presented annual reports were fair based on accounting principles. More than 35 of 40 federal government entities got a clean report from GAO upon auditing, as provided in the Federal Government’s annual report 2020.
The Eight Financial Statements the Federal Government Presents and Their Relevance to a Financial Statement User
Statement of Budgetary Resources
Based on the proposed budget, the statement of budgetary resources reports the current and future appropriations alongside the entity’s cash outlays and various newly incurred liabilities. This statement aims to ascertain how changes in the government’s cash position are related to its various budgets, such as the federal budget, interest payable, and financial assets. The statement justifies that deficits in the budget do not necessarily lead to a proportionate change in various financial assets and government cash.
Statement of Financial Position/Balance Sheet
The balance sheet expresses the federal government’s net position regarding assets, liabilities, and equity. The statement, which is primarily based on accrual accounting, highlights the government’s short-term and long-term assets. Essentially, this statement provides an insight into the government’s financial position. Users of information from this statement can rely on it to make decisions on the ability of the government to repay them if they purchase government securities. Further, information drawn from the balance sheet of the federal government is used by auditors, one of the major users of the information, to offer an opinion regarding the fairness of the statement to the general public.
Statement of Changes in Net Position
The statement of changes in net position summarizes all federal government transactions other than those reported in the net cost statement. The information from this statement highlights the financing of the entity’s net cost. Additionally, the statement covers adjustments from previous periods resulting from different appropriations. Users of information from this statement make investment decisions based on the final net position.
Statement of the Net Cost
The statement of net costs is an important statement that is entirely presented on an accrual basis accounting. Essentially, the statement provides information regarding operational program costs compared to revenues generated. Users of information from this statement evaluate the performance of government agencies based on the net costs.
Statement of Custodial Activities
The statement of custodial activities is required for entities involved in the collection of funds relayed to various agencies and the treasury. The purpose of this statement entails indicating the amounts of money transferred between the treasury and various agencies and the funds that are yet to be transferred. Users of information from this statement can anticipate the expected transfer to their agencies and, thus, make important expenditure decisions.
Statement of Financing
The financing statement links the net cost statement and the budgetary resources statement. The statement generally reconciles agency-incurred liabilities as indicated in the budget with the operational net cost based entirely on an accrual accounting basis. Further, the statement offers insight regarding the financing of various budgetary provisions. Decision makers require this statement information to compare budgeted resources and available net cost. Also, they can use the information to predict the nature of policies that are likely to be introduced by the federal government and plan on how to cope with them in advance.
Statement of Social Insurance
The statement of social insurance provides the essential estimates for social insurance programs rolled out by the federal government. Such insurance programs include Social Security and Medicare. Notably, it is important to assess the status of the most significant social insurance programs because they contribute to the social protection of citizens by improving their peace of mind and financial security. Decision makers use this statement to evaluate their anticipated gains from social insurance programs.
Statements of Changes in Social Insurance Amounts
The primary objective of this statement is to detail the reasons for shifts in social insurance programs between the prior valuation period and the current valuation period, including the changes in factors such as economic issues, policy, and demographic data and assumptions. It helps agencies in the social insurance program to budget for their financial activities.
An Opinion on Whether the Selected Financial Statement Met Its Objectives and Rationale
The department of Commerce is one of the reporting entities listed in the annual report provided by the federal government. Notably, this entity meets its goals by offering help to businesses and communities and targeted investments in science, technology, and research. As given in the federal government’s 2020 annual report, the Department of commerce meets the threshold of being a reporting entity as dictated in SFFAS No.47 requirements (Gavoor & Platt, 2020). The requirements provide that the entity has to be governed by Congress, funded through tax and non-exchange revenue, and imposed risks and rewards to the federal government. Essentially, the entity meets its objectives. Examples of how it met its objective include enhancing anti-dumping actions, countervailing duty actions, and enforcing subsidies to the government and third-country markets.
References
Clements, M. E. (2019). Financial Services Regulations: Status of GAO Recommendations to Enhance Regulatory Analyses and Interagency Coordination. United States Government Accountability Office. https://apps.dtic.mil/sti/pdfs/AD1168175.pdf
Gavoor, A. A., & Platt, S. A. (2020). Administrative Records after Department of Commerce v. New York. ADMIN. L. REV., 72, 87-93.
Indayani, B. (2020). Calculation of depreciation Fixed Assets based on Government Accounting Standards and their impact on Financial Statements. Point of View Research Accounting and auditing, 1(3), 43-48.
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Question 
Overview
The U.S. Constitution Article I, Section IX mandates that “a regular statement and account of the receipts and expenditures of all public money shall be published from time to time” by the federal government.
Two centuries after the publication of the U.S. Constitution, it is still difficult for the federal government to issue financial statements.
Financial Reporting Review of the Federal Government
In this assignment, you examine the U.S. Federal Government’s financial statements to explore the differences in these statements from other governmental financial statements and the reasons that necessitate these differences.
Instructions
Write a 3–5 page paper in which you do the following:
Discuss at least three unique characteristics of the federal government that necessitate special accounting and reporting practices, presenting at least one example for each transaction.
Choose at least three unique characteristics of the federal government that necessitate special accounting and reporting practices.
Discuss these characteristics, presenting at least one example for each one.
Accurately identify and explain the type of audit performed, the audit opinion issued, and the auditor’s reasons for that opinion, on the most recent federal government financial statement.
Each year the federal government issues an “official” comprehensive financial report that covers all its activities and is subject to audit.
Review the most recent Financial Report of the United States Government.
Explain the type of audit performed, the audit opinion issued, and the auditor’s reason for that opinion. (Auditor’s opinion is last item on Table of Contents).
Identify all eight of the financial statements presented by the federal government and the relevance of each one’s contents to a financial statement user.
In reviewing the federal government’s financial statements, you will observe more basic financial statements than were required by GASB for the local governments or by FASB for not-for-profits.
Identify each financial statement presented by the federal government and the relevance of the statement’s content to a financial statement user.
Express an opinion on whether the selected financial statement met its objectives, correctly identifying the objectives, justifying the opinion with three relative pieces of data from the Financial Report.
Congress enacted the Government Performance and Results Act of 1993, which requires federal agencies to develop strategic plans, operational objectives, and measures of performance, reporting on the extent to which the agency met its objectives.
Select one of the federal government reporting entities included in the Financial Report of the United States Government, and express an opinion on whether it is meeting its objectives. Justify your opinion with at least three pieces of data from the reporting entity’s Financial Report (reporting entities are listed in Appendix A).
Use at least three quality sources to support your writing. Choose sources that are credible, relevant, and appropriate. Cite each source listed on your source page at least one time within your assignment. For help with research, writing, and citation, access the library or review library guides.
Produce writing that contains accurate grammar, mechanics, and spelling in accordance with SWS style.