July 2004 

Dear Colleague: 

The U.S. Government Accountability Office (GAO) and the President’s Council 

on Integrity and Efficiency (PCIE) maintain the GAO/PCIE Financial Audit 

Manual (FAM). The FAM provides guidance for performing financial 

statement audits of federal entities. It is a key tool for enhancing accountability 

over taxpayer-provided resources. 

GAO and PCIE are committed to keeping the FAM current. With this goal in 

mind, in October of 2003, we revised the Checklist for Reports Prepared Under 

the CFO Act (CFO Checklist), and requested comments on an exposure draft of 

the checklist. One of the key changes in the final checklist is its title, which has 

been changed to Checklist for Federal Accounting, Reporting, and 

Disclosures. This change was made to reflect the checklist’s potential 

application to any federal entity preparing annual audited financial statements 

in accordance with the Office of Management and Budget’s (OMB) form and 

content guidance. 

This checklist is located in section 1050 of the GAO/PCIE FAM. It can be 

accessed at either the GAO Web site (www.gao.gov) or the PCIE Web site 

(www.ignet.gov/pande/audit1.html#guide). We extend our thanks to the 

individuals and organizations that provided comments to make this checklist 

more effective. 

 Jeffrey C. Steinhoff The Honorable Everett L. Mosley 

Managing Director Chair 

Financial Management and Assurance President’s Council on Integrity 

U.S. Government Accountability Office and Efficiency Audit Committee 

Attachment 
United States Government Accountability Office 

President’s Council on Integrity and Efficiency 

GAO-04-942G July 2004 

 

GAO/PCIE 

FINANCIAL AUDIT MANUAL 

 

 Checklist for Federal Accounting, 

Reporting, and Disclosures 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Contents 

 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-1 

Abbreviations 2

Sections 

I. Overview 3

II. General Items related to the Financial Statements 7

III. Balance Sheet 12

IV. Statement of Net Cost 102

V. Statement of Changes in Net Position 149

VI. Statement of Budgetary Resources 161

VII. Statement of Financing 171

VIII. Statement of Custodial Activity 182

IX. Notes to Financial Statements 192

X. Supplementary Information 193

XI. Social Insurance 218
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Abbreviations 

 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-2 

AcSEC Accounting Standards Executive Committee 

AICPA American Institute of Certified Public Accountants 

CFO Act Chief Financial Officers Act of 1990 

COTS commercial off-the-shelf 

CSRS Civil Service Retirement System 

FASAB Federal Accounting Standards Advisory Board 

FASB Financial Accounting Standards Board 

FDIC Federal Deposit Insurance Corporation 

FERS Federal Employees Retirement System 

FFMIA Federal Financial Management Improvement Act of 1996 

FHA Federal Housing Administration 

FIFO first-in, first-out 

FY fiscal year 

GAAP Generally Accepted Accounting Principles 

GDP gross domestic product 

GMRA Government Management Reform Act of 1994 

GPRA Government Performance and Results Act of 1993 

HI Hospital Insurance (Medicare Part A) 

IMF International Monetary Fund 

Imple. Guide Implementation Guide 

IRS Internal Revenue Service 

LIFO last-in, first-out 

MD&A Management’s Discussion and Analysis 

MRS Military Retirement System 

NRV net realizable value 

OASDI Old Age, Survivors, and Disability Insurance (Social Security) 

OMB Office of Management and Budget 

OPEB Other Postemployment Benefits 

ORB Other Retirement Benefits 

PP&E Property, Plant, and Equipment 

RRB Railroad Retirement Benefits 

RSI Required Supplementary Information 

RSSI Required Supplementary Stewardship Information 

SFAS Statement of Financial Accounting Standards 

SFFAC Statements of Federal Financial Accounting Concepts 

SFFAS Statements of Federal Financial Accounting Standards 

SGL U.S. Government Standard General Ledger 

SMI Supplementary Medical Insurance (Medicare Part B) 

SOP Statement of Position 

TVA Tennessee Valley Authority

UI unemployment insurance 

UTF Unemployment Trust Fund
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section I Overview 

 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-3 

Introduction 

The Chief Financial Officers (CFO) Act of 1990 and the Government Management Reform Act of 

1994 require, among other mandates, that agencies’ chief financial officers submit annual 

reports to their agency heads and to the Office of Management and Budget (OMB). These 

annual reports are to contain audited financial statements of their agencies. The financial 

statements are to be presented in conformity with generally accepted accounting principles 

(GAAP).1

 The title of this checklist has been changed to Checklist for Federal Accounting, 

Reporting, and Disclosures. Previously referred to as the CFO Act Checklist, the change was 

made to reflect its potential application to any federal entity preparing annual audited financial 

statements in accordance with OMB’s proposed form and content guidelines. 

This checklist is being issued to assist agencies in preparing these statements and auditors in 

auditing them. Use of this checklist is not a requirement. Rather, it is intended to help provide 

for a systematic, organized, and structured approach to preparing or reviewing agency financial 

statements. Furthermore, it should be noted that, while the questions contained in the checklist 

are taken from authoritative sources, the checklist itself is not authoritative, nor is it a 

comprehensive guide. Preparers and auditors should also consult financial management 

regulations for the individual agencies, as the regulations may have specific guidance when the 

standards allow alternatives or management flexibility. 

Checklist Organization 

The checklist has 11 sections: an overview section, a section related to general items in the 

financial statements, a section for each of the six financial statements, and three additional 

sections. The six sections reflecting the financial statements are organized by the line items in 

financial statements to allow the user to proceed through each statement from the beginning to 

the end. The final three sections cover (1) disclosures in the notes to the financial statements 

related to significant accounting policies, (2) required supplementary stewardship information 

and required supplementary information, and (3) social insurance. 

Since the financial statements are interrelated, some questions concerning line items in one 

financial statement may also pertain to line items in another statement. For example, the 

questions covering loans receivable in the balance sheet section may also deal with matters 

related to interest income and subsidy expense appearing in the statements of financing and net 

cost sections. Because of these relationships, our general organizational approach aggregates 

related information so that questions on related line items appearing in more than one financial 

statement are covered only in the first financial statement section in which the line item 

appears. For example, questions concerning interest income and subsidy expense would 

appear only in the balance sheet section. Similarly, questions related to the notes to the 

financial statements section would also appear only under the line item of the initial financial 

statement. 

 

1

The American Institute of Certified Public Accountants recognizes the federal accounting standards promulgated by the 

Federal Accounting Standards Advisory Board (FASAB) as generally accepted accounting principles. 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section I Overview 

 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-4 

Except for sections I, II, VI, IX, and XI, the first page of each section contains a list showing the 

number of questions in the section. This checklist has 785 questions as follows. 

 General Items Related to the Financial Statements 23 

 Balance Sheet 355 

 Statement of Net Cost 180 

 Statement of Changes in Net Position 39 

 Statement of Budgetary Resources 27 

 Statement of Financing 27 

 Statement of Custodial Activity 27 

 Notes to Financial Statements (Significant 

 Accounting Policies) 5 

 Supplementary Information 78 

 Social Insurance 24 

 

Authoritative Guidance 

Each question in this guide is referenced to a source. The sources cited are (1) the Statements 

of Federal Financial Accounting Standards (SFFAS) and (2) OMB Bulletin 01-09, Form and 

Content of Agency Financial Statements. 

FASAB statements include Statements of Federal Financial Accounting Concepts (SFFAC) and 

Statements of Federal Financial Accounting Standards (SFFAS). The three approved 

accounting concept statements are #1 Objectives of Federal Financial Reporting, 1993, #2 

Entity and Display, 1995, and #3 Management’s Discussion and Analysis, 1999. The 24 

SFFAS standards2

 covered in this checklist are: 

1. Accounting for Selected Assets and Liabilities, 1993. 

2. Accounting for Direct Loans and Loan Guarantees, 1993. 

3. Accounting for Inventory and Related Property, 1993. 

4. Managerial Cost Accounting Concepts and Standards, 1995. 

5. Accounting for Liabilities of the Federal Government, 1995. 

6. Accounting for Property, Plant, and Equipment, 1995. 

7. Accounting for Revenue and Other Financing Sources, 1996. 

8. Supplementary Stewardship Reporting, 1996. 

9. Deferral of the Effective Date of Managerial Cost Accounting Standards for the 

Federal Government in SFFAS No. 4, 1997. 

10. Accounting for Internal Use Software, 1998. 

11. Amendments to Accounting for Property, Plant, and Equipment - Definitional 

Changes, 1998.3

12. Recognition of Contingent Liabilities Arising from Litigation, 1998.

 

2

FASAB promulgates accounting standards after considering the financial and budgetary information needs of Congress, 

executive agencies, other users of federal financial information, and comments from the public. 3

SFFAS 11 was rescinded in its entirety by SFFAS 23. 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section I Overview 

 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-5 

13. Deferral of Paragraph 65.2 – Material Revenue-Related Transactions 

Disclosures, 1999.

14. Amendments to Deferred Maintenance Reporting, 1999. 

15. Management’s Discussion and Analysis, 1999. 

16. Amendments to Accounting for Property, Plant, and Equipment – Measurement 

and Reporting for Multi-Use Heritage Assets, 1999. 

17. Accounting for Social Insurance, 1999. 

18. Amendments to Accounting Standards For Direct Loans and Loans Guarantees, 

2000. 

19. Technical Amendments to Accounting Standards for Direct Loans and Loan 

Guarantees, 2001.

20. Elimination of Certain Disclosures Related to Tax Revenue Transactions by the 

Internal Revenue Service, Customs and Others, 2001.

21. Reporting Corrections of Errors and Changes in Accounting Principles, 2001. 

22. Change in Certain Requirements for Reconciling Obligations and Net Cost of 

Operations, 2001. 

23. Eliminating the Category National Defense Property, Plant, and Equipment, 

2003. 

25. Reclassification of Stewardship Responsibilities and Eliminating the Current 

Services Assessment, 2003.4

SFFAC 4, Intended Audience and Qualitative Characteristic for the Consolidated Financial 

Report of the United States Government, and SFFAS 24, Selected Standards for the 

Consolidated Financial Report of the United States Government, are not covered in this 

checklist, as this checklist is intended for use at the agency reporting level, and is not to be used 

for the financial report of the U.S. government. 

SFFAS 7 Implementation Guide to Accounting for Revenue and Other Financing Sources, 

1996, is also covered in this checklist. OMB Bulletin 01-09 provides the detailed requirements 

for the form and content of agency financial statements. 

How to Use This Guide 

To the right of each question are two columns. The first column provides for a “yes,” “no,” or 

“N/A” (not applicable) answer to each question. The second column provides for an 

explanation of the answer to each question. A “yes” answer should indicate that the financial 

statements contain the information asked by the question. For each “yes” answer, the 

explanation column should include the page number or location in the financial statements 

where the information can be found. Also, any other information pertinent to the question and 

the response should be provided in the explanation column. 

 

4

SFFAS 25 changes reporting requirements for social insurance information required by SFFAS 17, effective for periods 

beginning after September 30, 2004, with earlier implementation encouraged. 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section I Overview 

 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-6 

An “N/A” answer might indicate that the question does not apply to the federal entity. For 

example, most federal agencies do not administer loan, loan guarantee, or loan insurance 

programs and, therefore, do not have credit program receivables and related property. 

Consequently, the questions on these receivables, property, and subsidies would not apply. A 

simple explanation indicating that the reporting entity does not administer loan programs 

would appear in the explanation column of the first question in the series. 

A “no” answer indicates that the information asked for in the question is not included in the 

financial statements, notes, or supplementary information, respectively. The explanation 

column should describe in sufficient detail why the information is not included. 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section II 

General Items Related to the Financial Statements 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-7 

There are 23 questions in this section. All the questions relate to the overall financial 

statements and are not further divided into categories. 

General Items (1 – 23) 

Yes, 

No 

or 

N/A

Explanation 

1. Does the entity's annual financial statement consist 

of the following items? 

a. management’s discussion and analysis (MD&A) 

of the reporting entity 

b. basic statements and related notes 

c. required supplementary stewardship 

information (RSSI) 

d. required supplementary information (RSI) 

e. other accompanying information (OAI) that 

provides users of the financial statements with a 

better understanding of the entity’s programs 

and the extent to which program objectives are 

achieved (OMB Bulletin 01-09, p. 4, section 1.5)

 

2. Do the basic statements include? 

a. Balance Sheet 

b. Statement of Net Cost 

c. Statement of Changes in Net Position 

d. Statement of Budgetary Resources 

e. Statement of Financing 

f. Statement of Custodial Activity 

(OMB Bulletin 01-09, pp. 4 & 5, section 1.5)

 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section II 

General Items Related to the Financial Statements 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-8 

General Items (1 – 23) 

Yes, 

No 

or 

N/A

Explanation 

3. Does the entity use the following hierarchy as its 

sources of guidance in preparing its financial 

statements? 

a. FASAB Statements and Interpretations as well 

as American Institute of Certified Public 

Accountants (AICPA) and Financial Accounting 

Standards Board (FASB) pronouncements if 

made applicable to federal government entities 

by a FASAB Statement or Interpretation 

b. FASAB technical bulletins and, if specifically 

made applicable to federal government entities 

by AICPS and cleared by FASAB, AICPA 

Industry Audit and Accounting Guides and 

AICPA Statements of Position 

c. AICPA Accounting Standards Executive 

Committee (AcSEC) Practice Bulletins if 

specifically made applicable to federal 

government entities and cleared by FASAB, as 

well as Technical Releases of the Accounting 

and Auditing Policy Committee of FASAB 

d. Implementation guides published by FASAB 

staff and practices that are widely recognized 

and prevalent in the federal government 

e. In the absence of a pronouncement covered by 

federal Generally Accepted Accounting 

Principles (GAAP) or another source of 

established principles, other accounting 

literature, depending on its relevance in the 

circumstances.5

 (OMB Bulletin 01-09, p. 2, 

section 1.2 & p. 13, section 2.1, item B)

 

4. Does the entity present comparative information 

and related footnote disclosures for the current year 

and prior year for the six basic financial statements, 

and MD&A? (OMB Bulletin 01-09, p. 5, section 1.6 & 

p. 13, section 2.1, item F) 

 

 

5

Other accounting literature includes for example, FASAB Concept Statements, Governmental Accounting Standards Board 

(GASB) Statements, Interpretations, Technical Bulletins, and Concept Statements, and AICPA Issue Papers. 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section II 

General Items Related to the Financial Statements 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-9 

General Items (1 – 23) 

Yes, 

No 

or 

N/A

Explanation 

5. Does the entity present comparative information in 

the RSSI and RSI when the information would be 

meaningful to the user of the financial report? 

(OMB Bulletin 01-09, p. 5, section 1.6) 

 

6. Do the quarterly interim statements include full 

accruals and are intra-entity transactions 

eliminated? (OMB Bulletin 01-09, p. 14, section 2.1, 

item G) 

 

7. Are these interim statements prepared on a 

comparative basis?6

 (OMB Bulletin 01-09, p. 14, 

section 2.1, item G) 

 

8. To the extent that information is not available on a 

quarterly basis, has the entity developed reliable, 

alternative means of estimating quarterly amounts 

and balances? (OMB Bulletin 01-09, p. 14, 

section 2.1, item G) 

 

9. When an entity presents disaggregated information 

for component organizations, does the total column 

for the entity as a whole reflect consolidated totals 

net of intra-entity transactions, except for the 

Statement of Budgetary Resources, which is 

presented on a combined basis? 

(OMB Bulletin 01-09, p. 14, section 2.1, item H) 

 

When a reporting entity presents its financial statements in a single column format, the 

statements are referred to as consolidated statements. With the exception of the Statement of 

Budgetary Resources, financial statements that use a multicolumn format to present 

information on an entity’s major components or lines of business as well as the consolidated 

amounts are referred to as consolidating statements. (OMB Bulletin 01-09, p. 14, section 

2.1, item H) 

10. Are intra-entity transactions needed to arrive at the 

consolidated amounts presented in a column on the 

face of the consolidating statements? 

(OMB Bulletin 01-09, p. 14, item H) 

 

 

6

Interim financial statements shall be prepared on a comparative basis beginning 1 year following their initial preparation. That 

is, statements shall be comparative for fiscal year 2004 for the year-to-date ending December 31, 2003, March 31, 2004, and June 

30, 2004. 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section II 

General Items Related to the Financial Statements 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-10 

General Items (1 – 23) 

Yes, 

No 

or 

N/A

Explanation 

11. Has the entity provided assurance of the following? 

a. information in the financial statements is 

presented in accordance with federal GAAP 

b. the underlying records fully support the 

information (OMB Bulletin 01-09, p. 14, 

section 2.1, item J) 

 

12. Does the reporting entity include franchise funds 

and other intragovernmental support revolving 

funds among the activities covered by its financial 

statements? (OMB Bulletin 01-09, p. 15, section 2.1, 

item K & p. 113, section 11.6) 

 

13. If information about the assets, liabilities, costs, and 

revenues of these franchise funds and 

intragovernmental support revolving funds are not 

separately reported on the entity’s basic financial 

statements, then is condensed information reported 

as required supplemental information in accordance 

with the applicable SFFAS and required segment 

information? (OMB Bulletin 01-09, p. 15, 

section 2.1, item K & p. 113, section 11.6) 

 

14. Does the entity report its assets, liabilities, and net 

position by the lines displayed in the illustrative 

Balance Sheet and Statement of Changes in Net 

Position in OMB Bulletin 01-09? 

(OMB Bulletin 01-09, p.15, section 2.1, item L) 

 

15. If the entity aggregates such illustrated line items in 

reporting at the departmental level, is the 

composition of the aggregated line items disclosed? 

(OMB Bulletin 01-09, p.15, section 2.1, item L) 

 

16. Conversely, if the entity disaggregates such line 

items in its departmental statements, does the entity 

report or disclose the total of the disaggregated line 

items? (OMB Bulletin 01-09, p.15, section 2.1, 

item L) 

 

17. Are line items, which are immaterial but related in 

nature, combined? (OMB Bulletin 01-09, p. 15, 

section 2.1, item M) 

 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section II 

General Items Related to the Financial Statements 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-11 

General Items (1 – 23) 

Yes, 

No 

or 

N/A

Explanation 

18. Are discrete balances of an immaterial amount 

designated as “other?” (OMB Bulletin 01-09, p. 15, 

section 2.1, item M)” 

 

19. If not, are these material balances separately 

reported and designated by name? 

(OMB Bulletin 01-09, p. 15, section 2.1, items M & N) 

 

20. Are the statement line items, footnotes, and lines 

or columns in footnotes that do not apply or are not 

informative for the reporting entity excluded? 

(OMB Bulletin 01-09, p. 15, section 2.1, item O) 

 

21. Do schedule totals presented in the footnotes, in 

support of amounts presented in financial 

statements, agree with the amounts presented in the 

body of the financial statements? 

(OMB Bulletin 01-09, p. 15, section 2.1, item P) 

 

22. When presenting dollar amounts in the statements 

and the notes, does the entity do the following? 

a. round dollar amounts to the nearest whole 

dollar, thousand, or million based upon 

informative value to the reporting entity 

b. maintain the chosen rounding level throughout 

the financial statements and footnotes 

c. ensure that individual line items add up to the 

totals by adjusting the line items for the 

differences created by the rounding process 

rather than adjusting column totals 

(OMB Bulletin 01-09, p. 16, section 2.1, item Q) 

 

23. Are footnotes sequentially numbered? 

(OMB Bulletin 01-09, p. 16, section 2.1, item S) 

 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section III 

Balance Sheet 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-12 

The questions related to the balance sheet are contained under 23 line items. The question 

numbers related to each line item follow. 

 Question numbers 

 General items 1 - 6 

 

 Assets 

 1. Fund Balance with Treasury 7 - 22 

 2. Investments 23 - 32 

 3. Accounts Receivable (Net) 33 - 49 

 4. Interest Receivable (Net) 50 - 54 

 5. Credit Program Receivables 55 - 96 

 6. Cash and Other Monetary Assets 97 - 102 

 7. Inventory and Related Property 103 - 125 

 8. Operating Materials and Supplies 126 - 137 

 9. Stockpile Materials 138 - 150 

 10. Seized Property 151 - 158 

 11. Forfeited Property 159 - 172 

 12. Goods Held Under Price Support and 

 Stabilization Programs 173 - 186 

 13. General Property, Plant, and Equipment (Net) 187 - 233 

 14. Software 234 - 262 

 15. Other Assets 263 - 268 

 Liabilities 

 16. Liabilities in General 269 - 272 

 17. Accounts Payable and Interest Payable 273 - 280 

 18. Liabilities for Loan Guarantees 281 - 294 

 19. Lease Liabilities 295 - 300 

 20. Federal Debt and Related Interest 301 - 311 

 21. Pensions, Other Retirement Benefits, and 

 Postemployment Benefits 312 - 319 

 22. Other Liabilities 320 - 353 

Net Position 

 23. Unexpended Appropriations and Cumulative 

 Results of Operations 354 - 355
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section III 

Balance Sheet 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-13 

General Items (1 - 6) 

Yes, 

No 

or 

N/A

Explanation 

The Balance Sheet presents, as of a specific time, amounts of future economic benefits owned 

or managed by the reporting entity exclusive of items subject to stewardship reporting 

(assets), amounts owed by the entity (liabilities), and amounts that comprise the difference 

(net position). (SFFAC 2, par. 57; OMB Bulletin 01-09, p. 17, section 3.1) 

1. Are entity and nonentity assets combined on the 

face of the balance sheet?7

 (OMB Bulletin 01-09, 

p. 17, section 3.1 and p. 19, section 3.3) 

 

2. Are the amounts and types of nonentity assets 

disclosed in a note to the financial statements? 

OMB Bulletin 01-09, p. 17, section 3.1; p. 19, 

section 3.3; p. 56, section 9.2) 

 

Liabilities covered by budgetary resources are liabilities covered by realized budgetary 

resources as of the balance sheet date. Budgetary resources encompass not only new budget 

authority but also other resources available to cover liabilities for specified purposes in a 

given year. Available budgetary resources include (1) new budget authority, (2) unobligated 

balances of budgetary resources at the beginning of the year or net transfers of prior year 

balances during the year, (3) spending authority from offsetting collections (credited to an 

appropriation or fund account), and (4) recoveries of unexpired budget authority through 

downward adjustments of prior year obligations. Liabilities are considered covered by 

budgetary resources if they are to be funded by permanent indefinite appropriations or 

borrowing authority, which have been enacted and signed into law as of the balance sheet 

date, provided that the resources may be apportioned by OMB without further action by the 

Congress and without a contingency having to be met first. (OMB Bulletin 01-09, p. 24, 

section 3.4)

3. Are liabilities covered by budgetary resources and 

liabilities not covered by budgetary resources 

combined on the face of the balance sheet? 

(OMB Bulletin 01-09, p. 17, section 3.1, p. 24, 

section 3.4) 

 

4. Are liabilities not covered by budgetary resources 

disclosed in a note to the financial statements? 

(OMB Bulletin 01-09, p. 17, section 3.1 & pp. 78 & 79, 

section 9.12) 

 

 

9

Entity assets are assets that the reporting entity has authority to use in its operations. Nonentity assets are assets that are held 

by an entity but are not available to the entity, for example, income tax receivables. (OMB Bulletin 01-09, p. 19, section 3.3). 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section III 

Balance Sheet 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-14 

General Items (1 - 6) 

Yes, 

No 

or 

N/A

Explanation 

5. Does the Balance Sheet display assets, liabilities, 

and net position? (OMB Bulletin 01-09, p. 18, 

section 3.2) 

 

Intragovernmental assets arise from transactions among federal entities. Intragovernmental 

assets represent claims of a federal entity against other federal entities. Intragovernmental 

liabilities are claims against the reporting entity by other federal entities. (OMB Bulletin 

01-09, p. 19, section 3.3; p. 24, section 3.4)

6. Are intragovernmental assets and liabilities 

reported separately from transactions with nonfederal entities, including the Federal Reserve and 

government sponsored enterprises?8

 

(OMB Bulletin 01-09, p. 19, section 3.3 & p. 24, 

section 3.4) 

 

 

8

Government sponsored enterprises are federally chartered but privately owned and operated entities. 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section III 

Balance Sheet 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-15 

Assets 

Fund Balance with Treasury (7 – 22) 

Yes, 

No 

or 

N/A

Explanation 

A federal entity's fund balance with the Treasury is the aggregate amount of funds in the 

entity's accounts with Treasury for which the entity is authorized to make expenditures and 

pay liabilities. Fund balance with Treasury includes clearing account balances and the 

dollar equivalent of foreign currency account balances. From the reporting entity's 

perspective, a fund balance with Treasury is an asset. From the perspective of the federal 

government as a whole, the fund balance is neither an asset nor a liability; it instead 

represents a commitment to make resources available to federal departments, agencies, 

programs, and other entities. (SFFAS 1, par. 31 & 32) 

7. Is the fund balance with Treasury reported as an 

intragovernmental asset? (SFFAS 1, par. 31; 

OMB Bulletin 01-09, p. 18, section 3.2) 

 

8. Are amounts disclosed as fund balances in deposit, 

suspense, and clearing accounts that are not 

available to finance entity activities reported as 

nonentity assets? (OMB Bulletin 01-09, p. 19, 

section 3.3) 

 

9. Are foreign currency account balances reported on 

the balance sheet translated into U.S. dollars at 

exchange rates determined by the Treasury and 

effective at the financial reporting date? (SFFAS 1, 

par. 32; OMB Bulletin 01-09, p. 19, section 3.3) 

 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section III 

Balance Sheet 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-16 

Assets 

Fund Balance with Treasury (7 – 22) 

Yes, 

No 

or 

N/A

Explanation 

10. Does the entity's fund balance with Treasury also 

include the following? 

a. clearing account balances 

b. balances for direct loan and loan guarantee 

activities held in the credit reform program, 

financing, and liquidating accounts 

c. funds actually borrowed from Treasury under 

statutory authority 

d. the dollar equivalent of foreign currency account 

balances (SFFAS 1, par. 32 & 35)

 

11. Does the entity’s fund balance with Treasury 

exclude contract authority9

 or unused authority to 

borrow? (SFFAS 1, par. 34) 

 

12. Does the entity record an increase in its fund 

balance with Treasury when it does at least one of 

the following? 

a. receives appropriations, reappropriations, 

continuing resolutions, appropriation 

restorations, and allocations 

b. receives transfers and reimbursements from 

other agencies 

c. borrows from the Treasury, Federal Financing 

Bank, or other entities 

d. collects and credits amounts to its 

appropriations or fund accounts that the entity 

is authorized to spend or use to offset its 

expenditures (SFFAS 1, par. 33)

 

 

9

Contract authority is a statutory authority under which contracts or other obligations may be entered into prior to receiving an 

appropriation for the payment of obligations.
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section III 

Balance Sheet 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-17 

Assets 

Fund Balance with Treasury (7 – 22) 

Yes, 

No 

or 

N/A

Explanation 

13. Does the entity record a decrease in its fund 

balance with Treasury when each of the following 

occurs? 

a. disbursements are made to pay liabilities or to 

purchase assets, goods, and services 

b. investments are made in U.S. securities 

c. expired appropriations are canceled 

d. transfers and reimbursements are made to other 

entities or to the Treasury 

e. appropriations are sequestered or rescinded 

(SFFAS 1, par. 36)

 

14. Does the entity distinguish funds within fund 

balance with Treasury as the obligated balance not 

yet disbursed10 and the unobligated balance11 in a 

note to the financial statements? (SFFAS 1, par. 37; 

OMB Bulletin 01-09, p. 57, section 9.3, item B) 

 

15. Are fund balances that agencies were authorized to 

use disclosed by fund type (e.g., trust funds, 

revolving funds, appropriated funds, other fund 

types)? (OMB Bulletin 01-09, pp. 56 & 57, 

section 9.3, item A) 

 

16. Are any restrictions on unobligated balances related 

to future use disclosed? (SFFAS 1, par. 38; 

OMB Bulletin 01-09, p. 57, section 9.3, item B) 

 

 

10The obligated balance not yet disbursed is the amount of funds against which budgetary obligations have been incurred, but 

disbursements have not been made. 

11The unobligated balance is the amount of funds available to the entity against which no claims have been recorded. (SFFAS 1, 

par. 38) 
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Assets 

Fund Balance with Treasury (7 – 22) 

Yes, 

No 

or 

N/A

Explanation 

17. Does the entity explain any discrepancies between 

fund balance with Treasury in its general ledger 

accounts and the balance in the Treasury’s accounts 

and explain the causes of the discrepancies in 

footnotes to the financial statements?12 (SFFAS 1, 

par. 39; OMB Bulletin 01-09, p. 57, section 9.3, 

item C) 

 

18. Does the entity disclose any other information 

necessary for understanding the nature of the fund 

balances, including information on unused funds in 

expired appropriations that are returned to 

Treasury at the end of a fiscal year? (SFFAS 1, 

par. 39; OMB Bulletin 01-09, p. 57, section 9.3, item 

C) 

 

19. Are balances in deposit accounts, such as 

collections pending litigation or funds being held by 

the entity in the capacity of a banker or agent for 

others, disclosed under “other fund types?” 

(OMB Bulletin 01-09, p. 57, section 9.3, item A) 

 

20. If, however, any of the balances under “other fund 

types” are material, are they listed separately? 

(OMB Bulletin 01-09, p. 57, section 9.3, item A) 

 

21. Is other information necessary for understanding 

the nature of the fund balances with Treasury 

disclosed? (OMB Bulletin 01-09, p.57, section 9.3, 

item C) 

 

22. Are unexpended appropriations recognized as 

capital and included under funds with Treasury 

when they are made available for apportionment? 

(SFFAS 7, par. 71) 

 

 

12Discrepancies due to time lag should be reconciled and discrepancies due to error should be corrected when financial reports 

are prepared. 
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Assets 

Investments (23 – 32) 

Yes, 

No 

or 

N/A

Explanation 

Investments in federal (i.e., treasury) securities include (1) nonmarketable par value 

Treasury securities, (2) market-based Treasury securities expected to be held to maturity, 

(3) marketable Treasury securities expected to be held to maturity, and (4) securities issued 

by other federal entities. Nonfederal securities include those issued by state and local 

governments, private corporations, and government-sponsored enterprises. (SFFAS 1, par. 

62; OMB Bulletin 01-09, p. 20, section 3.3) 

23. Are investments in federal securities reported 

separately from investments in nonfederal 

securities? (SFFAS 1, par. 67; OMB Bulletin 01-09, 

p. 20, section 3.3) 

 

24. Are investments in federal securities initially 

recorded and reported at their acquisition cost or 

amortized acquisition cost (less an allowance for 

losses, if any)? (SFFAS 1, par. 68 & 69; 

OMB Bulletin 01-09, p. 20, section 3.3) 

 

25. Are investments in federal securities acquired in 

exchange for nonmonetary assets recognized at the 

fair market value of either the securities acquired or 

the assets given up, whichever is more definitively 

determinable? (SFFAS 1, par. 68) 

 

26. Subsequent to acquisition, are investments in 

federal securities reported at their carrying amount 

(i.e., acquisition cost) adjusted for amortized 

premium or discount? (SFFAS 1, par. 70-71; 

OMB Bulletin 01-09, pp. 59 & 60, section 9.5) 

 

27. Is the interest method (i.e., effective interest rate 

multiplied by the carrying amount) used in 

amortizing the premium or discount over the life of 

the treasury security? (SFFAS 1, par. 71) 

 

28. Is the market value of market-based and marketable 

securities disclosed? (SFFAS 1, par. 72; 

OMB Bulletin 01-09, pp. 59 & 60, section 9.5) 

 

29. Are investments grouped by type of security, such 

as marketable or market-based Treasury securities? 

(SFFAS 1, par. 72) 

 
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Assets 

Investments (23 – 32) 

Yes, 

No 

or 

N/A

Explanation 

30. Are investment securities, which are initially 

expected to be held to maturity, reclassified as 

securities available for sale or early redemption, if 

significant unforeseeable circumstances cause a 

change in the entity’s intent or ability to hold these 

securities to maturity? (SFFAS 1, par. 72 & 73; 

OMB Bulletin 01-09, pp. 59 & 60, section 9.5) 

 

31. If so, is the market value of such securities 

disclosed? (SFFAS 1, par. 72 & 73; 

OMB Bulletin 01-09, pp. 59 & 60, section 9.5) 

 

32. Does the entity disclose any other information 

relative to understanding the nature of reported 

investments, such as permanent impairments? 

(OMB Bulletin 01-09, p. 60, section 9.5, item B) 

 
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Assets 

Accounts Receivable (33 – 49) 

Yes, 

No 

or 

N/A

Explanation 

33. Is a receivable recognized when a federal entity 

establishes a claim to cash or other assets against 

other entities based on legal provisions or when 

goods or services are provided? (SFFAS 1, par. 41) 

 

34. If the exact amount of a receivable is unknown, is a 

reasonable estimate made? (SFFAS 1, par. 41) 

 

35. Are receivables from federal entities reported as 

intragovernmental receivables, and reported 

separately from receivables from nonfederal 

entities? (SFFAS 1, par. 42; OMB Bulletin 01-09, 

p. 19, section 3.3) 

 

Entity receivables are amounts due from other federal or nonfederal entities that the federal 

entity is authorized by law to include in its obligational authority or to offset its 

expenditures and liabilities upon collection. Nonentity receivables are amounts that the 

entity is to collect on behalf of the federal government or other entities, and the entity is not 

authorized to spend. (SFFAS 1, par. 43) 

36. Are receivables not available to an entity disclosed 

in a note to the financial statements as nonentity 

assets, separate from receivables available to the 

entity? (SFFAS 1, par. 43; OMB Bulletin 01-09, p. 19, 

section 3.3 & p. 56, section 9.2) 

 

37. Are losses on receivables recognized when it is 

more likely than not (greater than a 50 percent 

chance of occurrence) that the receivables will not 

be totally collected? (SFFAS 1, par. 44) 

 

38. Is an allowance for estimated uncollectible amounts 

recognized to reduce the gross amount of 

receivables to their net realizable value, and is this 

allowance reestimated on each annual financial 

reporting date and when information indicates that 

the latest estimate is no longer correct? (SFFAS 1, 

par. 45) 

 

39. Is an allowance for uncollectible amounts based on 

an analysis of both individual accounts receivable 

and groups of accounts receivable as prescribed by 

the standards? (SFFAS 1, par. 47-51; SFFAS 7, 

par. 56) 

 
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Assets 

Accounts Receivable (33 – 49) 

Yes, 

No 

or 

N/A

Explanation 

40. Are accounts that represent significant amounts 

individually analyzed to determine the loss 

allowance? (SFFAS 1, par. 47) 

 

41. Is the loss estimation for individual accounts based 

on the following? 

a. debtor's ability to pay 

b. debtor's payment record and willingness to pay 

c. probable recovery of amounts from secondary 

sources including liens, garnishments, cross 

collections, and other applicable collection tools 

(SFFAS 1, par. 47)

 

42. If information is not available to make a reliable 

assessment of losses on an individual account basis 

or if the nature of the receivables does not lend 

itself to individual account analysis, are the 

potential losses assessed on a group basis? 

(SFFAS 1, par. 48) 

 

43. If potential losses are assessed on a group basis, are 

the receivables separated into groups of 

homogeneous accounts with similar risk 

characteristics? (SFFAS 1, par. 49-51) 

 

44. Does the reporting entity disclose the following? 

a. major categories of accounts receivable by 

amount and type 

b. methodology used to estimate the allowance for 

uncollectible amounts 

c. dollar amount of the allowance for uncollectible 

accounts (SFFAS 1, par. 52; OMB Bulletin 01-09, 

p. 60, section 9.6)

 
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Assets 

Accounts Receivable (33 – 49) 

Yes, 

No 

or 

N/A

Explanation 

45. Is an account receivable arising from a 

nonexchange transaction recognized when a 

collecting entity establishes a specifically 

identifiable, measurable, and legally enforceable 

claim to cash or other assets through its established 

assessment processes to the extent the amount is 

measurable? (SFFAS 7, par. 53, footnote 9, 61-63) 

 

46. Are assessments recognized as accounts receivable 

if an enforceable claim for taxes and duties exists in 

the following instances? 

a. tax returns filed by the taxpayer without 

sufficient payment 

b. customs documents filed by the importer 

without sufficient payment 

c. taxpayer agreements to assessments at the 

conclusion of an audit or to substitute for a tax 

return (or importer agreements to supplemental 

assessments) 

d. court actions determining an assessment 

e. taxpayer (or importer) agreements to pay an 

assessment on an installment plan 

f. receivables determined to be currently not 

collectible, but with future collection potential 

(SFFAS 7, par. 53, 54, 170, & 171)

 

47. Is an interentity receivable recognized when (1) a 

legally enforceable claim exists between a 

collecting entity and a recipient entity for the 

transfer or repayment of taxes or duties and 

(2) payment of such a claim is probable and 

measurable? (SFFAS 7, par. 60) 

 
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Assets 

Accounts Receivable (33 – 49) 

Yes, 

No 

or 

N/A

Explanation 

Compliance assessments are proposed assessments by the collecting entity in definitive 

amounts, but with which the taxpayer (or importer) still has the right to disagree or object. 

(SFFAS 7, par. 55.1) 

Preassessment works-in-process are assessments not yet officially asserted by the collecting 

entity that are subject to a taxpayer’s right to conference in response to initial information 

notices. (SFFAS 7, par. 55.2)

48. Do nonexchange-related accounts receivable for 

taxes and duties exclude the following? 

a. amounts received or due with tax returns 

received after the close of the reporting period 

b. compliance assessments 

c. preassessment work-in-process (SFFAS 7, 

par. 54)

 

49. Are compliance assessments reclassified and 

recognized as account receivables in the following 

instances? 

a. if the taxpayer files an amended tax return 

b. when customs’ protest or retention period 

lapses 

c. when court action or an appeal finally 

determines the assessment 

d. if taxpayer (or importer) agrees to pay currently 

or through an installment agreement 

e. if an offer in compromise is accepted (SFFAS 7, 

par. 55.1 & 178-180)

 
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Assets 

Interest Receivable (50 – 54) 

Yes, 

No 

or 

N/A

Explanation 

50. Is interest receivable recognized for the amount of 

interest income earned but not received for the 

accounting period, including interest earned on 

investments in interest-bearing securities? 

(SFFAS 1, par. 53; OMB Bulletin 01-09, pp. 20 & 21, 

section 3.3) 

 

51. Is interest receivable also recognized on 

outstanding accounts receivable and other U.S. 

government claims against persons and entities in 

accordance with provisions in 31 U.S.C. 3717, 

Interest and Penalty Claims?13 (SFFAS 1, par. 53) 

 

52. Does interest receivable exclude interest on 

accounts receivable or investments that are 

determined to be uncollectible unless the entity 

actually collects interest? (SFFAS 1, par. 54; 

OMB Bulletin 01-09, pp. 20 & 21, section 3.3) 

 

53. Is interest accrued on uncollectible accounts 

receivable not disclosed until (1) the interest 

payment requirement has been waived by the 

federal government or (2) the related debt has been 

written off? (SFFAS 1, par. 55) 

 

54. Is interest receivable from federal entities 

accounted for and reported separately from interest 

receivable from the public? (SFFAS 1, par. 56) 

 

 

13See also Federal Claims Collection Standards, 4 CFR Part 103 par. 102.13) 
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Assets 

Credit Program Receivables (55 – 96) 

Yes, 

No 

or 

N/A

Explanation 

The Federal Credit Reform Act of 1990, as amended, divides loans and loan guarantees into 

two groups: pre-1992 and post-1991. Pre-1992 refers to direct loan obligations or loan 

guarantee commitments made prior to fiscal year 1992; post-1991 refers to direct loan 

obligations or loan guarantee commitments made after fiscal year 1991.14 (OMB Bulletin 01-

09, p. 68, section 9.8, item A) 

55. Is interest receivable related to pre-1992 and post1991 direct loans and acquired defaulted guaranteed 

loans reported as a component of credit program 

receivables and related foreclosed property? 

(OMB Bulletin 01-09, p 21, section 3.3) 

 

56. Are credit program receivables considered an entity 

asset if at least one of the following criteria is met? 

a. The entity has the authority to determine the 

use of the funds collected. 

b. The entity is legally obligated to use the funds to 

meet entity obligations (e.g., loans payable to 

Treasury). (OMB Bulletin 01-09, p. 21, 

section 3.3)

 

57. If a loan guarantee program, which guarantees a 

loan, is generating a negative subsidy and the lender 

has not disbursed the loan as of the balance sheet 

date, does the entity record and include this amount 

as part of the total undelivered orders?15

 

(OMB Bulletin 01-09, p. 21, section 3.3) 

 

58. Are special fund receipt accounts for negative 

subsidies and downward subsidy reestimates 

included in the credit reporting entity’s financial 

statements? (OMB Bulletin 01-09, p. 21, section 3.3) 

 

 

14Section 506 (a) of the Federal Credit Reform Act, as amended, exempts the credit activities of certain agencies, such as the 

Federal Deposit Insurance Corporation (FDIC) and the Tennessee Valley Authority (TVA). These agencies can report in 

accordance with other requirements. 

15Undelivered orders are the value of goods and services ordered and obligated but not yet received. The term is synonymous 

with unliquidated obligations. (The Federal Budget Politics, Policy, Process; copyright 1995 by Allen Schick; p. 216) 
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Assets 

Credit Program Receivables (55 – 96) 

Yes, 

No 

or 

N/A

Explanation 

59. Are any assets in these special receipt fund 

accounts shown as nonentity assets that are offset 

by intragovernmental liabilities covered by 

budgetary resources? (OMB Bulletin 01-09, p. 21, 

section 3.3) 

 

60. Does the entity disclose that direct loan obligations 

and loan guarantee commitments made after fiscal 

year 1991, and the resulting direct loans or loan 

guarantees, are governed by the Federal Credit 

Reform Act of 1990, as amended? 

(OMB Bulletin 01-09, p. 68, section 9.8, 

instruction A) 

 

61. Are loan amounts broken out by group (pre-1992 

and post-1991) and loan program and disclosed in a 

note to the financial statements? (OMB Bulletin 01-

09, pp. 61 & 70, section 9.8, items B & C) 

 

62. Do the notes disclose other relevant and 

appropriate information related to direct loans and 

loan guarantees including the following? 

a. description of the characteristics of the loan 

program 

b. commitments to guarantee 

c. management’s method for accruing interest 

revenue and recording interest receivable 

d. management's policy for accruing interest on 

nonperforming loans (OMB Bulletin 01-09, 

p. 69, section 9.8)

 

For post-1991direct loans and guarantees, a subsidy expense is recognized in the year they 

are disbursed. For pre-1992 direct loans and guarantees, a loss and liability need not be 

recognized until it is more likely than not that a loan (either direct or guaranteed) will go 

into default. (SFFAS 2, par. 24 & 39) 

63. Are post-1991 direct loans disbursed and 

outstanding recognized as assets at the present 

value (discounted at a comparable Treasury rate) of 

their estimated net cash inflows? (SFFAS 2, par. 22 

& app. B, part I A) 

 
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Assets 

Credit Program Receivables (55 – 96) 

Yes, 

No 

or 

N/A

Explanation 

64. Is the difference between the outstanding principal 

of post-1991 direct loans and the present value of 

their net cash inflows recognized as a subsidy cost 

allowance? (SFFAS 2, par. 22 & app. B, part I A) 

 

65. When post-1991 guaranteed loans default, is the 

value of the assets related to defaulted guaranteed 

loans receivable16 included in the reported credit 

program receivables? (OMB Bulletin 01-09, p. 64 & 

72, section 9.8, item I) 

 

66. When post-1991 direct loans are written off, is the 

unpaid principal removed from unpaid loans 

receivable and charged against the allowance for 

subsidy costs? (SFFAS 2, par. 61) 

 

67. Are the following components of the assets that are 

related to post-1991 direct and defaulted guaranteed 

loans receivable disclosed by loan program? 

a. loans receivable, gross, or defaulted guaranteed 

loans receivable, gross 

b. interest receivable 

c. estimated net realizable value of foreclosed 

property 

d. allowance for subsidy costs (present value) 

e. value of assets related to direct loans or 

defaulted guaranteed loans receivable, net 

(OMB Bulletin 01-09, pp. 61, 64, 70, & 72, 

section 9.8, items C & I)

 

 

16That is, the sum of (1) defaulted guaranteed loans receivable gross, (2) interest receivable, and (3) foreclosed property, less the 

allowance for subsidy cost at present value.
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Assets 

Credit Program Receivables (55 – 96) 

Pre-1992 Direct Loans 

Yes, 

No 

or 

N/A

Explanation 

68. Are losses of pre-1992 direct loans obligated 

recognized (and a corresponding allowance amount 

set up) when it is more likely than not that the 

direct loans will not be totally collected? (SFFAS 2, 

par. 39 & app. B, part II A) 

 

69. Are allowances for uncollectible pre-1992 loans 

reestimated each year? (SFFAS 2, par. 39) 

 

70. Are the following components of assets related to 

pre-1992 direct loans receivable disclosed by loan 

program? 

a. loans receivable, gross 

b. interest receivable 

c. foreclosed property 

d. present value allowance17 (if the present value 

method is used) 

e. allowance for loan losses18 (if the allowance-forloss method is used) (OMB Bulletin 01-09, 

pp. 61 & 70, section 9.8 item B)

 

 

17Under the present value method, the nominal amount of the direct loans is reduced by an allowance equal to the difference 

between the nominal amount and the present value of the expected net cash flows from the loans. (OMB Bulletin 01-09, p. 68, 

section 9.8, 4th par.) 

18Under the allowance-for-loss method, the nominal amount of the direct loans is reduced by an allowance for uncollectible 

amounts. (OMB Bulletin 01-09, p. 68, section 9.8, 4th par.) 
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Assets 

Credit Program Receivables (55 – 96) 

Pre-1992 Direct Loans 

Yes, 

No 

or 

N/A

Explanation 

71. Are the following components of defaulted 

guaranteed loans from pre-1992 guarantees 

disclosed by loan program? 

a. defaulted guaranteed loans receivable, gross 

b. interest receivable 

c. the estimated net realizable value of related 

foreclosed property 

d. the present value allowance (if the present value 

method is used) 

e. the allowance for loan losses (if the allowance 

for loss method is used) 

f. value of assets related to defaulted guaranteed 

loans receivable, net of the respective allowance 

(OMB Bulletin 01-09, pp. 64 & 72, section 9.8, 

item H)

 

A loan modification is a federal government action that directly or indirectly alters the 

estimated subsidy cost and the present value of outstanding direct loans or the liability of 

loan guarantees. A direct modification changes the subsidy cost by altering the terms of 

existing contracts or through the sale of direct loans. An indirect modification changes the 

subsidy costs by altering the way loans and loan guarantees are administered. A 

modification does not include subsidy cost reestimates, routine administrative workouts of 

troubled loans, and other actions permitted within existing contract terms. (SFFAS 2, par. 

41-44) 

72. When post-1991 loans are modified, is their existing 

book value changed to an amount equal to the 

present value of the loans' net cash inflows that are 

projected under the modified terms from the time of 

the modification to the loans' maturity and 

discounted at the original rate? (SFFAS 2, par. 46 & 

app. B, part I D (4)) 

 
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Assets 

Credit Program Receivables (55 – 96) 

Pre-1992 Direct Loans 

Yes, 

No 

or 

N/A

Explanation 

73. When pre-1992 loans are directly modified do they 

meet the following conditions? 

a. They are transferred from the liquidating 

account to a financing account. 

b. Their book value is recorded at their postmodification value. (SFFAS 2, par. 47 & app. B, 

part II B (4))

 

74. Are subsequent (direct) modifications of pre-1992 

loans treated as a modification of post-1991 loans? 

(SFFAS 2, par. 47) 

 

75. When pre-1992 loans are indirectly modified do they 

meet the following conditions? 

a. They are kept in a liquidating account. 

b. Their bad debt allowance is reassessed and 

adjusted to reflect amounts that would not be 

collected due to the modification. (SFFAS 2, 

par. 47)

 

76. Does the entity disclose the following by program in 

the notes to the financial statements? 

a. the nature of the modification of direct loans or 

loan guarantees 

b. the discount rate used in calculating the 

modification expense 

c. the basis for recognizing a gain or loss related to 

the modification (SFFAS 2, par. 56; 

OMB Bulletin 01-09, p. 69, section 9.8, 5th par.)

 

77. When post-1991 and pre-1992 loans are sold, is the 

sale treated as a direct modification if the agency 

did not assume sales proceeds in the cash flow 

estimates for the initial subsidy calculation? 

(SFFAS 2, par. 53 & App. B, Part I F, footnote 23) 

 
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Assets 

Credit Program Receivables (55 – 96) 

Pre-1992 Direct Loans 

Yes, 

No 

or 

N/A

Explanation 

78. Does the agency disclose the expectation that 

proceeds from the sale of its loans will differ from 

the reported face value of the loans or the value of 

their related assets? (OMB Bulletin 01-09, p. 69, 

section 9.8, 1st par.) 

 

Foreclosed property is any asset, which is assumed to be held for sale, that is either received 

in satisfaction of a loan receivable or as a result of payment of a claim under a guaranteed 

or insured loan (excluding commodities acquired under price support programs). Pre-1992 

foreclosed property refers to property associated with direct loans obligated or loan 

guarantees committed before October 1, 1991. Post-1991 foreclosed property refers to 

property associated with direct loans obligated or loan guarantees committed after September 

30, 1991. (SFFAS 3, par. 79 & 80) 

79. Is post-1991 foreclosed property valued at the net 

present value of the projected future cash flows 

associated with the property? (SFFAS 3, par. 81; 

OMB Bulletin 01-09, p. 70, section 9.8, item C) 

 

80. Is pre-1992 foreclosed property recorded at cost and 

adjusted to the lower of cost or net realizable value 

with any difference between cost and net realizable 

value carried in a valuation allowance? (SFFAS 3, 

par. 81) 

 

81. In determining net present value, does the 

projection of future cash flows include estimates of 

the following? 

a. sales proceeds

b. rent, management expense, and repair costs 

during the holding period

c. selling expense (i.e., advertising and 

commissions) (SFFAS No. 3, par. 82)

 

82. In estimating sales proceeds for projecting the 

future cash flows associated with the property in 

determining net present value, has the entity 

considered its historical experience in selling 

property as well as the nature of the sale? (SFFAS 3, 

par. 82) 

 
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Assets 

Credit Program Receivables (55 – 96) 

Pre-1992 Direct Loans 

Yes, 

No 

or 

N/A

Explanation 

83. Were the estimated future cash flows of post-1991 

foreclosed property or acquired loans discounted at 

the original (or Treasury) discount rate in effect at 

the time the underlying loan or guarantee was 

granted? (SFFAS 2, par. 57& 59; SFFAS 3, par. 83; 

SFFAS 19, par. 7(e)) 

 

84. Is the net present value of post-1991 foreclosed 

property adjusted periodically to recognize both 

changes in the expected future cash flows and 

accrual of interest due to the passage of time? 

(SFFAS 3, par. 84) 

 

85. Are any adjustments in the carrying amounts of 

post-1991 foreclosed property included in the 

presentation of "interest income" and the reestimate 

of "subsidy expense?" (SFFAS 3, par. 84) 

 

86. For post-1991 foreclosed property, are the following 

true? 

a. Third party claims are recorded at their net 

present value at the time of the foreclosure, 

using the same discount rate that applies to 

related foreclosed property. 

b. Any periodic changes in net present value of the 

claim are reflected in "interest income" and 

"subsidy expense." (SFFAS 3, par. 87)

 

87. Are receipts or disbursements associated with 

acquiring and holding post-1991 foreclosed property 

charged or credited to foreclosed property? 

(SFFAS 3, par. 88) 

 

88. When the entity acquires foreclosed assets in full or 

partial settlement of post-1991 direct loans or 

guarantees, is the present value of the government's 

claim against the borrowers reduced by the amount 

settled as a result of the foreclosure? (SFFAS 2, 

par. 60) 

 
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July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-34 

Assets 

Credit Program Receivables (55 – 96) 

Pre-1992 Direct Loans 

Yes, 

No 

or 

N/A

Explanation 

89. If a lender, debtor, or other third party has a 

legitimate claim to a post-1991 foreclosed asset, is 

the net present value of the estimated claim 

recognized as a special contra-valuation allowance? 

(SFFAS 2, par. 58; SFFAS 3, par. 87) 

 

90. Is pre-1992 foreclosed property recorded at cost and 

adjusted, if necessary, to the lower of cost or net 

realizable value? (SFFAS 3, par. 81 & 85) 

 

91. Is the net realizable value based on an estimate of 

the market value of the property adjusted for any 

expected losses consistent with historical 

experience, abnormal market conditions, and time 

limitations as well as any other costs of the sale? 

(SFFAS 3, par. 85 & 86) 

 

92. Is the estimate of market value based on one of the 

following criteria? 

a. the market value of the property if an active 

market exists 

b. the market value of similar properties if no 

active market exists 

c. a reasonable forecast of expected cash flows 

adjusted for estimates of all holding costs, 

including any cost of capital (SFFAS 3, par. 85)

 

93. For pre-1992 foreclosed property, are third-party 

claims recorded at the expected amount of cash 

required to settle the claims? (SFFAS 3, par. 87) 

 

94. If foreclosed property is not sold but placed into 

operation, is the asset removed from foreclosed 

property? (SFFAS 3, par. 90) 

 

95. If reimbursement for the transfer of assets from one 

program to another is made, are the proceeds from 

the transfer treated in the same manner as a sale to 

a third party? (SFFAS 3, par. 90) 

 
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Section III 

Balance Sheet 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-35 

Assets 

Credit Program Receivables (55 – 96) 

Pre-1992 Direct Loans 

Yes, 

No 

or 

N/A

Explanation 

96. When the government acquires foreclosed assets in 

full or partial settlement of a direct or guaranteed 

loan (pre-1992 and post-1991), is the following 

information disclosed? 

a. valuation basis for foreclosed property 

b. changes from prior-year's accounting methods, 

if any 

c. restrictions on the use/disposal of property 

d. balances by categories (i.e., pre-1992 and post1991 foreclosed property) 

e. number of properties held and average holding 

period by type or category 

f. number of properties for which foreclosure 

proceedings are in process at the end of the 

period (SFFAS 3, par. 91; OMB Bulletin 01-09, 

pp. 69 & 70, section 9.8)

 
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July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-36 

Assets 

Cash and Other Monetary Assets (97 – 102) 

Yes, 

No 

or 

N/A

Explanation 

Cash (including imprest funds) consists of: coins, paper currency, readily negotiable 

instruments (such as checks, money orders, and bank drafts), demand deposits, and foreign 

currencies stated in U.S. dollars at the exchange rate on the financial statement date. 

(SFFAS 1, par. 27; OMB Bulletin 01-09, p. 20, section 3.3) 

Other monetary assets consist of other items such as gold, special drawing rights, and U.S. 

reserves in the International Monetary Fund (IMF). (OMB Bulletin 01-09, p. 20, section 3.3 

& p.57, section 9.4, item C) 

97. Are the components of cash and other monetary 

assets disclosed and described in a note to the 

financial statements? (OMB Bulletin 01-09, p. 20, 

section 3.3 & pp. 57 & 58, section 9.4) 

 

Entity cash is the amount of cash that the reporting entity holds and is authorized by law to 

spend. Nonentity cash is the cash that a federal entity collects and holds on behalf of the U.S. 

government or other entities. In some instances the entity deposits cash in its accounts in a 

fiduciary capacity for the U.S. Treasury or other entities. (SFFAS 1, par. 28 & 29) 

98. Does cash available for agency use include petty 

cash and cash held in revolving funds that will not 

be transferred to the general fund? 

(OMB Bulletin 01-09, p.58, section 9.4, instruction E)

 

99. Is nonentity cash disclosed in the notes to the 

financial statements, separately from entity cash? 

(SFFAS 1, par. 29; OMB Bulletin 01-09, p. 17, 

section 3.1, p. 19, section 3.3, & pp. 57-58, section 

9.4) 

 

100. If cash is restricted,19 is the nature and reason 

disclosed? (SFFAS 1, par. 30; OMB Bulletin 01-09, 

p. 56, section 9.2 & p. 58, section 9.4) 

 

 

19Nonentity cash is always restricted. Restricted cash also includes cash held in escrow to pay property taxes and insurance 

related to property associated with defaulted loans. 
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July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-37 

Assets 

Cash and Other Monetary Assets (97 – 102) 

Yes, 

No 

or 

N/A

Explanation 

101. Does the entity disclose any restrictions on the use 

or conversion of cash denominated in foreign 

currencies and the significant effects, if any, of 

changes in the exchange rate on the entity’s 

financial position that occur after the end of the 

reporting period but before the issuance of financial 

statements? (OMB Bulletin 01-09, p. 58, section 9.4) 

 

102. Is other information on cash and other monetary 

assets disclosed, as appropriate, such as the 

valuation rate of gold? (OMB Bulletin 01-09, p. 58, 

section 9.4) 

 
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Section III 

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July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-38 

Assets 

Inventory and Related Property (103 – 125) 

Yes, 

No 

or 

N/A

Explanation 

Inventory is tangible personal property that is (1) held for sale including raw materials and 

work in process, (2) in process of production for sale, or (3) to be consumed in the 

production of goods for sale or in the provision of services for a fee. Inventory does not 

include other assets held for sale such as (1) stockpile materials, (2) seized and forfeited 

property, (3) foreclosed property, and (4) goods held under price support and stabilization 

programs. (SFFAS 3, par. 1; OMB Bulletin 01-09, p. 21, section 3.3) 

103. Is inventory valued at historical cost, latest 

acquisition cost, or net realizable value? (SFFAS 3, 

par. 20 & 26) 

 

104. If inventory is valued at historical cost, does that 

cost include the purchase amount and all other 

costs, such as transportation and production costs, 

incurred to bring the inventory into its current 

condition and location? (SFFAS 3, par. 21) 

 

105. Are abnormal costs, such as excessive handling or 

rework costs, charged to operations for the period? 

(SFFAS 3, par. 21) 

 

106. Is donated inventory valued at its fair value at the 

time of donation? (SFFAS 3, par. 21) 

 

107. Is inventory acquired through exchange of 

nonmonetary assets (e.g., barter) valued at the fair 

value of the asset received at the time of the 

exchange? (SFFAS 3, par. 21) 

 

108. For inventory acquired through exchange of 

nonmonetary assets, is any difference between the 

recorded amount of the asset surrendered and the 

fair value of the asset received recognized as a gain 

or loss? (SFFAS 3, par 21) 

 
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July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-39 

Assets 

Inventory and Related Property (103 – 125) 

Yes, 

No 

or 

N/A

Explanation 

109. Are one of the following historical cost flow 

assumptions used to value inventory? 

a. first-in, first out (FIFO) 

b. weighted average 

c. moving average 

d. any other valuation method (such as a standard 

cost system) whose results reasonably 

approximate “a,” “b,” or “c” above (SFFAS 3, 

par. 22)

 

110. If the latest acquisition cost method of inventory 

valuation is used, is the latest invoice price (actual 

cost) applied to all like units held, including those 

acquired through donation or nonmonetary 

exchange? SFFAS 3, par. 23) 

 

111. Under the latest acquisition cost method, is the 

inventory revalued periodically (or at least by the 

end of the fiscal year)?20 (SFFAS 3, par. 23) 

 

112. If unrealized holding gains/losses are recognized, is 

an allowance account established to capture these 

gains/losses? (SFFAS 3, par. 24) 

 

113. Is the ending balance of this [gain/loss] allowance 

account the cumulative difference between the 

historical cost, based on estimated or actual 

valuation, and the latest acquisition cost of ending 

inventory? (SFFAS 3, par. 24) 

 

114. Is the balance for the gain/loss account adjusted 

each time the inventory balance is adjusted? 

(SFFAS 3, par. 24) 

 

 

20Revaluation results in recognition of unrealized holding gains/losses in the ending inventory value. Upon adjustment for 

unrealized holding gains/losses, the latest acquisition cost method then results in an approximation of historical cost. 
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July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-40 

Assets 

Inventory and Related Property (103 – 125) 

Yes, 

No 

or 

N/A

Explanation 

115. Is the adjustment necessary to bring the allowance 

to the appropriate balance a component of the cost 

of goods sold as computed under the latest 

acquisition cost method?21 (SFFAS 3, par. 24 & 25) 

 

116. If the latest acquisition cost method is used to value 

inventory, is the reported cost of goods sold 

adjusted by the difference between the beginning 

and ending unrealized holding gains and losses? 

(SFFAS 3, par. 24 & 25) 

 

117. If inventory is valued at net realizable value, does it 

meet the following criteria? 

a. There is an inability to determine approximate 

cost. 

b. There is immediate marketability at quoted 

prices. 

c. There is unit interchangeability (e.g., petroleum 

reserves). (SFFAS 3, par. 26)

 

118. Are inventory stocks, which are maintained because 

they are not readily available in the market or 

because there is more than a remote chance that 

they will eventually be needed, classified as 

inventory held in reserve for future sale, and 

reported in one of the following manners? 

a. included in the inventory line item on the face 

of the financial statements with separate 

disclosure in the footnotes 

b. shown as a separate line item on the face of the 

financial statements (SFFAS 3, par. 27)

 

 

21Cost of goods sold under the latest acquisition cost method equals (1) beginning inventory at beginning-of-the period latest 

acquisition cost, less: beginning allowance for unrealized holding gains/losses, plus: actual purchases; and (2) resulting cost of 

goods available for sale, less: ending inventory at end-of-the period latest acquisition cost, plus: ending allowance for unrealized 

holding gains/losses. 
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July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-41 

Assets 

Inventory and Related Property (103 – 125) 

Yes, 

No 

or 

N/A

Explanation 

119. Is inventory identified as excess, obsolete, or 

unserviceable reported in one of the following 

manners? 

a. included in the inventory line item on the face of 

the financial statements with separate 

disclosures in the footnotes 

b. shown as a separate line item on the face of the 

financial statements (SFFAS 3, par. 29; 

OMB Bulletin 01-09, p. 74, section 9.9) 

 

120. Is excess, obsolete, and unserviceable inventory 

valued at its expected net realizable value? 

(SFFAS 3 par. 30) 

 

121. When inventory is declared excess, obsolete, or 

unserviceable is the difference between the carrying 

amount and the expected net realizable value 

recognized as a loss (or gain)? (SFFAS 3, par. 30) 

 

122. For excess, obsolete, or unserviceable inventory, 

are any subsequent adjustments to the inventory’s 

net realizable value or any loss (or gain) upon 

disposal recognized as losses (or gains)? (SFFAS 3, 

par. 30) 

 

123. When inventory is held for repair, is it valued using 

one of the following methods? 

a. the allowance method (valued at the same value 

as a serviceable item and a contra-asset repair 

allowance account is established

b. the direct method (valued at the same value as a 

serviceable item less estimated repair costs) 

(SFFAS 3, par. 32 & 33)

 

124. If inventory is transferred to “inventory held for 

repair,” are estimated prior period repair costs 

either credited to the repair allowance (under the 

repair allowance method) or to the inventory 

account (under the direct method) and reported as 

an adjustment to equity? (SFFAS 3, par. 34) 

 
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July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-42 

Assets 

Inventory and Related Property (103 – 125) 

Yes, 

No 

or 

N/A

Explanation 

125. Does the entity disclose the following about its 

inventory? 

a. the general composition 

b. the basis for determining inventory values 

(including the valuation method and any cost 

flow assumptions) 

c. changes from prior years’ accounting methods, 

if any 

d. balances for each of the following categories of 

inventory (unless otherwise presented on the 

financial statements): 

i. inventory held for current sale 

ii. inventory held in reserve for future use 

iii. excess, obsolete, and unserviceable 

inventory 

iv. inventory held for repair 

e. the difference between the carrying amount of 

the inventory before identification as excess, 

obsolete, or unserviceable, and its expected net 

realizable value 

f. restriction on the sale of inventory 

g. the decision criteria for categorizing inventory 

h. changes in the criteria for categorizing 

inventory (SFFAS 3, par. 18, 27-29, 31, 32 & 35; 

OMB Bulletin 01-09, pp. 74 & 75, section 9.9)

 
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July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-43 

Assets 

Operating Materials and Supplies (126– 137) 

Yes, 

No 

or 

N/A

Explanation 

Operating materials and supplies are tangible personal property to be consumed in normal 

operations. Excluded are (1) goods that have been acquired to construct real property and 

equipment for the entity’s use (2) stockpile materials, (3) goods held under price 

stabilization programs, (4) foreclosed property, (5) seized and forfeited property, and (6) 

inventory. (SFFAS 3, par. 36 & OMB Bulletin 01-09, p.21, section 3.3) 

126. Are operating materials and supplies recognized and 

reported as assets when produced or purchased? 

(SFFAS 3, par. 38) 

 

127. Are operating materials and supplies valued at 

historical cost, including all appropriate purchase 

and production costs incurred to bring the items to 

their current condition and location? (SFFAS 3, 

par. 42-43) 

 

128. Are donated operating materials and supplies 

valued at their fair value at the time of donation? 

(SFFAS 3, par. 43) 

 

129. Are operating materials and supplies acquired 

through exchange of nonmonetary assets (e.g., 

barter) valued at the fair value of the asset received 

at the time of the exchange? (SFFAS 3, par. 43) 

 

130. Are operating materials and supplies acquired 

through exchange of nonmonetary assets (e.g., 

barter) valued at the fair value of the asset received 

at the time of exchange, and is any difference 

between the recorded amount of the asset 

surrendered and the fair value of the asset received 

recognized as a gain or loss? (SFFAS 3, par. 43) 

 
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July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-44 

Assets 

Operating Materials and Supplies (126– 137) 

Yes, 

No 

or 

N/A

Explanation 

131. Is one of the following historical cost flow 

assumptions used to value ending operating 

materials and supplies under the consumption 

method? 

a. first-in, first-out (FIFO) 

b. weighted average 

c. moving average 

d. any other valuation method (such as a standard 

cost system) whose results reasonably 

approximate “a,” “b,” or “c” (SFFAS 3, par. 42 & 

44)

 

132. Are operating materials and supplies stocks, which 

are maintained because they are not readily 

available in the market or because there is more 

than a remote chance that they will eventually be 

needed (although not necessarily in the normal 

course of operations), classified as operating 

materials and supplies held in reserve for future 

use, and reported in one of the following manners? 

a. included in the operating materials and supplies 

line item on the face of the financial statements 

with separate disclosure in the footnotes 

b. shown as a separate line item on the face of the 

financial statements (SFFAS 3, par. 45)

 

133. Are operating materials and supplies identified as 

excess, obsolete, or unserviceable reported in one 

of the following manners? 

a. included in the operating materials and supplies 

line item on the face of the financial statements 

with separate disclosure in the footnotes 

b. shown as a separate line item on the face of the 

financial statements (SFFAS 3, par. 47)

 

134. Are excess, obsolete, and unserviceable operating 

materials and supplies valued at their estimated net 

realizable value? (SFFAS 3, par. 48) 

 
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July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-45 

Assets 

Operating Materials and Supplies (126– 137) 

Yes, 

No 

or 

N/A

Explanation 

135. When operating materials and supplies are declared 

excess, obsolete, or unserviceable is the difference 

between the carrying amount before identification 

as excess, obsolete, or unserviceable and the 

estimated net realizable value recognized as a loss 

(or gain)? (SFFAS 3, par. 48) 

 
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July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-46 

Assets 

Operating Materials and Supplies (126– 137) 

Yes, 

No 

or 

N/A

Explanation 

136. For excess, obsolete, or unserviceable operating 

materials and supplies, are any subsequent 

adjustments to the operating materials and supplies’ 

estimated net realizable value or any loss (or gain) 

upon disposal recognized as losses (or gains)? 

(SFFAS 3, par. 48) 

 

137. Does the entity disclose the following information 

about its operating materials and supplies? 

a. general composition 

b. basis for valuation (including valuation method 

and any cost flow assumptions) 

c. change from prior years’ accounting methods, if 

any 

d. balances in each operating material and supply 

category22

e. the difference between the carrying amount of 

the operating materials and supplies before 

identification as excess, obsolete, or 

unserviceable and their estimated net realizable 

value 

f. restrictions on the use of materials and supplies, 

if any 

g. decision criteria for identifying each category to 

which material and supplies are assigned 

h. changes in the criteria for identifying the 

category to which the operating materials and 

supplies are assigned (SFFAS 3, par. 36, 37, 

45-47, 49, & 50; OMB Bulletin 01-09, p. 75, 

section 9.9)

 

 

22Major categories of operating materials and supplies include (1) items held for use; (2) items held in reserve for future uses;

and (3) excess, obsolete, and unserviceable items. 
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July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-47 

Assets 

Stockpile Materials (138– 150) 

Yes, 

No 

or 

N/A

Explanation 

Stockpile materials are strategic and critical materials held due to statutory requirements for 

use in national defense, conservation, or national emergencies. Not included under this 

category are (1) items held for sale or use in normal operations, (2) items held for use in the 

event of an agency’s operating emergency or contingency, and (3) materials acquired to 

support market prices. (SFFAS 3, par. 51 & OMB Bulletin 01-09, p. 21, section 3.3) 

138. Are stockpile materials recognized and reported as 

assets when acquired (i.e., recognized as assets 

using the consumption method)? (SFFAS 3, par. 52) 

 

139. If the contract between the buyer and seller of the 

stockpile materials is silent regarding passage of the 

title, is title assumed to pass upon delivery of the 

goods? (SFFAS 3, par. 52) 

 

140. Are stockpile materials valued at historical cost, 

including all appropriate purchase, transportation, 

and production costs incurred to bring the items to 

their current condition and location? (SFFAS 3, 

par. 53) 

 

141. Are abnormal costs, such as excessive handling or 

rework costs, charged to operations for the period? 

(SFFAS 3, par. 53) 

 

142. Is one of the following historical cost flow 

assumptions used to value stockpile materials under 

the consumption method? 

a. first-in, first-out (FIFO) 

b. weighted average 

c. moving average 

d. any other valuation method (such as a standard 

cost system) whose results reasonably 

approximate “a,” “b,” or “c” (SFFAS 3, par. 52 & 

53)

 

143. If stockpile materials have either suffered a 

permanent decline in value to an amount below cost 

or have become damaged or decayed, has their 

value been reduced to expected net realizable 

value? (SFFAS 3, par. 54) 

 
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July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-48 

Assets 

Stockpile Materials (138– 150) 

Yes, 

No 

or 

N/A

Explanation 

144. Is the resultant decline in value recognized as a loss 

or expense in the period in which it occurs? 

(SFFAS 3, par. 54) 

 

145. When stockpile materials are authorized to be sold, 

are those materials disclosed as stockpile materials 

held for sale? (SFFAS 3, par. 55) 

 

146. Are the stockpile materials authorized for sale 

valued using the same basis used before they were 

authorized for sale? (SFFAS 3, par. 55) 

 

147. Is any difference between the carrying amount of 

the stockpile materials held for sale and their 

estimated selling price disclosed? (SFFAS 3, 

par. 55) 

 

148. If stockpile materials are sold, is the cost removed 

from stockpile materials and reported as a cost of 

goods sold? (SFFAS 3, par. 55) 

 

149. Is any gain (or loss) from the sale of stockpile 

materials recognized as a gain (or loss) at that time? 

(SFFAS 3, par. 55) 

 
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July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-49 

Assets 

Stockpile Materials (138– 150) 

Yes, 

No 

or 

N/A

Explanation 

150. Does the entity disclose the following information 

about its stockpile materials? 

a. general composition 

b. basis for valuing stockpile materials, including 

valuation method and any cost flow 

assumptions 

c. changes from prior year’s accounting methods, if 

any 

d. restrictions on the use of the material 

e. balances in each category of stockpile material 

(i.e., stockpile materials and stockpile materials 

held for sale) 

f. decision criteria for grouping stockpile material 

as held for sale 

g. changes in criteria for categorizing stockpile 

materials as held for sale (SFFAS 3, par. 56; 

OMB Bulletin 01-09, pp. 75 & 76, section 9.9)

 
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July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-50 

Assets 

Seized Property (151– 158) 

Yes, 

No 

or 

N/A

Explanation 

Seized property includes monetary instruments, real property, and tangible personal 

property belonging to others in actual or constructive possession of the custodial agency. 

This includes illegal drugs, contraband, and counterfeit items seized by authorized law 

enforcement agencies (SFFAS 3, par. 59; OMB Bulletin 01-09, p. 22, section 3.3) 

There may be as many as three government entities involved with seized property: (1) the 

seizing agency, (2) the custodial agency, and (3) another agency with a “central fund” set up 

for financial recordkeeping of seizure activities. (SFFAS 3, par. 57)

151. If the central fund is other than the seizing or 

custodial entity, does the custodial entity maintain 

sufficient internal records to carry out its 

stewardship responsibility? (SFFAS 3, par. 60) 

 

152. If monetary instruments are seized, are seized 

assets recognized at market value of the monetary 

instruments, and a corresponding liability equal to 

the seized asset value established? (SFFAS 3, 

par. 61 & 65; OMB Bulletin 01-09, p. 22, section 3.3) 

 

153. Is the existence of seized property other than 

monetary instruments disclosed in a note to the 

statements and accounted for in the entity’s 

property management records? (SFFAS 3, par. 62) 

 

154. Is seized property valued at its market value when 

seized (or as soon thereafter as reasonably possible 

if the market value cannot be readily determined)? 

(SFFAS 3, par. 63) 

 

155. If no active market exists for the property in the 

general area in which it was seized, is a value in the 

principle market nearest the place of seizure used? 

(SFFAS 3, par. 63) 

 

156. Is the valuation of property seized under the 

Internal Revenue Code based on the taxpayer’s 

equity (market value less any third-party liens)? 

(SFFAS 3, par. 64) 

 
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July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-51 

Assets 

Seized Property (151– 158) 

Yes, 

No 

or 

N/A

Explanation 

157. Does the entity disclose the type of seized property 

in its custody and include the following 

information? 

a. explanation of what constitutes a seizure and a 

general description of the composition of seized 

property 

b. valuation method(s) 

c. changes from prior years’ accounting methods, if 

any 

d. analysis of change in seized property (including 

dollar value and number of seized properties) 

that are 

i. on hand at the beginning of the year, 

ii. seized during the year, 

iii. disposed of during the year, and 

iv. on hand at the end of the year, as well as 

known liens or other claims against the 

property (SFFAS 3, par. 66; 

OMB Bulletin 01-09, p. 22, section 3.3; p. 76, 

section 9.9)

 

158. Does the entity also disclose the method of disposal 

of seized property, if material? (SFFAS 3, par. 66; 

OMB Bulletin 01-09, p. 76, section 9.9) 

 
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July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-52 

Assets 

Forfeited Property (159– 172) 

Yes, 

No 

or 

N/A

Explanation 

Forfeited property consists of (a) property (i.e., monetary instruments, intangible property, 

real property, and tangible personal property) acquired through forfeiture proceedings, (b) 

property acquired to satisfy a tax liability, and (c) unclaimed and abandoned merchandise. 

(SFFAS 3, par. 67 & 68 & OMB Bulletin 01-09, p. 22, section 3.3) 

159. When a forfeiture judgment is obtained for seized 

monetary instruments: 

a. Are they reclassified as forfeited monetary 

instruments at the current market value? 

b. Is revenue recognized in an amount equal to the 

value of the monetary asset? 

c. Is the liability associated with the seized 

monetary instrument classification removed? 

(SFFAS 3, par. 69)

 

160. When a forfeiture judgment is obtained for real, 

tangible, and intangible property: 

a. Is the property recorded as an asset at its fair 

value at the time of forfeiture? 

b. Is an allowance account (contra-asset account) 

established for liens or claims from third party 

claimants against forfeited property? 

c. Is offsetting deferred revenue recognized? 

(SFFAS 3, par. 70)

 

161. For forfeited property that cannot be sold due to 

legal restrictions, but may be either donated or 

destroyed, does the entity in lieu of recognizing 

financial value make the required disclosures 

concerning the composition, valuation, and 

disposition of the property? (SFFAS 3, par. 71 & 78) 

 

162. Is revenue from the sale of forfeited property 

recognized when sold? (SFFAS 3, par. 72) 

 
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Assets 

Forfeited Property (159– 172)

Yes, 

No 

or 

N/A

Explanation

Forfeited property not held for sale may be placed into official use, transferred to another 

federal agency, distributed to a state or local law enforcement agency, or distributed to a 

foreign government. (SFFAS 3, par. 73) 

163. When a determination is made that forfeited 

property will not be held for sale, but distributed in 

one of the manners described above, is the property 

reclassified as forfeited property held for donation 

or use? (SFFAS 3, par. 74) 

 

164. Is revenue associated with property not disposed of 

through sale recognized upon approval of 

distribution and the previously established deferred 

revenue reversed? (SFFAS 3, par. 74) 

 

165. Is a distinction maintained in the entity’s accounting 

reports between revenue arising from the sale of 

forfeited property and revenue arising from 

forfeited property being transferred, donated, or 

placed into official use? (SFFAS 3, par. 72–75 & 

Table 1) 

 

166. Is property acquired by the government to satisfy a 

taxpayer’s liability recorded when title to the 

property passes to the federal government, and is a 

credit made to the related account receivable? 

(SFFAS 3, par. 76) 

 

167. Is the property acquired in satisfaction of a 

taxpayer’s liability valued at its market value less 

any third party liens? (SFFAS 3, par. 76) 

 

168. Upon sale of forfeited property acquired in 

satisfaction of a taxpayer’s liability, is revenue 

recognized in the amount of the sale proceeds, and 

are the property and third party liens removed from 

the accounts? (SFFAS 3, par. 76) 

 

169. Is unclaimed and abandoned merchandise recorded 

with an offsetting deferred revenue when statutory 

and/or regulatory requirements for forfeiture have 

been met? (SFFAS 3, par. 77) 

 

170. Is unclaimed and abandoned merchandise valued at 

its market value? (SFFAS 3, par. 77) 

 
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July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-54 

Assets 

Forfeited Property (159– 172)

Yes, 

No 

or 

N/A

Explanation

171. Upon the sale of unclaimed and abandoned 

merchandise, is revenue recognized in the amount 

of the sale proceeds, and the merchandise and the 

deferred revenue removed from the accounts? 

(SFFAS 3, par. 77) 

 

172. Does the entity disclose the following information 

about forfeited property? 

a. composition of the property 

b. valuation method(s) 

c. restrictions on the use or disposition of forfeited 

property 

d. changes from prior year’s accounting methods, if 

any 

e. analysis of the changes in forfeited property by 

dollar amount and number of forfeitures that 

includes: 

i. forfeitures on hand at the beginning of 

the year 

ii. additions 

iii. disposals and method of disposition 

iv. forfeitures on hand at the end of the year 

f. if available, an estimate of the value of property 

or funds to be distributed to other federal, state, 

and local agencies in future reporting periods 

(SFFAS 3, par. 78; OMB Bulletin 01-09, p. 76, 

section 9.9)

 
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July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-55 

Assets 

Goods Held Under Price Support and 

Stabilization Program (173– 186) 

Yes, 

No 

or 

N/A

Explanation 

Goods acquired under price support and stabilization programs (i.e., commodities) are 

items of commerce or trade (usually farm commodities) having an exchange value. 

Producers of the goods (1) are either given nonrecourse loans under which they can, at their 

option, repay the loan with interest or surrender their commodity pledged as collateral for 

the loan or (2) may enter into purchase agreements that allow the producer of the option to 

sell commodities to the government (the Commodity Credit Corporation) at the price support 

rate. (SFFAS 3, par. 92, 93, & 94) 

173. Are nonrecourse loans recognized as assets when 

the loan principal is disbursed and recorded at the 

amount of the loan principal? (SFFAS 3, par. 96) 

 

174. Is interest accrued on nonrecourse loans? 

(SFFAS 3, par. 96) 

 

175. When the entity has entered into a purchase 

agreement and there is an expected loss: 

a. Is a loss23 recognized if it is probable that a loss 

has been incurred on purchase agreements 

outstanding and the amount of the loss can be 

reasonably measured? 

b. Is a corresponding liability recognized? 

(SFFAS 3, par. 97 & 103)

 

176. If the contingent loss arising from a purchase 

agreement is not recognized because it is less than 

probable or is not reasonably measurable, is the 

contingent loss disclosed if it is at least “reasonably 

possible that a loss may occur?” (SFFAS 3, par. 98) 

 

177. When commodities are acquired to satisfy a 

nonrecourse loan or purchase agreement, are they 

recognized and reported as assets at the lower of 

cost or net realizable value? (SFFAS 3, par. 99 & 

104) 

 

 

23The loss amount is the difference between the contract price and the net realizable value of the commodities. 
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Balance Sheet 

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Assets 

Goods Held Under Price Support and 

Stabilization Program (173– 186) 

Yes, 

No 

or 

N/A

Explanation 

178. When commodities acquired to satisfy the terms of 

a nonrecourse loan or purchase agreement are sold: 

a. Are revenues recognized? 

b. Is the carrying amount of the commodities 

removed from the asset account and reported as 

a cost of goods sold? (SFFAS 3, par. 100)

 

179. When commodities are held for purposes other than 

sale, is the carrying amount reported as an expense 

and removed from the commodity asset account 

upon transfer? (SFFAS 3, par. 101) 

 

180. Are all nonrecourse loans recorded at their face 

amounts, and is a valuation allowance set up to 

recognize losses on such loans when it is “more 

likely than not” (i.e., more than a 50 percent chance) 

that loans will not be totally collected? (SFFAS 3, 

par. 102) 

 

181. Is this allowance reestimated on each financial 

reporting date? (SFFAS 3, par. 102) 

 

182. Does the cost for the commodities acquired through 

a nonrecourse loan settlement include the following 

amounts? 

a. loan principal (excluding interest) 

b. processing and packaging costs incurred after 

acquisition 

c. other costs (e.g., transportation) incurred in 

taking title to the commodity 

(SFFAS 3, par. 105)

 

183. Does the cost for commodities acquired though a 

purchase agreement include the following amounts?

a. the unit price agreed upon in the purchase 

agreement multiplied by the number of units 

purchased 

b. other costs incurred in taking title to the 

commodity (SFFAS 3, par. 106)

 
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Balance Sheet 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-57 

Assets 

Goods Held Under Price Support and 

Stabilization Program (173– 186) 

Yes, 

No 

or 

N/A

Explanation 

184. Is any adjustment necessary to reduce the carrying 

amount of the acquired commodities to the lower of 

cost or net realizable value recognized as a loss on 

farm price support in the current period and 

recorded in a commodity valuation allowance? 

(SFFAS 3, par. 107) 

 

185. Are recoveries of losses recognized up to the point 

of any previously recognized losses on the 

commodities, and is the commodity valuation 

allowance reduced accordingly in the current 

period? (SFFAS 3, par. 107) 

 
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Balance Sheet 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-58 

Assets 

Goods Held Under Price Support and 

Stabilization Program (173– 186) 

Yes, 

No 

or 

N/A

Explanation 

186. Is the following information related to goods held 

under price support and stabilization programs 

disclosed? 

a. basis for valuing commodities including 

valuation method and cost flow assumptions 

(e.g., FIFO, weighted average, moving average, 

specific identification) 

b. changes from prior years’ accounting methods, 

if any 

c. restrictions on the use, disposal, or sale of 

commodities 

d. analysis of the changes in dollar amount and 

volume of commodities, including those 

i. on hand at the beginning of the year 

ii. acquired during the year 

iii. disposed of during the year by method of 

disposition 

iv. on hand at the end of the year 

v. on hand at year’s end and estimated to be 

donated or transferred during the 

coming period 

vi. received as a result of surrender of 

collateral related to nonrecourse loans 

outstanding 

vii. dollar value and volume of purchase 

agreement commitments (SFFAS 3, 

par. 108 & 109; OMB Bulletin 01-09, pp. 76 

& 77, section 9.9)

 
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Balance Sheet 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-59 

Assets 

General Property, Plant, & Equipment (Net) 

(187– 233) 

Yes, 

No 

or 

N/A

Explanation 

General property, plant, and equipment (PP&E) are any property, plant, and equipment 

used in providing goods or services. (SFFAS 6, par. 23) 

187. Has the entity established, disclosed, and 

consistently followed appropriate capitalization 

thresholds for property, plant, and equipment 

(PP&E) suitable to its financial and operational 

conditions? (SFFAS 6, par. 13) 

 

188. Does the entity follow a policy that ensures its 

PP&E consists of tangible assets, including land, 

that meet the following criteria? 

a. have estimated useful lives of 2 years or more 

b. are not intended for sale in the ordinary course 

of operations 

c. are acquired or constructed with the intention of 

being used or being available for use by the 

entity (SFFAS 6, par. 17)

 

189. Does PP&E consist of the following items? 

a. assets acquired through capital leases, including 

leasehold improvement

b. property owned by the reporting entity in the 

hands of others (e.g., state and local 

governments, colleges and universities, federal 

contractors)

c. land rights (SFFAS 6 par. 18)

 

Capital leases are leases that transfer substantially all the benefits and risks of ownership to 

the lessee. Operating leases are leases in which the federal entity does not assume the risks of 

ownership of PP&E. Multiyear service contracts and multiyear purchase agreements for 

expendable commodities are not capital leases. (SFFAS 6, par. 20, footnote 22; SFFAS 5, 

par. 43) 
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July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-60 

Assets 

General Property, Plant, & Equipment (Net) 

(187– 233) 

Yes, 

No 

or 

N/A

Explanation 

190. Does the entity classify a lease as a capital lease if 

at its inception the lease meets one or more of the 

following criteria? 

a. the lease transfers ownership of the property to 

the lessee by the end of the lease term 

b. the lease contains an option to purchase the 

leased property at a bargain price 

c. the lease term is equal to or greater than 75 

percent of the estimated economic life of the 

leased property, and the beginning of the lease 

term does not fall within the last 25 percent of 

the total estimated economic life of the property 

d. the present value of rental and other minimum 

lease payments, excluding that portion of the 

payments representing executory cost, equals or 

exceeds 90 percent of the fair value of the 

leased property, and the beginning of the lease 

term does not fall within the last 25 percent of 

the total estimated economic life of the property 

(SFFAS 6, par. 20; SFFAS 5, par. 43)

 

191. Does the general PP&E asset line item exclude the 

following items? 

a. items held in anticipation of physical 

consumption such as operating materials and 

supplies 

b. items the federal entity has a reversionary 

interest in 

c. heritage assets (except multiuse heritage 

assets)24

d. stewardship land (i.e., land not included in 

general PP&E) (SFFAS 6, par. 19, 21, 57, 58, & 

68; SFFAS 16, par. 6)

 

 

24Multiuse heritage assets are heritage assets used predominately in general government operations (e.g., the main Treasury 

building, which is used as an office building). 
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July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-61 

Assets 

General Property, Plant, & Equipment (Net) 

(187– 233) 

Yes, 

No 

or 

N/A

Explanation 

192. In determining the level at which the entity 

categorizes its PP&E, has the entity considered the 

following factors? 

a. the cost of maintaining different accounting 

methods for property and the usefulness of the 

information 

b. the diversity of the PP&E (e.g., useful lives, 

value, alternative uses) 

c. the programs being served by the PP&E 

d. future disposition of the PP&E (SFFAS 6, 

par. 22)

 

193. Does the entity categorize an asset under general 

PP&E if it has one or more of the following 

characteristics? 

a. it could be used for alternative purposes (e.g., 

by other federal programs, state or local 

governments, nongovernmental entities) but is 

used to produce goods or services or to support 

the mission of the entity 

b. it is used for business-type activities25

c. it is used by entities in activities whose costs 

can be compared to those of other entities 

performing similar activities (e.g., federal 

hospital services in comparison to other 

hospitals) (SFFAS 6, par. 23; 

OMB Bulletin 01-09, p. 22, section 3.3)

 

194. Is PP&E of entities operating as business-type 

activities categorized as general PP&E whether or 

not it meets the definition of other PP&E categories 

(e.g., heritage assets)? (SFFAS 6, par. 24; 

OMB Bulletin 01-09, p. 22, section 3.3) 

 

 

25A business-type activity is defined as a significantly self-sustaining activity that finances its continuing cycle of operations 

through the collection of exchange revenue. 
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July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-62 

Assets 

General Property, Plant, & Equipment (Net) 

(187– 233) 

Yes, 

No 

or 

N/A

Explanation 

195. Are land and land rights specifically acquired for or 

in connection with other general PP&E included in 

general PP&E? (SFFAS 6, par. 25; 

OMB Bulletin 01-09, p. 22 & 23, section 3.3) 

 

196. Is all general PP&E recorded at cost? (SFFAS 6, 

par. 26) 

 
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Balance Sheet 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-63 

Assets 

General Property, Plant, & Equipment (Net) 

(187– 233) 

Yes, 

No 

or 

N/A

Explanation 

197. Does the cost of general PP&E include all costs 

incurred to bring the PP&E to a form and location 

suitable for its intended use, such as the following? 

a. amounts paid to vendors 

b. transportation charges to the point of initial use 

c. handling and storage costs 

d. labor and other direct or indirect production 

costs (for assets produced or constructed) 

e. costs of engineering, architectural, and other 

outside services for designs, plans, 

specifications, and surveys 

f. acquisition and preparation costs of buildings 

and other facilities 

g. an appropriate share of the cost of the 

equipment and facilities used in construction 

work 

h. fixed equipment and related installation costs 

required for activities in a building or facility 

i. direct costs of inspection, supervision, and 

administration of construction contracts and 

construction work 

j. legal and recording fees and damage claims 

k. fair value of facilities and equipment donated to 

the government 

l. material amounts of interest costs paid (SFFAS 

6, par. 26)

 

198. Is the cost of general PP&E acquired under a capital 

lease equal to the amount recognized as a liability26

for the capital lease at its inception? (SFFAS 6, 

par. 29) 

 

 

26The liability is the net present value of lease payments unless the net present value of the lease payments exceeds the fair 

value of the asset, in which case the amount recorded as the liability would be the fair value of the asset. (SFFAS 5, par. 44) 
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Balance Sheet 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-64 

Assets 

General Property, Plant, & Equipment (Net) 

(187– 233) 

Yes, 

No 

or 

N/A

Explanation 

199. Is the cost of general PP&E acquired through 

donation, will, or judicial process, excluding 

forfeiture, capitalized at estimated fair value at the 

time acquired by the government? (SFFAS 6, 

par. 30) 

 

200. Is general PP&E transferred from other federal 

entities capitalized at the book value recorded by 

the transferring entity? (SFFAS 6, par. 31) 

 

201. Is general PP&E transferred from other federal 

entities capitalized at the fair value at the time of 

the transfer, if the receiving entity cannot 

reasonably ascertain the book value of the PP&E 

being transferred? (SFFAS 6, par. 31) 

 

202. If general PP&E is acquired through exchange 

between a federal entity and a nonfederal entity, is 

it capitalized at the fair value of the PP&E 

surrendered at the time of the exchange? (SFFAS 6, 

par. 32) 

 

203. If general PP&E is acquired through exchange 

between a federal entity and a nonfederal entity and 

the fair value of the PP&E is more readily 

determinable than that of the PP&E surrendered, is 

the acquired general PP&E capitalized at it’s fair 

value? (SFFAS 6, par. 32) 

 

204. If general PP&E is acquired through exchange 

between a federal entity and a nonfederal entity and 

neither the fair value of the PP&E acquired or 

surrendered is determinable, is the acquired general 

PP&E capitalized at the book value of the PP&E 

surrendered? (SFFAS 6, par. 32) 

 

205. If cash is included in an exchange of general PP&E 

between a federal entity and a nonfederal entity, is 

the cost of PP&E acquired increased by the amount 

of cash surrendered or decreased by the amount of 

cash received? (SFFAS 6, par. 32) 

 
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Assets 

General Property, Plant, & Equipment (Net) 

(187– 233) 

Yes, 

No 

or 

N/A

Explanation 

206. For general PP&E acquired through exchange 

between a federal entity and a nonfederal entity, is 

any difference between the net recorded amount of 

the PP&E surrendered and the cost of the PP&E 

acquired recognized as a gain or loss? (SFFAS 6, 

par. 32) 

 

207. Is PP&E recognized when title passes to the 

acquiring entity or when PP&E is delivered to the 

entity or to an agent of the entity? (SFFAS 6, 

par. 34) 

 

208. If general PP&E is under construction, is it recorded 

as construction work in process until it is placed 

into service and transferred to general PP&E? 

(SFFAS 6, par. 34) 

 

Depreciation expense is calculated through the systematic and rational allocation of the cost 

of general PP&E, less its estimated salvage or residual value over its estimated useful life. 

(SFFAS 6, par. 35, OMB Bulletin 01-09, p. 23, section 3.3) 

209. Is depreciation expense recognized on all general 

PP&E, except land and land rights of unlimited 

duration? (SFFAS 6, par. 35) 

 

210. Do estimates of useful life of general PP&E consider 

such factors as physical wear and tear and 

technological change? (SFFAS 6, par. 35) 

 

211. Are changes in estimated useful life or salvage and 

residual value of general PP&E accounted for in the 

period of change and future periods? (SFFAS 6, 

par. 35) 

 

212. Is the depreciation method systematic, rational, and 

best reflective of the use of the PP&E, including the 

use of a composite or a group methodology27

whereby the costs of PP&E are allocated using the 

same allocation rate? (SFFAS 6, par. 35; SFFAS 23, 

par. 9(f)) 

 

 

27The composite methodology is a method of calculating depreciation that applies a single average rate to a number of 

heterogeneous assets that have dissimilar characteristics and service lives. The group methodology is a method of calculating 

depreciation that applies a single, average rate to a number of homogenous assets having similar characteristics and service 

lives. 
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July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-66 

Assets 

General Property, Plant, & Equipment (Net) 

(187– 233) 

Yes, 

No 

or 

N/A

Explanation 

213. Are depreciation and amortization expenses 

accumulated in contra-asset accounts? (SFFAS 6, 

par. 36) 

 

214. Are costs that either extend the useful life of 

existing general PP&E or enlarge or improve its 

capacity capitalized and depreciated/amortized over 

the remaining useful life of the asset? (SFFAS 6, 

par. 37) 

 

215. When general PP&E is disposed of, retired, or 

removed from service, is the asset removed from 

the asset accounts along with the associated 

accumulated depreciation/amortization? (SFFAS 6, 

par. 38) 

 

216. Are the differences between the book value of the 

PP&E and the amounts realized, recognized as a 

gain or loss in the period that the general PP&E is 

disposed of, retired or removed from service? 

(SFFAS 6, par. 38) 

 

217. Is general PP&E removed from general PP&E 

accounts along with associated accumulated 

depreciation/amortization if prior to disposal, 

retirement, or removal from service, it no longer 

provides service in the operations of the entity? 

(SFFAS 6, par. 39) 

 

218. Is such PP& E that has been removed from the asset 

accounts recorded in an appropriate asset account 

at its expected net realizable value? 

(SFFAS 6, par. 39) 

 

219. Is any difference in the book value and its expected 

net realizable value of the about-to-be disposed, 

retired, or removal-from-service PP&E recognized 

as a gain or loss in the period of adjustment? 

(SFFAS 6, par. 39) 

 

220. Is the expected net realizable value of such PP&E 

assets adjusted at the end of each accounting 

period, and are any further adjustments in value 

recognized as a gain or loss? (SFFAS 6, par. 39) 

 
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Assets 

General Property, Plant, & Equipment (Net) 

(187– 233) 

Yes, 

No 

or 

N/A

Explanation 

221. If historical cost information for existing general 

PP&E has not been maintained, are cost estimates 

based on either of the following costs? 

a. the cost of similar assets at the time of 

acquisition 

b. the current cost of similar assets discounted for 

inflation since the time of acquisition (SFFAS 6, 

par. 40)

 

222. For general PP&E previously considered national 

defense PP&E, is the initial capitalization amount 

for these assets the initial historical cost for the 

items including any major improvements or 

modifications? (SFFAS 23, par. 10) 

 

223. For general PP&E previously considered national 

defense PP&E where obtaining initial historical cost 

is not practical, is estimated historical cost used, 

based on one of the following alternatives? 

a. current replacement cost of similar items, 

deflated through the use of price-level indexes 

to the acquisition year or estimated acquisition 

year if the actual year is unknown 

b. other information indicating amount expended, 

such as budget, appropriation, or engineering 

documents and other reports reflecting amounts 

expended 

c. other reasonable approaches for estimating 

historical cost28 (SFFAS 23, par. 12 & 13)

 

224. For general PP&E previously considered national 

defense PP&E that was in service upon 

implementation of SFFAS 23, are cleanup cost 

liabilities adjusted as needed?29 (SFFAS 23, par. 15) 

 

 

28For example, the latest acquisition cost may be substituted for current replacement cost in some situations. 

29This adjustment may be needed because the Department of Defense may have already recognized the total estimated cleanup 

costs as a liability and expense for some military equipment (per paragraph 101 of SFFAS 6). 
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Balance Sheet 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-68 

Assets 

General Property, Plant, & Equipment (Net) 

(187– 233) 

Yes, 

No 

or 

N/A

Explanation 

225. Is accumulated depreciation/amortization recorded 

based on one of the following methods? 

a. the estimated cost of the PP&E and the number 

of years the PP&E has been in use relative to its 

estimated useful life

b. the PP&E’s estimated net remaining cost30 and 

the depreciation/amortization charged over the 

remaining life based on that net remaining cost

c. a composite or a group methodology whereby 

the costs of PP&E are allocated using the same 

allocation rate (SFFAS 6, par. 41; SFFAS 23, 

par. 9(f))

 

226. If general PP&E would have been substantially 

depreciated or amortized had it been recorded upon 

acquisition, does the entity weigh materiality and 

cost-benefit in considering either of the following 

alternatives? 

a. record only improvements made during the 

period beyond the initial expected useful life of 

general PP&E 

b. make an aggregate entry for whole classes of 

PP&E (e.g., entire facilities rather than a 

building-by-building estimate). (SFFAS 6, 

par. 42)

 

227. In recording existing general PP&E, is the 

difference in amounts added to asset and contraaccounts credited (or charged) to the net position of 

the entity, with the amount of the adjustment shown 

as a “prior period adjustment” in the Statement of 

Changes in Net Position? (SFFAS 6, par. 43) 

 

 

30Net remaining cost is the original cost of the asset less any accumulated depreciation/amortization to date (i.e., book value).
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Assets 

General Property, Plant, & Equipment (Net) 

(187– 233) 

Yes, 

No 

or 

N/A

Explanation 

228. In recording existing general PP&E previously 

identified as national defense PP&E, is the 

difference in amounts added to asset and contra 

accounts reported as a “change in accounting 

principle” and reflected as an adjustment to the 

beginning balance of cumulative results of 

operations in the statement of changes in net 

position, for the period the change is made? 

(SFFAS 23, par. 10 & 16) 

 

229. Does the entity make the following minimum 

disclosures about its general PP&E? 

a. the cost, associated accumulated depreciation, 

and book value by major class (e.g., building and 

structures, fixtures, equipment) 

b. the estimated useful lives for each major class 

c. the method(s) of depreciation for each major 

class 

d. capitalization threshold(s) including any 

changes in thresholds(s) during the period 

e. restrictions on the use or convertibility of 

general PP&E (SFFAS 6, par. 45; 

OMB Bulletin 01-09, p. 77, section 9.10)

 

Property, plant, and equipment are classified as heritage assets if they have (1) historical or 

natural significance; (2) cultural, educational, or artistic importance; or (3) significant 

architectural characteristic. (SFFAS 6, par. 57) 

Multiuse heritage assets are heritage assets that are predominately used in general 

government operations (e.g., buildings such as the main Treasury building, which is used as 

an office building). (SFFAS 16, par. 6; OMB Bulletin 01-09, p. 23, section 3.3) 

230. If the predominant use of the heritage asset(s) is in 

general government operations, is the acquisition, 

betterment, or reconstruction of the asset(s) 

capitalized as general PP&E and depreciated over 

its useful life? (SFFAS 16, par. 6 & 9; 

OMB Bulletin 01-09, p. 23, section 3.3; p. 98, 

section 10.2A) 

 
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Section III 

Balance Sheet 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-70 

Assets 

General Property, Plant, & Equipment (Net) 

(187– 233) 

Yes, 

No 

or 

N/A

Explanation 

231. Does the entity also include a footnote disclosure 

explaining that “physical quantity” information for 

the multiuse heritage assets is included in 

supplemental stewardship reporting for heritage 

assets? (SFFAS 16, par. 9; OMB Bulletin 01-09, 

p. 23, section 3.3; p. 98, section 10.2A) 

 

232. Are multiuse heritage assets acquired through 

donation or devise recognized as general PP&E at 

the assets’ fair value? (SFFAS 16, par. 11) 

 

233. For multiuse heritage assets acquired through 

donation or devise, are the assets fair value also 

recognized as “nonexchange revenue,” as defined in 

SFFAS 7? (SFFAS 16, par. 11) 

 
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Assets 

Software (234– 262) 

Yes, 

No 

or 

N/A

Explanation 

Software includes the application and operating system programs, procedures, rules, and 

any associated documentation pertaining to the operation of a computer system or program. 

“Internal use software” is software that is purchased from commercial vendors “off the shelf,” 

internally developed, or contractor-developed solely to meet the entity’s internal or 

operational needs. (SFFAS 10, par. 8) 

234. Does the entity capitalize the cost of software when 

such software meets the following criteria? 

a. specifically identifiable 

b. determinate life of 2 years or more 

c. not intended for sale in the ordinary course of 

operations 

d. acquired or developed with the intention of 

being used by the entity 

e. meets the criteria for general property, plant, 

and equipment in that it is used in providing 

goods and services (SFFAS 6, par. 17; 

SFFAS 10, par. 15 & 38)

 

235. Does the capitalized cost of internally developed 

software include the full cost (i.e., direct and 

indirect costs) incurred during the software 

development stage? (SFFAS 10, par. 16) 

 
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Assets 

Software (234– 262) 

Yes, 

No 

or 

N/A

Explanation 

236. Are capitalized internally developed software 

development costs limited to costs incurred after 

the following steps have been taken? 

a. management authorizes and commits to a 

computer software project and believes that it is 

more likely than not that the project will be 

completed and the software will be used to 

perform the intended function with an 

estimated service life of 2 years or more 

b. the conceptual formulation, design, and testing 

of possible software project alternatives (i.e., 

preliminary design stage) have been completed. 

(SFFAS 10, par. 16)

 

237. Do software capitalization costs include costs for 

new software31 and documentation manuals? 

(SFFAS 10, par. 17) 

 

238. Do the capitalized costs for commercial off-the-shelf 

(COTS) software include the amount paid to the 

vendor? (SFFAS 10, par. 18) 

 

239. Do the capitalized costs for contractor-developed 

software include the amount paid to a contractor to 

design, program, install, and implement the 

software? (SFFAS 10, par. 18) 

 

240. Does the entity capitalize material internal costs 

incurred to implement the COTS or contractordeveloped software and otherwise make it ready for 

use? (SFFAS 10, par. 18) 

 

241. Does the entity expense as incurred all data 

conversion costs for internally developed, 

contractor-developed, or COTS software as well as 

the cost to develop or obtain software that allows 

for access or conversion of existing data to the new 

software? (SFFAS 10, par. 19) 

 

 

31Examples of costs for new software are salaries of programmers, systems analysts, project managers, and administrative 

personnel; associated employee benefits; outside consultants’ fees; rent; and supplies. 
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Assets 

Software (234– 262) 

Yes, 

No 

or 

N/A

Explanation 

242. Does the entity expense costs incurred after the 

completion of final acceptance testing? (SFFAS 10, 

par. 20) 

 

243. Does the entity treat software that serves both 

internal uses and stewardship purposes32 as internal 

use software and capitalize it to the extent such 

software meets criteria for general PP&E? (SFFAS 

10, par. 21) 

 

244. Is computer software that is integrated into and 

necessary to operate general PP&E,33 rather than 

perform an application, considered part of the 

PP&E of which it is an integral part, and is it 

capitalized and depreciated accordingly? (SFFAS 

10, par. 22) 

 

245. If the entity purchased software as part of a 

package of products and services, does it use a 

reasonable estimate of the relative fair value of the 

individual elements in allocating the cost as 

capitalizable or noncapitalizable (i.e., expense) 

elements? (SFFAS 10, par. 23) 

 

246. If the entity purchased software as part of a 

package of products and services, does it expense 

software costs that are not susceptible to allocation 

between maintenance and relatively minor 

enhancements? (SFFAS 10, par. 23) 

 

247. Has the entity established capitalization thresholds 

for its internal-use software including bulk 

purchases of software programs and modules or 

components of a total software system? (SFFAS 10, 

par. 24) 

 

 

32Software that serves both internal uses and stewardship purposes is referred to as multiuse software. An example is a global 

positioning system used in connection with national defense activities and general operating activities and services. 

33For example, such software could include software necessary to operate airport radar and computer operated lathes. 
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Assets 

Software (234– 262) 

Yes, 

No 

or 

N/A

Explanation 

248. Does the entity capitalize the acquisition cost of 

enhancements to existing internal-use software, as 

well as related modules, when it is more likely than 

not that they will result in significant additional 

capabilities? (SFFAS 10, par. 25) 

 

249. Does the entity expense, in the period incurred, the 

cost of minor enhancements resulting from ongoing 

systems maintenance as well as the purchase of 

enhanced versions of software for a minimal 

charge? (SFFAS 10, par. 26) 

 

250. Are costs incurred solely to repair a design flaw or 

to perform minor upgrades that may extend the 

useful life of the software without adding 

capabilities expensed?34 (SFFAS 10, par. 27) 

 

251. Does the entity recognize a loss upon impairment of 

computer software if either of these 

postimplementation/operational conditions apply? 

a. the software is no longer expected to provide 

substantive service potential and will be 

removed from service 

b. a significant reduction occurs in the capabilities, 

functions, or uses of the software (or module 

thereof) (SFFAS 10, par. 28 & 29)

 

252. If impaired software is to remain in use, is the loss 

due to impairment measured as the difference 

between the book value and either of the following 

amounts? 

a. the cost to acquire software that would perform 

similar remaining functions (i.e., unimpaired 

functions) 

b. the portion of book value attributable to the 

remaining functional elements of the software 

(SFFAS 10, par. 29) 

 

 

34SFFAS 10 provides that material expenditures to add software capability/functionality would be capitalized but that 

expenditures that result in extending useful life or capacity would be expensed. (SFFAS 10, par. 42 & 43) 
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Assets 

Software (234– 262) 

Yes, 

No 

or 

N/A

Explanation 

253. If the loss due to impairment cannot be determined, 

is the book value of the software amortized over the 

remaining useful life of the software? (SFFAS 10, 

par. 29) 

 

254. If impaired software is to be removed from use, is 

the loss due to impairment measured as the 

difference between the book value and any net 

realizable value (NRV)? (SFFAS 10, par. 30) 

 

255. In situations of impaired software to be removed 

from use, does the entity transfer the NRV, if any, to 

an appropriate asset account until such time as the 

software is disposed of and the NRV realized? 

(SFFAS 10, par. 30) 

 

256. If the entity’s managers conclude that it is no longer 

“more likely than not” that developmental software 

or a module thereof will be completed and placed in 

service, is the accumulated book value or the 

balance in a work in process account, if applicable, 

reduced to reflect the expected NRV and a loss 

recognized? (SFFAS 10, par. 31) 

 

257. Does the entity amortize capitalized internal use 

software systematically and rationally over the 

estimated useful life of the software? (SFFAS 10, 

par. 32) 

 

258. Does amortization of each module or component of 

a software project begin when that module or 

component has been successfully tested? 

(SFFAS 10, par. 33) 

 

259. If the use of a module is dependent on the 

completion of another module(s), does the 

amortization begin only when both that module and 

the other module(s) have successfully completed 

testing? (SFFAS 10, par. 33) 

 
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Assets 

Software (234– 262) 

Yes, 

No 

or 

N/A

Explanation 

260. Are additions to the book value or changes in useful 

life of capitalized software treated prospectively 

(i.e., during the period of change and future periods 

only) when the software is amortized? (SFFAS 10, 

par. 34) 

 

261. When the entity replaces existing internal-use 

software with new software, is the unamortized cost 

of the old software expensed when the new 

software has successfully completed testing? 

(SFFAS 10, par. 34) 

 

262. Does the entity disclose, if material, the following 

information regarding its capitalized software? 

a. the cost, associated amortization, and book 

value 

b. the estimated useful life for each major class of 

software 

c. the method(s) of amortization (SFFAS 10, 

par. 35; SFFAS 6, par. 45)

 
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Assets 

Other Assets (263– 268) 

Yes, 

No 

or 

N/A

Explanation 

263. Does the entity include under the “other” assets 

category assets that are not reported in a separate 

category on the face of the balance sheet? 

(OMB Bulletin 01-09, p. 23, section 3.3) 

 

264. Are other assets listed and described in a note to the 

financial statements and broken out by major 

homogenous components and intragovernmental 

versus other (nonfederal) entity assets)? 

(OMB Bulletin 01-09, p. 78, section 9.11) 

 

Advances are cash outlays made by a federal entity to its employees, contractors, grantees, or 

others to cover the recipient’s anticipated expenses or as advance payments for the costs of 

goods and services acquired by an entity. (SFFAS 1, par. 57 & OMB Bulletin 01-09, p. 23, 

section 3.3) 

Prepayments are payments made by a federal entity to cover certain periodic expenses before 

those expenses are incurred (SFFAS 1, par. 58; OMB Bulletin 01-09, p. 23, section 3.3) 

Progress payments on work in progress are not included in advances and prepayments 

(OMB Bulletin 01-09, p. 23, section 3.3)

265. Are advances and prepayments recorded as assets 

and disclosed in the notes to the financial 

statements? (SFFAS 1, par. 59; OMB Bulletin 01-09, 

p. 23, section 3.3) 

 

266. Are amounts of advances or prepayments that are 

subject to a refund transferred to accounts 

receivable? (SFFAS 1, par. 59) 

 

267. Are advances and prepayments paid out reported 

separately as assets and not netted against the 

liability for advances and prepayments that the 

entity received? (SFFAS 1, par. 60) 

 

268. Are advances and prepayments that are made to 

federal entities accounted for and reported 

separately from those made to nonfederal entities? 

(SFFAS 1, par. 61) 

 
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Liabilities 

Liabilities in General (269– 272) 

Yes, 

No 

or 

N/A

Explanation 

Liabilities of the federal agencies are reported under two major categories: (1) liabilities 

covered by budgetary resources35 and (2) liabilities not covered by budgetary resources.36

Within each of these two categories, liabilities are classified as (1) intragovernmental 

liabilities, which are amounts owed to other federal entities or (2) governmental liabilities, 

which are amounts owed to nonfederal entities by the federal government or an entity within 

the federal government. (SFFAS 1, par. 21; SFFAS 5, footnote 1 in summary; OMB Bulletin 

01-09, p. 24, section 3.4 & pp. 78 & 79, section 9.12) 

269. Are liabilities covered by budgetary resources and 

liabilities not covered by budgetary resources 

combined on the face of the balance sheet? 

(OMB Bulletin 01-09, p. 17, section 3.1, p. 24, 

section 3.4 & pp. 78 & 79, section 9.12) 

 

270. Are the amounts and types of liabilities not covered 

by budgetary resources disclosed? (SFFAS1, par. 80 

& 86; OMB Bulletin 01-09, p. 17, section 3.1 & p. 24, 

section 3.4) 

 

 

35Liabilities covered by budgetary resources are liabilities covered by realized budgetary resources as of the balance sheet date. 

Budgetary resources include (1) new budget authority, (2) unobligated balances of budgetary resources at the beginning of the 

year or net transfers of prior year balances during the year, (3) spending authority from offsetting collections (credited to an 

appropriation or fund account), (4) recoveries of unexpired budget authority through downward adjustments of prior year 

obligations, and (5) permanent indefinite appropriations or borrowing authority, which have been enacted and signed into law 

as of the balance sheet date, provided that the resources may be apportioned by OMB without further action by the Congress 

and without a contingency having to be met. 

36Liabilities not covered by budgetary resources are liabilities for which congressional action is needed before budgetary 

resources can be provided. 
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Liabilities 

Liabilities in General (269– 272) 

Yes, 

No 

or 

N/A

Explanation 

271. Does the federal entity recognize a liability for 

probable37 and measurable38 future outflows or other 

sacrifices of resources arising from one or more of 

the following events? 

a. past exchange transactions 

b. government-related events, such as a federal 

entity accidentally causing damage to private 

property 

c. government-acknowledged events, such as 

natural disasters, for which the government has 

taken formal responsibility for the related costs 

d. nonexchange transactions that, according to 

current law and applicable policy, are unpaid 

amounts due as of the reporting date (SFFAS 5, 

par. 19–34; OMB Bulletin 01-09, p. 23, 

section 3.4)

 

272. Are liabilities recognized when incurred regardless 

of whether they are covered by available budgetary 

resources (including those liabilities related to 

appropriations canceled under subchapter IV of 

chapter 15 of title 31, United States Code (closing 

accounts)? (OMB Bulletin 01-09, p. 24, section 3.4) 

 

 

37Probable refers to that which can be reasonably expected or is believed to be more likely than not on the basis of available 

evidence or logic. However, in the context of assessing the outcome of matters of pending or threatened litigation and 

unasserted claims and recognizing an associated liability, “probable” refers to that which is likely, not to that which is “more 

likely than not.” 

38Measurable refers to that which can be quantified in monetary units with sufficient reliability to be reasonably estimable.
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Liabilities 

Accounts Payable and Interest Payable 

(273– 280) 

Yes, 

No 

or 

N/A

Explanation 

Accounts payable are amounts owed by a federal entity for goods and services received from, 

progress in contract performance made by, and rents due to other entities. (SFFAS 1, par. 

74; OMB Bulletin 01-09, p. 24, section 3.4) 

273. Do accounts payable exclude amounts related to 

ongoing continuous expenses, such as salary and 

related benefits expense, which are classified as 

other current liabilities? (SFFAS 1, par. 75) 

 

274. Are (intragovernmental) accounts payable owed to 

other federal agencies reported separately from 

those owed to the public? (SFFAS 1, par. 76; 

OMB Bulletin 01-09, p. 18, section 3.2 & p. 24, 

section 3.4) 

 

275. When an entity accepts title to goods, whether the 

goods are delivered or in transit, does the entity 

recognize a liability for the unpaid cost of goods? 

(SFFAS 1, par. 77) 

 

276. If invoices for goods, for which the entity has 

accepted the title, are not available, does the entity 

estimate the amount owed? (SFFAS 1, par. 77) 

 

277. For facilities or equipment constructed or 

manufactured by contractors or grantees according 

to agreements or contract specifications, are 

amounts recorded as payable based on an estimate 

of work completed under the contract or the 

agreement in accordance with the federal entity's 

engineering and management evaluation of actual 

performance progress and incurred costs? 

(SFFAS 1, par. 78 & 79) 

 

278. Does the entity disclose accounts payable not 

covered by budgetary resources? (SFFAS 1, par. 80; 

OMB Bulletin 01-09, p. 24, section 3.4; p. 78, 

section 9.12) 

 

279. Is interest incurred but unpaid on borrowed funds, 

late payments, and refunds recognized as interest 

payable and reported as a liability at the end of each 

period? (SFFAS 1, par. 81; OMB Bulletin 01-09, 

p. 24, section 3.4) 

 
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Liabilities 

Accounts Payable and Interest Payable 

(273– 280) 

Yes, 

No 

or 

N/A

Explanation 

280. Is interest payable to federal entities reported 

separately from interest payable to the public? 

(SFFAS 1, par. 82) 

 
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Liabilities 

Liabilities for Loan Guarantees (281– 294) 

Yes, 

No 

or 

N/A

Explanation 

A loan guarantee is any guarantee, insurance (but not deposit insurance), or other pledge 

with respect to the payment of all or part of the principal or interest on any debt obligation of 

a nonfederal borrower to a nonfederal lender. (SFFAS 2, app. C) 

The Federal Credit Reform Act of 1990 requires federal entities to estimate and budget for the 

costs arising from default of guaranteed loans made after fiscal year (FY) 1991 (i.e., post 

1991). (SFFAS 2, par. 7)

281. Is the present value of estimated net cash outflows 

from post-1991 (i.e., committed after September 30, 

1991) loan guarantees recognized as a liability? 

(SFFAS 2, par. 7 & 23) 

 

282. Does the entity disclose by loan program the face 

value of guaranteed loans outstanding and the 

amount of outstanding principal guaranteed? 

(SFFAS 2, par. 23; OMB Bulletin 01-09, 

pp. 60, 65, & 72, section 9.8, item J) 

 

283. Does the entity disclose by loan program the 

estimated liabilities39 arising from post-1991 loan 

guarantees? (OMB Bulletin 01-09, 

pp. 60, 61, 65, & 72, section 9.8, item K) 

 

284. Is a liability for a pre-1992 (i.e., committed before 

October 1, 1991) loan guarantee recognized when it 

is more likely than not that the loan guarantee will 

require a future cash outflow to pay a default claim? 

(SFFAS 2, par. 39 & app. B, part IV A) 

 

285. Does the entity disclose by loan program the 

estimated liabilities arising from pre-1992 loan 

guarantees? (OMB Bulletin 01-09, p. 25, section 3.4; 

pp. 60 & 72, section 9.8, item K) 

 

286. Are the liabilities for the pre-1992 loan guarantees 

reestimated each year as of the date of the financial 

statements? (SFFAS 2, par. 39) 

 

 

39The present value of the estimated net cash flows (outflows less inflows) to be paid by the entity arising from loan guarantees.
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Liabilities 

Liabilities for Loan Guarantees (281– 294) 

Yes, 

No 

or 

N/A

Explanation 

287. Does the entity disclose, by loan program, whether 

pre-1992 loan guarantees are reported on a presentvalue basis40 or under the allowance-for-loss 

method?41 (OMB Bulletin 01-09, p. 68, section 9.8, 

item A, 4th par.) 

 

288. When the total loan guarantee liability for all of the 

credit programs is negative, is this reported as an 

asset? (OMB Bulletin 01-09, p. 25, section 3.4) 

 

289. If loan guarantee liability is the result of both 

positive and negative amounts of the various 

components, is the total shown as a liability, and are 

the negative components (of the loan guarantee 

liability) disclosed? (OMB Bulletin 01-09, p. 25, 

section 3.4) 

 

290. When post-1991 loan guarantees are modified, is the 

existing book value of the related liability changed 

to an amount equal to the present value of net cash 

outflows that are projected under the modified 

terms from the time of the modification to the loan’s 

maturity, and discounted at the original discount 

rate?42 (SFFAS 2, par. 50 & app. B, part III D(4); 

SFFAS 19, par. 7(d)) 

 

 

40Under the present-value method, the liability for loan guarantees is the present value of the expected net cash outflows due to

the loan guarantees. 

41Under the allowance-for-loss method, the liability for loan guarantees is the amount the agency estimates will more likely than

not require future cash outflow to pay default claims. 

42The original discount rate is the rate that was originally used to calculate the present value of the liability when the guaranteed 

loans were disbursed, after adjusting for the interest rate reestimate. 
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Liabilities 

Liabilities for Loan Guarantees (281– 294) 

Yes, 

No 

or 

N/A

Explanation 

291. When pre-1992 loan guarantees are directly 

modified, does the following occur? 

a. the loan guarantees are transferred from the 

liquidating account to a financing account 

b. the existing book value of the liability of the 

modified loan guarantees is changed to an 

amount equal to their postmodification liability 

(i.e., the present value of the net cash outflows 

under postmodification terms discounted at the 

current Treasury rate) (SFFAS 2, par. 51 & 

app. B, part IV B (2) & (4))

 

292. When pre-1992 loan guarantees are indirectly 

modified, does the following occur? 

a. The loan guarantees are kept in a liquidating 

account. 

b. The related liability is reassessed and adjusted 

to reflect any change in the liability resulting 

from the modification. (SFFAS 2, par. 51)

 

293. Are subsequent modifications of pre-1992 loan 

guarantees treated as modifications of post-1991 

loan guarantees? (SFFAS 2, par. 51) 

 

294. If a post-1991 or pre-1992 loan is sold with a 

recourse provision, is the present value (discounted 

at the Treasury rate in effect at the time of the sale) 

of the estimated losses recognized as a subsidy 

expense and a loan guarantee liability? (SFFAS 2, 

par. 54 & app. B, part I F(3)) 

 
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Liabilities 

Lease Liabilities (295– 300) 

Yes, 

No 

or 

N/A

Explanation 

Capital leases are leases that transfer substantially all of the benefits and risks of ownership 

to the lessee. (SFFAS 5, par. 43) 

295. Is the amount recorded by the lessee as a liability 

under a capital lease arrangement the present value 

of rental and other minimum lease payments 

(excluding executory costs) during the lease term? 

(SFFAS 5, par. 44) 

 

296. If the present value of the rental and other minimum 

lease payments during the lease term exceeds the 

fair value of the leased property, is the liability 

recorded as the fair value43 of the property at the 

inception of the lease? (SFFAS 5, par. 44) 

 

297. Does the entity use the applicable Treasury 

borrowing rate to determine the discount rate 

charged on a capital lease unless both of the 

following apply? 

a. It is practicable for the lessee to learn the 

implicit rate computed by the lessor. 

b. The implicit rate is less than the Treasury 

borrowing rate. (SFFAS 5, par. 45)

 

298. During the lease term, is each minimum lease 

payment allocated between a reduction of the 

obligation and interest expense so as to produce a 

constant periodic rate of interest on the remaining 

balance of the liability? (SFFAS 5, par. 46) 

 

 

43Fair value is the price for which an asset could be bought or sold in an arm’s-length transaction between unrelated parties. 

Roman L. Well and Patrick C. O’Brien, Accounting: The Language of Business, 9th ed. (Sun Lakes, Arizona: Thomas Horton and 

Daughters, 1994). 
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Liabilities 

Lease Liabilities (295– 300) 

Yes, 

No 

or 

N/A

Explanation 

299. Does the entity disclose, in a note to the financial 

statements, the following information about its 

capital leases? 

a. gross amounts of assets under capital lease by 

major asset category and the related total 

accumulated amortization 

b. description of the lease arrangements, for 

example, future funding commitments, lease 

terms, renewal options, escalation clauses, 

restrictions, amortization periods 

c. future payments due, by major asset category, 

and deductions for imputed interest and 

executory costs for all noncancelable leases 

with terms longer than 1 year 

d. a breakout of portions of the capital lease 

liability covered by budgetary resources and not 

covered by budgetary resources 

(OMB Bulletin 01-09, p. 84-85, section 9.17) 

 

300. For operating leases, does the entity disclose the 

following information in a note to the financial 

statements? 

a. description of the lease arrangements, such as 

future funding commitments, lease terms, 

renewal options, escalation clauses, restriction, 

amortization periods 

b. future payments due, by major asset category, 

for all noncancelable leases with terms longer 

than 1 year (OMB Bulletin 01-09, p. 84-85, 

section 9.17)

 
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Liabilities 

Federal Debt and Related Interest 

(301– 311) 

Yes, 

No 

or 

N/A

Explanation 

Debts are amounts borrowed from the Treasury, the Federal Financing Bank, other federal 

agencies, or the public under general or special financing authority such as Treasury bills, 

notes, bonds, and Federal Housing Administration (FHA) debentures. (SFFAS 5, par. 47; 

OMB Bulletin 01-09, p. 25, section 3.4) 

301. Does the entity accounting for federal debt identify 

the amount of the outstanding debt liability at any 

given time and the related interest cost for each 

accounting period? (SFFAS 5, par. 48) 

 

302. Are fixed-value securities with known redemption 

or maturity amounts at time of issue valued at their 

original face (par) value net of any unamortized 

discount or premium? (SFFAS 5, par. 50) 

 

303. For fixed-value securities, is either the straight line 

or interest method44 of discount or premium 

amortization used in the following cases? 

a. short-term securities with a maturity of 1 year or 

less 

b. longer term securities, where the difference 

between the amount of amortization under the 

interest and straight-line methods is immaterial 

(SFFAS 5, par. 50) 

 

304. For fixed-value securities, is the interest method 

used for amortizing any discount or premium on all 

cases other than those described in the previous 

question? (SFFAS 5, par. 51) 

 

305. If the entity has issued variable value securities of 

unknown redemption or maturity values, are they 

appraised at their original value and periodically 

revalued on the basis of the regulations or offering 

language? (SFFAS 5, par. 52) 

 

306. Are old currencies issued by the federal government 

and not yet redeemed or written off identified as a 

noninterest bearing federal debt liability at face 

value? (SFFAS 5, par. 55) 

 

 

44The interest method for amortizing a bond premium or discount reduces the discount or premium by the difference between 

the effective interest and stated interest on the bond. (SFFAS 1, app B, tables 1 & 2) 
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Section III 

Balance Sheet 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-88 

Liabilities 

Federal Debt and Related Interest 

(301– 311) 

Yes, 

No 

or 

N/A

Explanation 

307. Is all debt owed to Treasury, the Federal Financing 

Bank, or other federal agencies reported under 

intragovernmental liabilities on the balance sheet 

and disclosed by category? (OMB Bulletin 01-09, 

p. 18 & pp. 79-80, section 9.13) 

 

308. Are the beginning balances, net borrowings, and 

ending balances of debt disclosed by the following 

categories? 

a. total Treasury debt (reported by the Treasury 

Department only) broken out by government 

accounts and debt held by the public 

b. total agency debt issued under special financing 

authority (e.g., Federal Housing Administration 

(FHA) debentures and Tennessee Valley 

Authority (TVA) bonds) broken out by debt held 

by government accounts and debt held by the 

public 

c. other debt broken out by debt owed to the 

Treasury, debt owed to the Federal Financing 

Bank, and debt owed to other federal agencies 

(OMB Bulletin 01-09, pp. 79 & 80, section 9.13)

 

309. Is all debt owed to the public reported and 

disclosed as such? (OMB Bulletin 01-09, p. 18 & 

pp. 79-80, section 9.13) 

 

310. Are the names of the agencies disclosed, other than 

Treasury or the Federal Financing Bank, to which 

intragovernmental debt is owed, and are the 

amounts disclosed? (OMB Bulletin 01-09, p. 80, 

section 9.13) 

 

311. Is other information relative to debt disclosed (e.g., 

redemption or call of debt owed to the public before 

maturity dates, write-offs of debts owed to Treasury 

or the Federal Financing Bank)? 

(OMB Bulletin 01-09, p. 80, section 9.13) 

 
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Section III 

Balance Sheet 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-89 

Liabilities 

Pensions, Other Retirement Benefits, and 

Postemployment Benefits (312 – 319) 

Yes, 

No 

or 

N/A

Explanation 

Federal employee and veterans benefits include the actuarial portion of pensions, other 

retirement benefits, and other postemployment benefits. They do not include liabilities 

related to ongoing continuous expenses such as employees’ accrued salary, accrued annual 

leave, unpaid portions of employee benefits, and other benefits that are currently due. These 

items are reported under the “other liabilities” line item. (SFFAS 1, par. 83 & 84; SFFAS 5, 

par. 56; OMB Bulletin 01-09, p. 25, section 3.4) 

In the context of accounting for pensions, other retirement benefits (ORB), and other 

postemployment benefits, the “administrative entity” manages and accounts for the pension 

or other employee plan, while the “employer entity” employs federal workers and generates 

employee costs, for which it would typically receive a salary and expense appropriation. 

(SFFAS 5, par. 57, footnote 38) 

The “aggregate entry age normal” actuarial cost method is one under which the expenses or 

liabilities arising from the actuarial present value of projected pension benefits are allocated 

on a level basis over the earnings or the service of the group between entry age and assumed 

exit ages. The portion of the actuarial present value allocated to a valuation year is called 

“normal cost.” (SFFAS 5, par. 64)

312. Is the aggregate entry age normal actuarial cost 

method used to calculate, for the administrative 

entity financial statements, the liabilities arising 

from pension and ORB expenses? 

(SFFAS 5, par. 64 & 82) 

 

313. If other actuarial cost methods are used because the 

results are not materially different, does the entity 

provide an explanation why aggregate entry age 

normal is not used? (SFFAS 5, par. 64 & 82) 

 

314. Does the administrative entity disclose the 

assumptions used to calculate the liability for 

pensions, other retirement benefits, and other 

postemployment benefits? (SFFAS 5, par. 67 & 83; 

OMB Bulletin 01-09, p. 25, section 3.4; p. 80, 

section 9.14) 

 
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Section III 

Balance Sheet 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-90 

Liabilities 

Pensions, Other Retirement Benefits, and 

Postemployment Benefits (312 – 319) 

Yes, 

No 

or 

N/A

Explanation 

315. If the assumptions for a pension plan differ from the 

assumptions used by the three primary plans—Civil 

Service Retirement System (CSRS), Federal 

Employees Retirement System (FERS), and Military 

Retirement System (MRS)—does the 

administrative entity disclose how and why the 

assumptions differ from those of the primary plans? 

(SFFAS 5, par. 67; OMB Bulletin 01-09, p. 80, 

section 9.14) 

 

316. Does the administrative entity report pension and 

ORB assets separately from liabilities as opposed to 

netting them out? (SFFAS 5, par. 68 & 85) 

 

317. Does the administrative entity carry pension and 

ORB assets at their acquisition cost, adjusted for 

amortization, if appropriate? 

(SFFAS 5, par. 68 & 85) 

 

318. Does the administrative entity disclose the market 

value of pension and ORB investments in marketbased and marketable securities? 

(SFFAS 5, par. 68 & 85) 

 

319. Does the employer entity recognize the long-term 

other postemployment benefits liability as the 

present value of future payments discounted at the 

Treasury borrowing rate for securities of similar 

maturity? (SFFAS 5, par. 95) 

 
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Section III 

Balance Sheet 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-91 

Liabilities 

Other Liabilities (320 – 353) 

Yes, 

No 

or 

N/A

Explanation 

Unless they are reported separately, other liabilities cover liabilities not recognized in other 

categories. They may include, but are not limited to: capital leases, insurance, advances and 

prepayments, deposit funds held in escrow, accrued liabilities related to ongoing continuous 

expenses such as federal employee salaries and accrued employee annual leave, and 

estimated losses for claims and other contingencies. Claims and other contingencies include 

indemnity agreements, adjudicated claims, and commitments to international institutions. 

(SFFAS 1, par. 83-86; OMB Bulletin 01-09, p. 26, section 3.4) 

320. Does the entity separately report items within other 

liabilities if the amounts are material? 

(OMB Bulletin 01-09, p. 26, section 3.4) 

 

321. Do all federal insurance and guarantee programs 

(except social insurance and loan guarantee 

programs) recognize a liability for unpaid claims 

incurred resulting from insured events that have 

occurred as of the reporting date? (SFFAS 5, 

par. 104; OMB Bulletin 01-09, p. 26, section 3.4) 

 

322. Do federal insurance programs accrue a contingent 

liability when an existing condition, situation, or set 

of circumstances involving uncertainty as to 

possible loss exists, and when the following 

conditions apply? 

a. the uncertainty will be resolved when one or 

more probable future events occur or fail to 

occur. 

b. future outflow or other sacrifice of resources is 

probable and measurable. (SFFAS 5, par. 104 & 

108; OMB Bulletin 01-09, pp. 26 & 27, section 

3.4)

 

323. Does the entity also recognize a liability for future 

life insurance policy benefits (such as death or 

disability)? (SFFAS 5, par. 104; OMB Bulletin 01-09, 

p. 27, section 3.4) 

 

324. When insurance payments and losses extend 

beyond the current year, does the liability at the end 

of the year represent net losses calculated on a 

present-value basis to reflect the time value of 

money? (SFFAS 5, par. 109) 

 
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Section III 

Balance Sheet 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-92 

Liabilities 

Other Liabilities (320 – 353) 

Yes, 

No 

or 

N/A

Explanation 

325. Does the entity report under “required 

supplementary information” (RSI) the major 

assumptions and “risks assumed” (i.e., the present 

value of unpaid expected losses net of associated 

premiums based on risk inherent in the insurance or 

guarantee coverage) for all sponsored insurance 

programs (except for social insurance, life 

insurance, and loan guarantee programs)? 

(SFFAS 5, par. 105 & 106; SFFAS 25, par. 4) 

 

326. Does the entity also report under RSI the indicators 

of the range of uncertainty around insurance-related 

estimates and sensitivity of the estimates to changes 

in major assumptions? (SFFAS 5, par. 114; 

SFFAS 25, par.4) 

 
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Section III 

Balance Sheet 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-93 

Liabilities 

Other Liabilities (320 – 353) 

Yes, 

No 

or 

N/A

Explanation 

The liability for future policy benefits is the present value of future outflows to be paid to (or 

on behalf of) policyholders, less the present value of future related premiums. In general, for 

whole life policies, the liability for future policy benefits should be no less than the cash 

surrender value that accrues to the benefit of the policyholder. (SFFAS 5, par. 116) 

327. Are liabilities for future benefits of whole life 

insurance policies reported and disclosed in 

accordance with private sector standards (i.e., 

Financial Accounting Standards Board (FASB) 

Statement of Accounting Standards (SFAS) 60, 97, & 

120; American Institute of Certified Public 

Accountants (AICPA) Statement of Position (SOP) 

95-1)? (SFFAS 5, par. 117; OMB Bulletin 01-09, 

p. 85, section 9.18) 

 

328. Does the liability for future benefits relating to 

participating life insurance contracts equal the sum 

of the following amounts? 

a. the net level premium reserve for death and 

endowment policy benefits 

b. liability for terminal dividends and 

c. any premium deficiency45 (SFFAS 5, par. 118 & 

120)

 

 

45A premium deficiency occurs if the liability for future policy benefits using current conditions exceeds the liability for future 

policy benefits using contract conditions.
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Section III 

Balance Sheet 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-94 

Liabilities 

Other Liabilities (320 – 353) 

Yes, 

No 

or 

N/A

Explanation 

329. Has the entity made an assessment to compare the 

liability for future policy benefits using actuarial 

assumptions applicable at the time the contract was 

made (contract assumptions) with the liability for 

future policy benefits using assumptions that 

consider the following factors? 

a. current economic conditions (i.e., current and 

expected investments and expected long-term 

yields) 

b. experience (i.e., mortality, morbidity, and 

termination rates) (SFFAS 5, par. 119)

 

330. Does the entity separately disclose the 

components46 of the liability for future policy 

benefits of whole life insurance contracts along 

with a description of each amount and explanation 

of its projected use and any other potential uses? 

(SFFAS 5, par. 121; OMB Bulletin 01-09, p. 85, 

section 9.18) 

 

331. Does the reporting entity disclose and break out the 

following items? 

a. the portion of other liabilities covered by 

budgetary resources and the portion not 

covered by budgetary resources 

b. the portion of other liabilities payable to federal 

entities (i.e., intragovernmental liabilities) and 

the portion payable to nonfederal entities 

c. the portion of other liabilities that are 

noncurrent and the portion that are current 

(SFFAS 1, par. 85 & 86; OMB Bulletin 01-09, 

pp. 78 & 79, section 9.l2 & pp. 81 & 82, 

section 9.16)

 

 

46The net-level premium reserve for a death and endowment policy and the liability for terminal dividends.
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Section III 

Balance Sheet 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-95 

Liabilities 

Other Liabilities (320 – 353) 

Yes, 

No 

or 

N/A

Explanation 

332. Does the agency record “unearned revenue” as a 

liability if it requests advances or progress 

payments prior to receipt of cash, and it records the 

amounts? (SFFAS 7, par. 37) 

 

333. Are amounts payable for refunds, refund offsets,47

and drawbacks48 recognized as liabilities when 

measurable and legally payable under established 

processes of the collecting entity? (SFFAS 7, 

par. 57) 

 

334. Do amounts payable for refunds include refund 

claims filed by the taxpayer when the government 

has determined the amount refundable and 

identified the payee? (SFFAS 7, par. 57) 

 

335. Are amounts payable for refunds with respect to 

returns or claims filed as of the end of the reporting 

period included in accounts payable for refunds if 

they do not require specific approval before 

payment? (SFFAS 7, par. 57) 

 

336. For claims filed for refunds where specific 

administrative actions are required before payments 

can be made, are the amounts excluded from being 

recognized as a liability if the required 

administrative actions are not yet complete as of the 

close of the reporting period, even if reasonably 

estimable? (SFFAS 7, par. 58.1) 

 

337. Are unasserted claims for refunds by taxpayers or 

importers, such as unfiled claims for refunds or 

drawbacks for which no claim has been filed, 

excluded from being recognized as a liability, even 

if reasonably estimable? (SFFAS 7, par. 58.2) 

 

 

47Refund offsets are amounts withheld from refunds on behalf of other agencies. (OMB Circular No. A-129 (revised), app. A, Part 

V, section 2.c.i. (1)) 

48Drawbacks are refunds payable on all or part of duties paid on imported goods that are subsequently exported or destroyed. 

(SFFAS 7, app. C, glossary) 
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Section III 

Balance Sheet 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-96 

Liabilities 

Other Liabilities (320 – 353) 

Yes, 

No 

or 

N/A

Explanation 

338. Are amounts voluntarily made as deposits, such as 

those made to stop the accrual of interest or those 

made pending settlements and judgments, 

separately recognized as deposit liabilities? 

(SFFAS 7, par. 59) 

 

A loss contingency is an existing condition, situation, or set of circumstances involving 

uncertainty as to possible loss to an entity. The uncertainty should ultimately be resolved 

when one or more future events occur or fail to occur. (SFFAS 5, par. 35; OMB Bulletin 01-

09, pp. 85 & 86, section 9.19) 

339. Does the entity recognize estimated losses for 

claims or other contingencies if all of the following 

conditions apply? 

a. a past event or exchange transaction has 

occurred 

b. a future outflow or other sacrifice of resources 

is probable49

c. the future outflow or sacrifice of resources is 

measurable (e.g., the federal entity’s 

management determines an estimated 

settlement amount) (SFFAS 5, par. 38; SFFAS 6, 

par. 91; SFFAS 12, par. 10 & 11; 

OMB Bulletin 01-09, p. 26, section 3.4)

 

340. When determining an estimated contingent liability, 

if some amount within a range of amounts is a 

better estimate than any other amount within the 

range, is that amount recognized? (SFFAS 5, 

par. 39) 

 

 

49In the context of pending or threatened litigation, “probable” is taken to mean “likely;” otherwise, “probable” refers to that 

which is believed to be more “likely than not” or can be reasonably expected. 
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Section III 

Balance Sheet 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-97 

Liabilities 

Other Liabilities (320 – 353) 

Yes, 

No 

or 

N/A

Explanation 

341. When determining an estimated contingent liability, 

if no amount within a range of amounts is a better 

estimate than any other amount, does the entity 

recognize a minimum amount in the range and 

disclose a description of the nature of the 

contingency? (SFFAS 5, par. 39) 

 

342. If any one of the conditions for recognizing a 

contingent liability is not met and there is at least a 

“reasonable possibility” 50 that a loss or additional 

loss may be incurred, does the entity disclose the 

nature of the contingency51 and one of the 

following? 

a. an estimate of the possible liability 

b. an estimate of the range of the possible liability 

c. a statement that such an estimate cannot be 

made (SFFAS 5, par. 36, 38, 40, & 41)

 

343. If information about remote contingencies, or 

related to remote contingencies, is included in 

general purpose federal financial reports,52 is the 

information labeled to avoid the misleading 

implication that there is more than a remote chance 

of a loss of that amount? (SFFAS 5, par. 42) 

 

 

50The chance of a future event occurring is less than “probable” but more than “remote.”

51Examples of claims or other contingencies include (1) indemnity agreements-reimbursements due to licenses or contractors 

for losses incurred in support of federal activities; (2) adjudicated claims (i.e., claims against the federal government that are in 

the process of judicial proceedings); and (3) commitments to international institutions-payment due to international 

institutions. 

52An example of information related to a remote contingency would be the total face amount of insurance and guarantees in 

force. 
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Section III 

Balance Sheet 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-98 

Liabilities 

Other Liabilities (320 – 353) 

Yes, 

No 

or 

N/A

Explanation 

344. Does the entity disclose the following related to 

commitments and contingencies? 

a. an estimate of obligations related to canceled 

appropriations for which the reporting entity 

has a contractual commitment for payment 

b. amounts for contractual arrangements that may 

require future financial obligations 

(OMB Bulletin 01-09, p. 27, section 3.4 & pp. 85 

& 86, section 9.19)

 

345. If material, does the entity separately recognize a 

contingent liability for environmental clean-up 

costs53 for PP&E if the following criteria apply? 

a. they are related to a past transaction or event 

b. the related costs are probable and measurable 

(SFFAS 5, par. 38 & SFFAS 6, par. 91-93; 

OMB Bulletin 01-09, pp. 25 & 26, section 3.4)

 

346. When clean-up costs are paid, are the payments 

recognized as a reduction in the liability for cleanup costs? (SFFAS 6, par. 100) 

 

347. If clean-up costs have not been previously 

recognized, is a liability recognized for the portion 

of the estimated total clean-up cost that is 

attributable to either the portion of the physical 

capacity used or the portion of the estimated useful 

life that has passed since the PP&E was placed into 

service? (SFFAS 6, par. 104-106) 

 

348. Are any subsequent changes (made in periods 

following implementation) in estimated total cleanup cost immediately expensed (if costs are to be 

recovered though user charges) and reflected in the 

related liability balance? (SFFAS 6, par. 104) 

 

 

53Clean-up costs are the costs of removing, containing, and/ or disposing of (1) hazardous waste from property, or (2) material 

and/or property that consists of hazardous waste at permanent or temporary closure or shutdown of associated PP&E. (SFFAS 

6, par. 85) 
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Section III 

Balance Sheet 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-99 

Liabilities 

Other Liabilities (320 – 353) 

Yes, 

No 

or 

N/A

Explanation 

349. When clean-up costs are recognized for the first 

time, is the offsetting charge for any liability for 

clean-up costs shown as a “prior-period 

adjustment?” (SFFAS 6, par. 105; SFFAS 21, par. 13)

 

350. Are the amounts of prior-period adjustments arising 

from belated recognition of clean-up costs and 

liabilities disclosed and, if possible, are amounts 

associated with current and prior periods noted? 

(SFFAS 6, par. 105; SFFAS 21, par. 13) 

 

351. Does the entity also disclose the following 

information related to clean-up costs? 

a. the sources (i.e., applicable laws and 

regulations) of clean-up requirements 

b. the method for assigning estimated total cleanup costs to current operating periods (e.g., 

physical capacity versus passage of time) 

c. the unrecognized portion of estimated total 

clean-up costs associated with PP&E 

d. the material changes in total estimated clean-up 

costs due to changes in laws, technology, or 

plans 

e. the portion of change in an estimate that relates 

to prior-period operations 

f. the nature of estimates and the disclosure of 

information regarding possible changes due to 

inflation, deflation, technology, or applicable 

laws and regulations (SFFAS 6, par. 107-111; 

OMB Bulletin 01-09, p. 81, section 9.15)

 
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Section III 

Balance Sheet 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-100 

Liabilities 

Other Liabilities (320 – 353) 

Yes, 

No 

or 

N/A

Explanation 

Social insurance programs provide for the maintenance and distribution of incomes and 

medical benefits during periods of unemployment, disability, and retirement. These 

programs are Social Security, Medicare, Railroad Retirement Benefits, Black Lung Benefits, 

and Unemployment Insurance. Expense and liability recognition for these programs is the 

same for both the consolidated governmentwide entity and for the component entities. 

(SFFAS 17, par. 2, 4, 14, 15, 19, 30, & app. D, glossary) 

352. Does the entity recognize a liability for social 

insurance benefits due and payable including claims 

incurred but not reported? (SFFAS 17, par. 22) 

 

353. Does the liability for unemployment insurance 

include the following amounts? 

a. amounts due to states and territories for benefits 

they have paid to beneficiaries but for which 

they have not withdrawn funds from the federal 

unemployment trust fund (UTF) as of the fiscal 

year end 

b. estimated amounts to be withdrawn from UTF 

and benefits paid by states and territories after 

fiscal year end for compensatory days occurring 

prior to fiscal year end (SFFAS 17, par. 23)

 
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Section III 

Balance Sheet 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-101 

Net Position 

Unexpended Appropriations & Cumulative 

Results of Operations (354 – 355) 

Yes, 

No 

or 

N/A

Explanation 

354. Does the line item “unexpended appropriations” 

include both the portion of the entity’s 

appropriation represented by undelivered orders 

and unobligated balances? (OMB Bulletin 01-09, 

p. 27, section 3.5) 

 

355. Does the line item “cumulative results of 

operations” include the following items? 

a. the net results of operations since inception 

b. the cumulative amount of prior-period 

adjustments 

c. the cumulative amount of donations and 

transfers of assets in and out without 

reimbursement (OMB Bulletin 01-09, p. 27, 

section 3.5)

 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section IV 

Statement of Net Cost 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-102 

The questions related to the Statement of Net Cost are presented under three general captions 

and 12 sections. The question numbers related to each caption and section are identified below. 

 

 Question Numbers 

 Cost Accounting in General 

 1. Overall Requirements 1 - 13 

 2. Responsibility Segments 14 - 18 

 3. Full Cost 19 - 26 

 4. Interentity Costs 27 - 33 

 5. Costing Methodology 34 - 40 

 Revenues 41 - 63 

 

 Costs

 6. Pensions and Other Retirement and 

 Postemployement Benefits 64 - 91 

 7. Inventory, Materials, Supplies, and Commodities 92 - 100 

 8. Property, Plant, and Equipment 101 - 117 

 9. Clean-up Costs 118 - 126 

 10. Interest 127 - 128 

 11. Insurance and Subsidies 129 - 132 

 12. Credit Programs 133 - 180 
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Section IV 

Statement of Net Cost 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-103 

Cost Accounting in General 

Overall Requirements (1 – 13) 

Yes, 

No 

or 

N/A

Explanation 

The Statement of Net Cost is designed to show separately the components of the net cost of the 

reporting entity's operations for the period. The statement and any related supporting 

schedules classify revenue and cost information by suborganization or responsibility 

segment. (OMB Bulletin 01-09, p. 28, section 4.1) 

Managerial cost accounting is the process of accumulating, measuring, analyzing, 

interpreting, and reporting cost information useful to both internal and external groups 

concerned with the way in which the organization uses, accounts for, safeguards, and 

controls its resources to meet its objectives. (SFFAS 4, par. 42) 

A cost accounting "system" is a continuous and systematic cost accounting process that may 

be designed to accumulate and assign costs to a variety of objects routinely or as desired by 

management. (SFFAS 4, par. 74) 

Cost finding is a method for determining the cost of producing goods or services using 

appropriate procedures, for example, special cost studies or analyses. (SFFAS 4, par. 76)

1. Are net costs reported for the entity as a whole and 

for its suborganizations54 and major programs? 

(OMB Bulletin 01-09, p. 28, section 4.1) 

 

2. Does the entity present responsibility segments that 

align directly with the major goals and outputs 

described in the entity’s strategic and performance 

plans, required by the Government Performance 

and Results Act of 1993 (GPRA)? (SFFAS 4, par. 69; 

OMB Bulletin 01-09, p. 28, section 4.1) 

 

 

54Suborganizations are considered to be generally equivalent to responsibility segments 
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Section IV 

Statement of Net Cost 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-104 

Cost Accounting in General 

Overall Requirements (1 – 13) 

Yes, 

No 

or 

N/A

Explanation 

3. In its Statement of Net Cost, does the entity show 

the following? 

a. the gross cost of goods and services provided to 

federal government agencies 

(intragovernmental) 

b. the gross cost of goods, services, transfers, and 

grants provided to the public 

c. related exchange revenues 

d. excess of costs over exchange revenues (net 

program costs) 

e. costs that cannot be assigned to specific 

programs or outputs 

f. the exchange revenues that cannot be attributed 

to specific programs and outputs (SFFAS 7, 

par. 43 & 44; OMB Bulletin 01-09, pp. 28 & 29, 

section 4.1 & p. 30, section 4.2)

 

4. Are the costs related to the production of goods and 

services provided to other programs 

(intragovernmental) reported separately from the 

costs of goods, services, transfers, and grants 

provided to the public? (OMB Bulletin 01-09, p. 31, 

section 4.3) 

 

5. Are costs related to the production of outputs 

reported separately from costs that are not related 

to the production outputs (i.e., nonproduction 

costs)? (OMB Bulletin 01-09, p. 31, section 4.3) 

 

6. Are costs that cannot be directly traced or assigned 

on a cause-and-effect basis, or reasonably allocated 

to segments and their outputs and programs 

reported on the Statement of Net Cost as “Costs not 

assigned to programs?” (SFFAS 4, par. 92; 

OMB Bulletin 01-09, p. 32, section 4.6) 

 
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Section IV 

Statement of Net Cost 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-105 

Cost Accounting in General 

Overall Requirements (1 – 13) 

Yes, 

No 

or 

N/A

Explanation 

7. Has the entity established appropriate procedures 

and practices to enable the consistent and regular 

collection, measurement, accumulation, analysis, 

interpretation, and communication of cost 

information? (SFFAS 4, par. 68-70) 

 

8. As a means of providing cost information in an 

efficient and reliable manner on a continuing basis, 

does the reporting entity regularly accumulate and 

report the costs of its activities either by means of 

cost accounting systems or cost finding techniques? 

(SFFAS 4, par. 68-70) 

 
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Section IV 

Statement of Net Cost 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-106 

Cost Accounting in General 

Overall Requirements (1 – 13) 

Yes, 

No 

or 

N/A

Explanation 

9. Does the reporting entity's cost accounting system 

or cost finding technique, at a minimum, do the 

following? 

a. collect cost information by responsibility 

segments identified by management 

b. define outputs for each responsibility segment 

c. measure the full cost (including the cost of 

goods or services provided by other entities) of 

outputs so that total operational costs and total 

unit costs of outputs can be determined 

d. use a costing methodology (e.g., activity-based, 

job order, standard costing) that is appropriate 

for management’s needs and the operating 

environment 

e. provide information needed to determine and 

report service efforts and accomplishments and 

information necessary to meet the requirements 

of GPRA (or interface with a system that 

provides such information) 

f. report cost information in a timely manner and 

on a regular basis consistent with the needs of 

management and budgetary and financial 

reporting requirements 

g. rely on the United States Standard General 

Ledger as a basis for integrating its cost 

information with its general financial accounting 

capability 

h. supply cost data precise enough to provide 

reliable and useful information to internal and 

external users in making evaluations or 

decisions but also avoid unnecessary precision 

and refinement of data 

i. accommodate management’s special cost 

information needs (SFFAS 4, par. 71) 

 
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Cost Accounting in General 

Overall Requirements (1 – 13) 

Yes, 

No 

or 

N/A

Explanation 

10. Are all managerial cost accounting activities, 

processes, and procedures documented? (SFFAS 4, 

par. 71) 

 

11. In determining the appropriate detail for its cost 

accounting processes and procedures, has the 

reporting entity considered the following? 

a. nature of its operations 

b. the precision desired and needed in cost 

information 

c. the practicality of data collection and 

processing 

d. the availability of electronic data-handling 

facilities 

e. the cost of installing, operating, and maintaining 

the cost accounting processes 

f. any specific information needs of management 

(SFFAS 4, par. 72)

 

12. Has the entity used similar or compatible cost 

accounting processes throughout its component 

units? (SFFAS 4, par. 73) 

 

13. Does the line item “net cost of operations,” as 

reported on the Statement of Net Cost, agree with 

the line items of the same name that are reported on 

the Statement of Changes in Net Position and 

Statement of Financing? (OMB Bulletin 01-09, p. 38, 

section 5.6 & p. 51, section 7.7) 

 
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Cost Accounting in General 

Responsibility Segments (14 – 18) 

Yes, 

No 

or 

N/A

Explanation 

A responsibility segment is a component of a reporting entity that is responsible for carrying 

out a mission, conducting a major line of activity, or producing one or a group of related 

products or services. (SFFAS 4, par. 78) 

14. Has the management of the reporting entity defined 

and established responsibility segments? (SFFAS 4, 

par. 77) 

 

15. Does management designate or establish 

responsibility segments based on the following? 

a. the entity’s organizational structure 

b. its lines of responsibility and missions 

c. its output (goods or services it delivers) 

d. budget accounts and funding authorities 

(SFFAS 4, par. 86)

 

16. For each responsibility segment, does the entity do 

the following? 

a. define and accumulate outputs and, if feasible, 

quantify each type of output in units 

b. accumulate costs and quantitative units of 

resources consumed in producing the outputs 

c. assign costs to outputs and calculate the cost 

per unit of each type of output 

d. establish cost centers within responsibility 

segments, as needed (SFFAS 4, par. 79 & 88)

 
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Cost Accounting in General 

Responsibility Segments (14 – 18) 

Yes, 

No 

or 

N/A

Explanation 

17. Does the reporting entity include supporting 

schedules in the notes to the financial statements if 

the suborganization’s summary information 

provided in the Statement of Net Cost does not fully 

display the suborganization’s major programs and 

activities? (OMB Bulletin 01-09, pp. 88-90, 

section 9.21) 

 

18. Does the reporting entity disclose gross cost and 

earned revenue,55 by budget functional 

classification? (OMB Bulletin 01-09, p. 91, 

section 9.25) 

 

 

55Gross cost and earned revenue should be net of intra-entity transactions (consolidated). 
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Cost Accounting in General 

Full Cost (19 – 26) 

Yes, 

No 

or 

N/A

Explanation 

Full cost is the sum of all costs that contribute to an output and includes direct and indirect 

costs regardless of funding sources. It also includes the costs of supporting services provided 

by other responsibility segments or entities. (SFFAS 4, par. 89) 

Output is any product or service generated from the consumption of resources. (SFFAS 4, 

par. 89) 

Direct costs are costs that can be specifically identified with an output. (SFFAS 4, par. 90) 

Indirect costs are costs of resources that are jointly or commonly used to produce two or more 

types of outputs, but are not specifically identifiable with any of the outputs. (SFFAS 4, par. 

91) 

19. Does the reporting entity include all direct costs in 

the full cost of outputs? (SFFAS 4, par. 90) 

 

20. Does the reporting entity also include the following 

in the full cost of outputs? 

a. indirect costs incurred within a responsibility 

segment 

b. the costs of support services that a 

responsibility segment receives from other 

segments or entities (SFFAS 4, par. 91, 122, & 

123)

 

21. Are the costs of employee benefits56 included as 

part of the cost of outputs? (SFFAS 4, par. 93-97) 

 

22. Are the costs of other postemployment benefits 

reported as expenses for the period during which a 

future outflow or other sacrifice of resources is 

probable and measurable on the basis of an event 

occurring on or before the accounting date? 

(SFFAS 4, par. 96-97) 

 

23. Are the full costs of transfer payments for welfare, 

insurance, grants, and other public assistance 

programs separately identified from the costs of 

operating such programs? (SFFAS 4, par. 98-101; 

OMB Bulletin 01-09, pp. 30-32, section 4.3) 

 

 

56These include health and life insurance, pension, and other retirement benefits, but not other postemployment benefits. 
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Cost Accounting in General 

Full Cost (19 – 26) 

Yes, 

No 

or 

N/A

Explanation 

24. Is depreciation expense incurred by responsibility 

segments on general PP&E included in the full costs 

of the goods and services that the segments 

produce? (SFFAS 4, par. 102) 

 

25. Are the costs of acquiring or constructing heritage 

assets excluded from the full cost of goods and 

services and treated as a program cost57 or period 

expense? (SFFAS 4, par. 103) 

 

26. Are nonproduction costs incurred by responsibility 

segments, such as reorganization costs and 

nonrecurring clean-up costs resulting from facility 

abandonment, excluded from the full cost of 

outputs and treated as current-period expenses? 

(SFFAS 4, par. 104) 

 

 

57Acquisition costs of heritage assets are part of the costs of the entity or the program that makes the property acquisitions. 
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Cost Accounting in General 

Interentity Costs (27 – 33) 

Yes, 

No 

or 

N/A

Explanation 

Within the federal government, some reporting entities rely on other federal entities to help 

them achieve their missions. Often, this involves support services, but may include the 

provision of goods. The reporting entity generally must account for the full cost of goods or 

services provided to or received from other federal entities. (SFFAS 4, par. 105-108) 

Costs between reporting entities that are part of the same department or larger reporting 

entity (such as bureaus, components or responsibility segments within a department) are 

considered intradepartmental costs. Reporting entities should account for imputed 

intradepartmental costs in accordance with the full cost provisions of SFFAS 4. (FASAB 

Interpretation Number 6, par. 4 & 8) 

27. Does the reporting entity include in its Statement of 

Net Cost the full costs of goods and services 

received from other federal entities whether or not 

the providing entity is fully reimbursed? (SFFAS 4, 

par. 105; OMB Bulletin 01-09, p. 31, section 4.3) 

 

28. Does the reporting entity recognize the following 

costs, including the portions that are funded 

through the Office of Personnel Management, the 

Department of Defense, the Department of the 

Treasury, the Department of Labor, or other 

agencies: 

a. employee pension, postretirement health, and 

life insurance benefits 

b. other postemployment benefits for retired, 

terminated, and inactive employees, which 

included unemployment and workers 

compensation under the Federal Employees’ 

Compensation Act 

c. losses in litigation proceedings?58 (SFFAS 4, 

par. 110; OMB Bulletin 01-09, p. 31, section 4.3) 

 

29. Does the entity providing goods or services to 

another reporting entity recognize in its accounting 

records, as well as disclose to the receiving entity, 

the full cost of goods and services provided? 

(SFFAS 4, par. 108) 

 

 

58See FASAB Interpretation Number 2, Accounting for Treasury Judgment Fund Transactions. 
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Cost Accounting in General 

Interentity Costs (27 – 33) 

Yes, 

No 

or 

N/A

Explanation 

30. Is recognition of interentity costs that are not fully 

reimbursed limited to material items based on an 

assessment of the importance of the individual 

interentity transaction in light of the following 

factors? 

a. significance to the entity 

b. directness of relationship to the entity’s 

operations 

c. identifiability (SFFAS 4, par. 112)

 

31. Are the costs of broad, general support services 

provided by a federal entity to other federal entities 

excluded from the costs of the recipient entity 

unless such services are integral to the receiving 

entity (e.g., Treasury check-writing services 

provided for the Social Security Administration)? 

(SFFAS 4, par. 112) 

 

32. If the receiving entity cannot get complete 

information on the full cost of goods or services 

provided by another reporting entity, does the 

receiving entity use a reasonable estimate of the 

cost of the goods or services received or the market 

value of the goods or services received if an 

estimate of the cost cannot be made? (SFFAS 4, 

par. 109) 

 

33. Are interentity expenses and financing sources 

eliminated for any consolidated financial statements 

covering both entities? (SFFAS 4, par. 109) 

 
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Cost Accounting in General 

Costing Methodology (34 – 40) 

Yes, 

No 

or 

N/A

Explanation 

Cost accumulation is the process of collecting cost data in an organized way by 

responsibility segment. (SFFAS 4, par. 117) 

Cost assignment is a process that identifies accumulated costs with reporting periods and 

cost objects. Three methods of cost assignment are direct tracing, cause and effect, and 

allocating costs on a reasonable and consistent basis. (SFFAS 4, par. 120) 

Cost object or cost objective is an activity, output, or item the cost of which is to be measured. 

(SFFAS 4, par. 121) 

Entities are not required to use a particular costing system or costing methodology, but the 

costing system or methodology used should be appropriate to the entity's operating 

environment and used consistently. Four examples of acceptable (but not necessarily 

mutually exclusive) costing methodologies are activity-based costing, job order costing, 

process costing, and standard costing. (SFFAS 4, par. 144-147) 

34. Is the entity's accounting system capable of 

identifying costs with responsibility segments? 

(SFFAS 4, par. 118) 

 

35. Are the costs of resources consumed by 

responsibility segments classified by type of 

resource, such as costs of employees, materials, 

capital, utilities, and rent? (SFFAS 4, par. 119) 

 

36. Are data on the quantity of units (e.g., staff days, 

gallons of gasoline consumed) related to the various 

cost categories maintained, when appropriate and 

feasible? (SFFAS 4, par. 119) 

 

37. Are costs assigned to outputs using the methods in 

the following order of preference? 

a. directly tracing costs used in the production of 

an output, wherever economically feasible59

b. assigning costs on a cause-and-effect basis 

c. allocating costs on a reasonable and consistent 

basis (SFFAS 4, par. 124)

 

 

59A method is economically feasible if the benefits resulting from implementing the method outweigh its costs. 
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Cost Accounting in General 

Costing Methodology (34 – 40) 

Yes, 

No 

or 

N/A

Explanation 

38. For cost allocation purposes, do indirect costs 

assigned to a given cost pool have similar 

characteristics? (SFFAS 4, par. 136) 

 

39. Are common costs60 assigned to activities either on 

a cause-and-effect basis, if feasible, or through 

reasonable allocations? (SFFAS 4, par. 140) 

 

40. Are the full costing methodologies that are most 

appropriate to a segment's operating environment 

used and consistently followed, and any changes 

made documented and explained? (SFFAS 4, 

par. 145 & 146) 

 

 

60Common costs refers to the costs of maintaining and operating facilities and other resources that cannot be directly traced to 

any of the activities or outputs that share resources. 
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Revenues (41 – 63) 

Yes, 

No 

or 

N/A

Explanation 

Revenues are inflows of resources that the government demands, earns, or receives by 

donation. Revenue comes from two sources: exchange transactions and nonexchange 

transactions. (SFFAS 7, par. 30) 

Exchange (or earned) revenues arise when a government entity provides goods or services to 

the public or to another government entity for a price. (SFFAS 7, par. 30; 

OMB Bulletin 01-09, p. 32, section 4.4) 

Nonexchange revenues arise primarily from the government’s power to demand payments 

from the public (e.g., taxes, duties, fines), and also include donations. (SFFAS 7, par. 30) 

The net cost of a program is the difference between its gross costs and related exchange 

revenues. (OMB Bulletin 01-09, p. 32, section 4.5) 

The net cost of operations by a reporting entity consists of gross cost incurred by the 

reporting entity less any exchange revenue earned from its activities. (OMB Bulletin 01-09, 

p. 28, section 4.1 & p. 33, section 4.8) 

41. Are earned revenues deducted from the full cost of 

outputs or outcomes, if practical, to determine 

their net costs? (SFFAS 7, par. 43; 

OMB Bulletin 01-09, p. 32, section 4.4) 

 

42. Is the net amount of gains (or losses) subtracted 

from (or added to) the gross cost to determine net 

cost of operations and programs? (SFFAS 7, 

par. 44; OMB Bulletin 01-09, p. 28, section 4.1) 

 

43. Is earned revenue that is insignificant or cannot be 

attributed to particular outputs or programs 

reported separately as a deduction in arriving at the 

net cost of operations of the suborganization or 

reporting entity as a whole? (SFFAS 7, par. 44; 

OMB Bulletin 01-09, p. 30, section 4.2 & p. 33, 

section 4.7) 

 

44. Are nonexchange revenues and other financing 

sources excluded from calculating net cost of 

operations for the reporting entity? (SFFAS 7, 

par. 44) 

 
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Revenues (41 – 63) 

Yes, 

No 

or 

N/A

Explanation 

45. If the entity incurs virtually no cost in connection 

with earning exchange revenue, is such revenue 

not recognized in the Statement of Net Cost, but 

shown as a financing source on the Statement of 

Changes in Net Position or (if appropriate) 

Statement of Custodial Activity? (SFFAS 7, par. 45)

 

46. Is any portion of exchange revenue that cannot be 

retained by the entity reported as a transfer-out on 

the Statement of Changes in Net Position? 

(OMB Bulletin 01-09, p. 32, section 4.4) 

 

47. Does a reporting entity that provides goods or 

services to the public or other government entity 

disclose the following in a note or narrative? 

a. a pricing policy that differs from the full cost or 

market pricing guidance set forth in OMB 

Circular No. A-25 and the possible effect on 

demand and revenue if prices were raised to 

reflect the market or full cost 

b. exchange transactions with the public in which 

prices are set by law or executive order and are 

not based on full cost or market price, or the 

possible effect on demand and revenue if prices 

were raised to reflect the market or full cost 

c. the nature of intragovernmental exchange 

transactions in which goods or services are 

provided free or at less than full cost and the 

reasons for disparities between billing (if any) 

and full cost 

d. the full amount of any expected loss when 

specific goods or services are provided or made 

to order under a contract and a loss is both 

probable and measurable 

(SFFAS 7, par. 46 & 47)

 
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Revenues (41 – 63) 

Yes, 

No 

or 

N/A

Explanation 

48. Is collected custodial nonexchange revenue that is 

legally retained by the collecting entity as 

reimbursement for the cost of collection, 

recognized as exchange revenue in determining the 

collecting entity's net cost of operations? (SFFAS 7, 

par. 60.3; OMB Bulletin 01-09, p. 52, section 8.1) 

 

49. Is revenue received from the public or other 

government entity in return for providing goods or 

services recognized and reported in the Statement 

of Net Cost as exchange revenue? (SFFAS 7, 

par. 34; OMB Bulletin 01-09, p. 32, section 4.4) 

 

50. If an exchange transaction is likely to be unusual or 

nonrecurring for a particular entity, is a gain or loss 

recognized rather than a revenue or expense? 

(SFFAS 7, par. 35) 

 

51. Is exchange revenue recognized when services are 

performed for transactions in which services are 

provided to the public or another government 

entity? (SFFAS 7, par. 34 & 36(a)) 

 

52. If specific goods or services are made to order 

under terms of a contract, is exchange revenue 

(and any probable loss) recognized in proportion to 

estimated total cost when goods and services are 

acquired to fulfill the contract? (SFFAS 7, 

par. 36(b)) 

 

53. When goods are kept in inventory so that they are 

available to customers when ordered, is exchange 

revenue recognized when the goods are delivered 

to the customer? (SFFAS 7, par. 36(c)) 

 

54. If services are rendered continuously or the right to 

use an asset extends continually over time, is 

exchange revenue recognized in proportion to the 

passage of time or the use of the asset? (SFFAS 7, 

par. 36(d)) 

 
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Revenues (41 – 63) 

Yes, 

No 

or 

N/A

Explanation 

55. Is interest received on intragovernmental loans 

recognized as exchange revenue if the source of 

borrowed funds is predominately exchange 

revenue? (SFFAS 7, par. 36(d)) 

 

56. When an asset other than inventory is sold, is any 

gain (or loss) recognized when the asset is 

delivered to the purchaser? (SFFAS 7, par. 36(e)) 

 

57. When advance fees or payments are received, such 

as for large-scale, long-term projects, is revenue 

recognized only as the cost of providing the 

corresponding goods and services is incurred? 

(SFFAS 7, par. 37) 

 

58. Is the measurement of revenue from exchange 

transactions based on the actual price received or 

receivable under established pricing arrangements? 

(SFFAS 7, par. 38) 

 

59. To the extent that realization of the full amount of 

exchange revenue is not probable due to credit 

losses (caused by the failure of the debtor to pay 

the established or negotiated price), is an expense 

recognized and the allowance for bad debts 

increased, if the bad debts can be reasonably 

estimated? (SFFAS 7, par. 40) 

 

60. If the realization of the full amount of exchange 

revenue is not probable for reasons apart from 

credit losses (e.g., returns and allowances), is a 

provision made to reduce the recognized revenue 

(if amounts can be reasonably estimated), with the 

provision recognized as a revenue adjustment? 

(SFFAS 7, par. 41) 

 

61. Is exchange revenue recognized regardless of 

whether the entity retains the revenue for its own 

use or transfers it to other entities? (SFFAS 7, 

par. 43) 

 
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Revenues (41 – 63) 

Yes, 

No 

or 

N/A

Explanation 

62. Is exchange revenue broken out by major category 

and linked, where possible, to the net costs of 

related outputs, programs, organizations, or 

suborganizations in the Statement of Net Cost? 

(SFFAS 7, par. 43; OMB Bulletin 01-09, p. 32, 

section 4.4) 

 

63. As the lessor in any lease arrangements, does the 

entity disclose the following in a note to the 

financial statements? 

a. any information necessary to disclose the 

commitment of the entity’s assets including but 

not limited to the major asset category and 

lease terms 

b. future lease revenues, by major asset category, 

for all noncancelable leases with terms longer 

than one year

c. other information necessary for understanding 

leases not disclosed in the above categories. 

(OMB Bulletin 01-09, p. 85, section 9.17B)

 
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Costs 

Pensions and Other Retirement and Post 

Employment Benefits (64 – 91) 

Yes, 

No 

or 

N/A

Explanation 

Pension benefits include all retirement, disability, and survivor benefits financed through a 

pension plan, including unfunded pension plans. Required federal payments to social 

insurance plans (i.e., Social Security and Medicare) and matching federal payments to 

defined contribution pension plans are also considered to be plan expenses. (SFFAS 5, par. 

61) 

Costs of pensions and other retirement benefits (ORB), whether they are paid for in part or 

in total by other governmental entities, are included in the costs of program outputs. (SFFAS 

4, par. 95)) 

Recognition of other postemployment benefits (OPEB) is linked to the occurrence of an OPEB 

event rather than the production of an output. OPEB costs are generally treated as period 

expenses. Special-purpose cost studies may distribute OPEB costs over a number of prior 

years to determine the cost of outputs OPEB recipients helped produce. (SFFAS 4, par. 96 & 

97) 

In accounting for pensions, ORB, and OPEB, the “administrative entity,” typically manages 

and accounts for the related assets and liabilities. The “employer entity” accounts for the 

related costs of pensions, ORB, and OPEB. For these costs the employer entity receives a 

salary and expense appropriation, imputes a financing source, or both. (SFFAS 5, par. 57, 

footnote 38) 

The “aggregate entry age normal” actuarial cost method is one under which the expenses or 

liabilities arising from the actuarial present value of projected pension benefits are allocated 

on a level basis over the earnings or the service of the group between entry age and assumed 

exit ages. The portion of the actuarial present value of pension plan and benefits and 

expenses that is allocated to a valuation year is called “normal cost.” (SFFAS 5, par. 64) 

64. Are pensions and ORB recognized as expenses at 

the time the employee’s services are rendered? 

(SFFAS 5, par. 59) 

 

65. Are postemployment benefits recognized as 

expenses at the time the accountable event occurs? 

(SFFAS 5, par. 59) 

 

66. Is the "aggregate entry age normal" actuarial cost 

method (or other actuarial cost method, if the 

results are not materially different and an 

explanation is provided) used to calculate pension 

expense, the liability for the administrative entity 

financial statements, and the expense for the 

employer entity financial statements? (SFFAS 5, 

par. 64) 

 
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Costs 

Pensions and Other Retirement and Post 

Employment Benefits (64 – 91) 

Yes, 

No 

or 

N/A

Explanation 

67. When using the "aggregate entry age normal" 

actuarial cost method, does the entity allocate 

pension expenses on the basis of a level percentage 

of earnings? (SFFAS 5, par. 64) 

 

68. Does the administrative entity base its actuarial 

assumptions for pension plans on the experience of 

the covered groups, long-term trends, and guidance 

of the Actuarial Standards Board? (SFFAS 5, 

par. 65) 

 

69. Does the administrative entity base its interest rate 

assumptions on the estimated long-term investment 

yield for the pension plan or, if the plan is not being 

funded, on some other appropriate long-term 

assumption (e.g., the federal long-term borrowing 

rate)? (SFFAS 5, par. 66) 

 

70. Does the administrative entity disclose the 

assumptions used to calculate pension benefit 

expenses? (SFFAS 5, par. 67) 

 

71. When a new pension plan is initiated or current one 

amended, does the administrative entity recognize 

all past and prior service costs61 or gains 

immediately, without amortization? (SFFAS 5, 

par. 69 & 70) 

 

72. Does the administrative entity recognize actuarial 

gains and losses62 immediately, without 

amortization? (SFFAS 5, par. 69 & 70) 

 

 

61Past service costs result from retroactive benefits granted when a new plan is initiated. Prior service costs result from 

retroactive benefits granted in a plan amendment. 

62Actuarial gains and losses are changes in the balance of the pension liability that result from (1) deviations between actual 

experience and the actuarial assumptions used or (2) changes in actuarial assumptions. 
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Costs 

Pensions and Other Retirement and Post 

Employment Benefits (64 – 91) 

Yes, 

No 

or 

N/A

Explanation 

73. Does the administrative entity report a pension 

expense for the net of the following components, 

with disclosure of the individual components? 

a. normal cost 

b. interest on pension liability during the period 

c. prior (and past) service cost from plan 

amendments (or the initiation of a new plan) 

during the period, if any 

d. actuarial gains or losses (including any gains or 

losses due to a change in the medical inflation 

rate assumption) during the period, if any 

(SFFAS 5, par. 72; OMB Bulletin 01-09, p. 80, 

section 9.14)

 

74. Does the administrative entity report pension plan 

revenue for the sum of contributions from the 

following entities? 

a. the employer 

b. its employees63

 

c. interest on the plan’s investments (SFFAS 5, 

par. 73 & 78)

 

75. Does the employer entity recognize a pension 

expense that equals the service cost (normal cost) 

for its employees for the accounting period, less the 

amount contributed by the employees, if any? 

(SFFAS 5, par. 74) 

 

 

63The administrative entity may also receive financing from the general fund to cover prior service or other costs for which 

contributions were not provided by the employer or employee. 
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Costs 

Pensions and Other Retirement and Post 

Employment Benefits (64 – 91) 

Yes, 

No 

or 

N/A

Explanation 

76. Is the employer entity's pension expense balanced 

by (1) a decrease to its “fund balance with 

Treasury” for the amount of its contribution to the 

pension plan, if any; and if this does not equal the 

full pension expense, by (2) an increase to an 

account representing an intragovernmental 

financing source (e.g., “imputed financing- expenses 

paid by other agencies.” (SFFAS 5, par. 75) 

 

77. If the employer entity is also the administrative 

entity, does it also report the liability64 and 

recognize the expense for all components of the 

pension plan's cost? (SFFAS 5, par. 71 & 76) 

 

ORB includes all retirement benefits other than pension benefits. The predominant ORB 

expense in the federal government is retirement health benefits. (SFFAS 5, par. 58 & 79) 

78. Is the "aggregate entry age normal" actuarial cost 

method (or other actuarial cost method, if the 

results are not materially different and an 

explanation is provided) used to calculate the ORB 

expense and liability for the administrative entity 

financial statements and the expense for the 

employer entity financial statements? (SFFAS 5, 

par. 82) 

 

79. Are expenses and other liabilities attributable to 

ORB expenses allocated based on the service 

rendered by each employee? (SFFAS 5, par. 82) 

 

80. Do the amounts calculated for financial reports 

prepared for ORB plans reflect the following? 

a. general actuarial and economic assumptions 

that are consistent with those used for pensions 

b. a health care cost trend assumption that is 

consistent with Medicare projections or other 

authoritative sources appropriate for the 

population covered by the plan (SFFAS 5, 

par. 83)

 

 

64The liability is the actuarial present value of all future benefits, based on projected salaries and total projected service, less the 

actuarial present value of future normal cost contributions that would be made for and by the employees under the plan.
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Costs 

Pensions and Other Retirement and Post 

Employment Benefits (64 – 91) 

Yes, 

No 

or 

N/A

Explanation 

81. Does the administrative entity discount the 

projected ORB costs at the rate of expected return 

of plan assets, if the plan is being funded, or on 

some other long-term assumptions (e.g., the longterm federal government borrowing rate) for 

unfunded plans? (SFFAS 5, par. 83 

 

82. Does the administrative entity disclose the 

assumptions used to calculate projected ORB costs? 

(SFFAS 5, par. 83) 

 

83. Is the accrual period for ORB based on the expected 

retirement age rather than the age when the 

employee first becomes eligible for retirement 

benefits? (SFFAS 5, par. 84) 

 

84. When a new ORB plan is initiated or current one 

amended, does the administrative entity recognize 

all past and prior service costs or gains 

immediately, without amortization? (SFFAS 5, 

par. 86 & 87) 

 

85. Does the administrative entity recognize all 

actuarial gains and losses from changes in the ORB 

liability immediately, without amortization? 

(SFFAS 5, par. 86 & 87) 

 
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Costs 

Pensions and Other Retirement and Post 

Employment Benefits (64 – 91) 

Yes, 

No 

or 

N/A

Explanation 

86. Does the administrative entity report an ORB 

expense (e.g., health insurance) for the net of the 

following components with disclosure of the 

individual components? 

a. normal cost 

b. interest on the ORB liability during the period 

c. prior (and past) service cost from plan 

amendments (or the initiation of a new plan) 

during the period, if any 

d. any gains/losses due to a change in the medical 

inflation rate assumption 

e. other actuarial gains or losses during the period, 

if any (SFFAS 5, par. 88; OMB Bulletin 01-09, 

p. 80, section 9.14)

 

87. Does the administrative entity report ORB revenue 

for the sum of contributions from the employer 

entity and its employees? (SFFAS 5, par. 89) 

 

88. In the financial report, does the employer entity 

recognize ORB expenses equal to the service cost 

(normal cost) for its employees for the accounting 

period, less the amount contributed by the 

employees, if any? (SFFAS 5, par. 90) 

 
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Costs 

Pensions and Other Retirement and Post 

Employment Benefits (64 – 91) 

Yes, 

No 

or 

N/A

Explanation 

89. Is the employer entity’s ORB expense balanced by 

either of the following? 

a. a decrease to its “fund balance with Treasury” 

for the amount of its contribution to the ORB 

plan, if any 

b. an increase to an account representing an 

intragovernmental imputed financing source 

(e.g., “imputed financing-expenses paid by other 

entities”) (SFFAS 5, par. 91)

 

90. If the employer entity is also the administrative 

entity, does it also report the liability65 and 

recognize the expense for all components of the 

ORB's cost? (SFFAS 5, par. 88 & 92) 

 

OPEB are provided to former or inactive employees, beneficiaries, and covered dependents 

outside pension or ORB plans. Postemployment benefits can include salary continuation, 

severance benefits, counseling and training, continuation of health care or other benefits, 

unemployment workers' compensation, and veterans’ disability compensation benefits paid 

by the employer. (SFFAS 4, par. 96; SFFAS 5, par. 57 & 94) 

91. Does the employer recognize an expense and a 

liability for OPEB when a future outflow or other 

sacrifice of resources is probable (i.e., more likely 

than not) and measurable? (SFFAS 5, par. 95) 

 

 

65The liability is the actuarial present value of all future benefits less the actuarial present value of future normal cost 

contributions that would be made for and by the employees under the plan. (SFFAS 5, par. 88)
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Costs 

Inventory, Materials, Supplies, and 

Commmodities (92 – 100) 

Yes, 

No 

or 

N/A

Explanation 

92. Upon sale or use of inventory, is the related expense 

recognized and the cost of those goods removed 

from the inventory asset account? (SFFAS 3, 

par. 19) 

 

93. To arrive at the historical cost of ending inventory 

and cost of goods sold, is one of the following cost 

flow assumptions used? 

a. first-in, first-out 

b. weighted average 

c. moving average 

d. any other valuation method (such as a standard 

cost system) whose results reasonably 

approximate one of the above historical cost 

methods (SFFAS 3, par. 22)

 

94. Are operating materials and supplies expensed 

using the consumption method (i.e., reported as an 

operating expense as they are issued to the end user 

for consumption in normal operations)? (SFFAS 3, 

par. 38 & 39) 

 

95. Are operating materials and supplies expensed upon 

purchase (purchase method) if they meet one of the 

following attributes? 

a. they are of insignificant amounts 

b. they are in the hands of the end user for use in 

normal operations 

c. it is not cost beneficial to apply the 

consumption method (SFFAS 3, par. 40 & 41)

 

96. Are inventory and operating materials and supplies 

acquired through a nonmonetary exchange valued 

at the fair value of the items received at the time of 

the exchange, and is the difference between the fair 

value of the acquired items and the recorded 

amount surrendered reported as a gain or loss? 

(SFFAS 3, par. 21 & 43) 

 
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Costs 

Inventory, Materials, Supplies, and 

Commmodities (92 – 100) 

Yes, 

No 

or 

N/A

Explanation 

97. Are abnormal costs associated with inventory and 

operating materials and supplies, such as excessive 

handling or rework costs, charged to operations of 

the period? (SFFAS 3, par. 21 & 43) 

 

98. Are any unrealized gains or losses resulting from 

periodic revaluations of inventory captured in a 

designated allowance account? (SFFAS 3, par. 23 & 

24) 

 

99. Is the cost of stockpile materials removed from the 

corresponding asset account and reported as an 

operating expense when issued for use or sale? 

(SFFAS 3, par. 52) 

 

100. Are abnormal costs of stockpile materials, such as 

excessive handling and rework costs, expensed in 

current operations? (SFFAS 3, par. 53) 

 
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Costs 

Property, Plant, and Equipment (101 – 117) 

Yes, 

No 

or 

N/A

Explanation 

A common expense related to PP&E that is included in the Statement of Net Cost is 

depreciation. Other PP&E-related expenses that are reported in the Statement of Net Cost 

include all current cost of acquiring and maintaining stewardship land and heritage assets 

(other than multiuse heritage assets.) (SFFAS 6, par. 35, & 69; SFFAS 16, par. 8) 

Depreciation expense is calculated through systematic and rational allocation of the cost of 

PP&E, less its estimated salvage or residual value, over its estimated useful life. A composite 

or group methodology,66 whereby the costs of PP&E are allocated using the same allocation 

rate, is permissible. (SFFAS 6, par. 35; SFFAS 23, par. 9, item f) 

101. Is depreciation expense recognized on all general 

PP&E? (SFFAS 6, par. 35) 

 

102. If historical cost information has not been 

maintained for existing PP&E, does the entity 

depreciate or amortize the estimated net remaining 

cost over its remaining useful life in a systematic 

and rational manner? (SFFAS 6, par. 35, 40, & 41) 

 

103. In an exchange transaction with a nonfederal entity, 

is the difference between the book value (i.e., cost 

less accumulated depreciation) of PP&E 

surrendered and the cost of PP&E acquired67

recognized as either a gain or a loss? (SFFAS 6, 

par. 32) 

 

104. In the event that cash consideration is included in 

the exchange transaction with a non federal entity, 

is the cost of PP&E acquired either increased by the 

amount of cash consideration surrendered or 

decreased by the amount of cash consideration 

received? (SFFAS 6, par. 32) 

 

105. When assets have been removed from PP&E in 

anticipation of disposal, retirement, or removal 

from service, has the entity stopped recording 

depreciation and amortization expenses for such 

assets? (SFFAS 6, par. 38 & 39) 

 

 

66The composite methodology is a method of calculating depreciation that applies a single average rate to a number of 

heterogeneous assets that have dissimilar characteristics and service lives. The group methodology is a method of calculating 

depreciation that applies a single, average rate to a number of homogeneous assets having similar characteristics and service 

lives. 

67The cost of the PP&E acquired is recorded at the cost of the PP&E surrendered net of any accumulated depreciation or 

amortization when the fair value of the PP&E surrendered or acquired is not determinable. 
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Costs 

Property, Plant, and Equipment (101 – 117) 

Yes, 

No 

or 

N/A

Explanation 

106. For general PP&E that is disposed of, retired or 

removed from service, is any difference between the 

book value of the PP&E and amounts realized 

recognized as a gain or a loss in the period of 

disposal, retirement, or removal from service? 

(SFFAS 6, par. 38) 

 

107. For PP&E assets removed from general PP&E 

accounts prior to disposal, retirement or removal 

from service, is the expected net realizable value of 

these assets adjusted at the end of each accounting 

period, and is any adjustment made recognized as 

either a gain or loss? (SFFAS 6, par. 39) 

 

108. Are costs to acquire, improve, reconstruct, or 

renovate heritage assets, other than multiuse 

heritage assets, recognized and reported separately 

on the Statement of Net Cost for the period in which 

the costs are incurred? (SFFAS 16, par. 8; 

OMB Bulletin 01-09, pp. 31 & 32, section 4.3 & p. 91, 

section 9.22) 

 

109. Do the recognized costs of heritage assets also 

include all costs incurred during the period to bring 

the items to their current condition at its initial 

location? (SFFAS 16, par. 8) 

 

110. Are amounts for heritage assets or stewardship land 

acquired through donation or devise excluded from 

the calculation of net cost? (SFFAS 8, par.79; 

SFFAS 16, par. 10; OMB Bulletin 01-09, p. 91, 

section 9.23) 

 

111. Is the fair value, if known and material, of heritage 

assets acquired through donation or devise 

disclosed in notes to the financial statements in the 

year received? (SFFAS 16, par. 10; 

OMB Bulletin 01-09, p. 91, section 9.23) 

 
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Costs 

Property, Plant, and Equipment (101 – 117) 

Yes, 

No 

or 

N/A

Explanation 

112. If the fair value of donated or bequeathed heritage 

assets is not known or reasonably estimable, is 

information as to the type and quantity of assets 

received disclosed in the notes to the financial 

statements in the year received? (SFFAS 16, par. 10; 

OMB Bulletin 01-09, p. 91, section 9.23) 

 

113. Are costs to acquire, as well as costs incurred to 

bring the stewardship land to its current condition 

or prepare it for its intended use, recognized as a 

cost of the period incurred and disclosed as “Cost of 

Stewardship Land?” (SFFAS 6, par. 69 & 73; 

SFFAS 8, par. 77 & 119; OMB Bulletin 01-09, p. 91, 

section 9.22) 

 

114. Is the fair value, if known and material, of 

stewardship land acquired through donation or 

devise disclosed in notes to the Statement of Net 

Cost in the year received? (SFFAS 6, par. 71; 

OMB Bulletin 01-09, p. 91, section 9.23) 

 

115. If the fair value of donated or willed stewardship 

land is not estimable, is information as to the type 

and quantity of assets received disclosed in notes to 

the Statement of Net Cost in the year received, if 

material? (SFFAS 6, par. 71; OMB Bulletin 01-09, 

p. 91, section 9.23) 

 

116. If land included in PP&E is transferred to another 

federal entity to be used as stewardship land, is the 

cost to the receiving entity of the transferred land 

recognized at the book value on the transferring 

entity’s books? (SFFAS 6, par. 72) 

 

117. If the receiving entity does not know the book value 

of the transferred land, is the transfer disclosed in 

the notes to the Statement of Net Cost, if material? 

(SFFAS 6, par. 72) 

 
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Section IV 

Statement of Net Cost 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-133 

Costs 

Clean-up Costs (118 – 126) 

Yes, 

No 

or 

N/A

Explanation 

Clean-up costs are the costs of removing, containing, and/or disposing of (1) hazardous 

waste from property or (2) material and/or property that consists of hazardous waste upon 

permanent or temporary closure or shutdown of associated PP&E. Clean-up costs may 

include, but are not limited to, decontamination, decommissioning, site restoration, site 

monitoring, closure, and postclosure costs. (SFFAS 6, par. 85 & 87) 

118. When PP&E is placed into service, does the entity 

estimate the associated clean-up costs? (SFFAS 6, 

par. 94) 

 

119. In estimating clean-up costs and liability, has the 

entity considered the following? 

a. the level of restoration to be performed 

b. current legal and regulatory requirements 

c. current technology 

d. current costs (i.e., amount that would be paid if 

all goods and services included in the clean-up 

estimate were acquired in the current period) 

(SFFAS 6, par. 95)

 

120. Are estimated clean-up costs periodically revised to 

account for material changes due to inflation or 

deflation and changes in regulations, plans, and/or 

technology? (SFFAS 6, par. 96) 

 

121. When PP&E is placed into service, does the entity 

recognize cleanup costs during each period that 

general PP&E is in operation, in a systematic and 

rational manner based on one of the following 

methods? 

a. based on the physical capacity of the PP&E, 

(e.g., expected usable landfill area) 

b. if physical capacity is not applicable or 

estimable, based on the estimated useful life of 

the associated PP&E (SFFAS 6, par. 97)

 
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Costs 

Clean-up Costs (118 – 126) 

Yes, 

No 

or 

N/A

Explanation 

122. Does recognition of the cleanup costs and the 

accumulation of the related liability begin on the 

date that the associated PP&E is placed into 

service, continue in each period that operation 

continues, and end when the PP&E ceases 

operation? (SFFAS 6, par. 98) 

 

123. If clean-up costs are reestimated, are the cumulative 

effects of changes in total estimated cleanup costs 

related to current and past operations of PP&E 

immediately recognized as an expense and is the 

corresponding liability adjusted? (SFFAS 6, par. 99) 

 

124. When stewardship PP&E is placed into service, 

does the entity expense the total estimated clean-up 

costs and establish a liability in the period the asset 

is placed into service? (SFFAS 6, par. 101) 

 

125. If clean-up costs for stewardship PP&E are 

reestimated, are any adjustments to the liability 

associated with clean-up costs expensed in the 

period of the change in estimate? (SFFAS 6, 

par. 102) 

 
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Costs 

Clean-up Costs (118 – 126) 

Yes, 

No 

or 

N/A

Explanation 

126. Does the entity disclose the following related to 

cleanup costs? 

a. the applicable laws and regulations covering 

clean-up requirements 

b. the method for assigning estimated total cleanup costs to current operating periods (e.g., 

physical capacity versus passage of time) 

c. the unrecognized portion of estimated total 

clean-up costs for clean-up costs associated 

with PP&E 

d. material changes in total estimated clean-up 

costs due to changes in laws, technology, or 

plans, as well as the portion of the change in 

clean-up cost estimates that relates to priorperiod operations 

e. the nature of estimates and information 

regarding possible changes due to inflation, 

deflation, technology, or applicable laws and 

regulations (SFFAS 6, par. 107-111) 

 
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Costs 

Interest (127 – 128) 

Yes, 

No 

or 

N/A

Explanation 

Interest incurred results from borrowing funds from Treasury, Federal Financing Bank, 

other federal entities, or the public. Interest also should be recorded on late payment of bills 

by the federal entity and on refunds. (SFFAS 1, par. 81) 

Interest costs are generally related to securities and other debt instruments issued by the U.S. 

Treasury or other federal agencies. (SFFAS 5, par. 47-48) 

127. Does the related interest cost of federal debt 

include the following? 

a. the accrued (prorated) share of the nominal 

interest incurred during the accounting period 

b. the amortized discounts or premiums for each 

accounting period for fixed value securities 

c. the amount of change in the current value for 

the accounting period for variable value 

securities (SFFAS 5, par. 53)

 

128. If securities are retired before maturity, is the 

difference between the reacquisition price and net 

carrying value of the extinguished debt recognized 

in the period of extinguishment as a gain or loss? 

(SFFAS 5, par. 54) 

 
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July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-137 

Costs 

Insurance and Subsidies (129 – 132) 

Yes, 

No 

or 

N/A

Explanation 

Federal insurance and guarantee programs are established to assume risks that private 

sector entities are unwilling or unable to assume or to subsidize the provision of insurance 

to achieve social objectives. For life insurance, a premium deficiency occurs if the liability 

for future policy benefits using current conditions exceeds the liability for future policy 

benefits using contract conditions. (SFFAS 5, par. 97 & 120) 

129. If an insured event has occurred as of the financial 

statement reporting date, has the federal entity 

recognized an expense for all claims incurred 

during the period, including, when appropriate, 

those incurred but not reported and contingencies 

that meet the criteria for recognition? (SFFAS 5, 

par. 104 & 109) 

 

130. Are changes in estimates of claim cost resulting 

from (1) the present value calculations, (2) the 

continuous review process, and (3) differences 

between the estimates and actual payments for 

claims, recognized as charges against operations of 

the period in which the estimates are changed or 

payments are made? (SFFAS 5, par. 109) 

 

131. If the liability for future [life insurance] policy 

benefits using current conditions exceeds the 

liability for future policy benefits under contract 

conditions (resulting in a premium deficiency), is 

the difference recognized as a charge to operations 

in the current period? (SFFAS 5, par. 120) 

 

132. Does the entity recognize an expense for social 

insurance68 benefits paid during the reporting period 

plus any increase (or less any decrease) in the 

liability for social insurance benefits due and 

payable to or on behalf of beneficiaries, from the 

end of the prior period to the end of the current 

period? (SFFAS 17, par. 22) 

 

 

68Social insurance programs include Social Security, Medicare, Railroad Retirement, Black Lung Benefits, and Unemployment 

Insurance (SFFAS 17, par. 14). 
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Costs 

Credit Programs (133 – 180) 

Yes, 

No 

or 

N/A

Explanation 

In accordance with the Federal Credit Reform Act of 1990, as amended, a subsidy expense is 

recognized for direct or guaranteed loans disbursed during the fiscal year. The amount of 

the subsidy expense equals the present value of estimated cash outflows over the life of the 

loans minus the present value of the estimated cash inflows. The discount rate used to 

calculate the present value is the average interest rate on marketable Treasury securities of 

similar maturity to the cash flows of the direct loan or loan guarantee for which the estimate 

is being made. (SFFAS 2, par. 6, 7, 24, 30, & 31; SFFAS 19, par. 6 & 7) 

133. For post-1991 direct or loan guarantee programs, is 

the present value of estimated cash outflows over 

the life of the loans minus the present value of 

estimated cash inflows discounted at the interest 

rate of marketable Treasury securities with similar 

maturity to the cash flows? (SFFAS 2, par. 24; 

SFFAS 19, par. 6) 

 

134. For post-1991 direct or loan guarantee programs, 

are the net present values recognized as expense in 

the year the loan is disbursed? (SFFAS 2, par. 24; 

SFFAS 19, par. 6) 

 

135. Are the following components of estimated subsidy 

costs (and offsetting receipts) of post-1991 loans 

and guarantees separately recognized? 

a. interest subsidy costs69

b. default costs70

c. present value of fees and other collections 

d. other subsidy costs (SFFAS 2, par. 25-29)

 

 

69The interest subsidy cost of direct loans is the excess of the amount of the loans disbursed over the present value of the 

interest and principal payments required by loan contracts discounted at the applicable Treasury rate; for loan guarantees it is 

the present value of estimated interest supplement payments. 

70The default cost of direct loans or loan guarantees is measured at the present value of projected payment delinquencies and 

omissions minus projected net recoveries. 
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Costs 

Credit Programs (133 – 180) 

Yes, 

No 

or 

N/A

Explanation 

136. Is the subsidy cost allowance for post-1991 direct 

loans amortized using the interest method? 71 

(SFFAS 2, par. 30, 31, and app. B, part I B (2); 

SFFAS 19, par. 7(a)) 

 

137. If the effective interest for post-1991 direct loans is 

less than the nominal interest, is the subsidy cost 

allowance increased by the difference and 

recognized as a reduction in interest income? 

(SFFAS 2, par. 30 & app. B, part I B (2); SFFAS 19, 

par. 7(a)) 

 

138. If the effective interest for post-1991 direct loans is 

greater than the nominal interest, is the subsidy cost 

allowance decreased by the difference and 

recognized as an increase in interest income? 

(SFFAS 2, par. 30 & app. B, part I B (2); SFFAS 19, 

par. 7(a)) 

 

139. Is interest accrued and compounded on the 

liabilities of post-1991 loan guarantees at the 

interest rate that was originally used to calculate the 

present value of the loan guarantee liabilities when 

the guaranteed loans were disbursed, after adjusting 

for the interest reestimate? (SFFAS 2, par. 31 & 

app. B, part III B (2); SFFAS 19, par. 7(b)) 

 

140. Is the interest accrued and compounded on the 

liabilities of post-1991 loan guarantees recognized 

as an interest expense? (SFFAS 2, par. 31 & app. B, 

part III B (2)) 

 

 

71Under the interest method, the amortized amount is the difference between the nominal interest (face amount of loan times 

stated interest) and effective interest (present value of loan times discount rate). The effective interest rate is the average

interest rate of marketable Treasury securities with similar maturity that was used to calculate the present value of the direct 

loans when the direct loans were disbursed, after adjusting for the interest rate reestimate. 
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Costs 

Credit Programs (133 – 180) 

Yes, 

No 

or 

N/A

Explanation 

Two kinds of reestimates for the subsidy cost allowance for outstanding direct loans and the 

liability for outstanding loan guarantees are (1) interest rate reestimates and (2) 

technical/default reestimates. An interest rate reestimate is due to a change in the interest 

rates from those that were assumed in budget preparation and used in calculating the 

subsidy expense to the interest rates that are prevailing during the periods in which the 

direct or guaranteed loans are disbursed. A technical/default reestimate is due to changes in 

projected cash flows of outstanding direct loans and loan guarantees after reevaluating the 

underlying assumptions and other factors (except for interest rate reestimates) that affect 

cash flow projections as of the financial statement date. (SFFAS 18, par. 9) 

141. Does the entity measure and disclose reestimates of 

allowances for subsidy costs of post-1991 loans and 

liabilities for guarantees in two components 

separately, specifically: the interest rate reestimate 

and the technical/default reestimate? (SFFAS 18, 

par. 9) 

 

142. Is any increase (or decrease) in the subsidy cost 

allowance of post-1991 direct loans or loan 

guarantee liabilities resulting from the interest rate 

and technical /default reestimates recognized as a 

subsidy expense (or a reduction in subsidy 

expense) and disclosed separately by component? 

(SFFAS 2, par. 32; SFFAS 18, par. 9; 

OMB Bulletin 01-09, pp. 62 & 71, section 9.8, 

item E2 & pp. 66 & 73, section 9.8, item L2) 

 

143. If the assumed interest rates used in calculating the 

subsidy expenses for cohorts72 from which direct or 

guaranteed loans are disbursed differ from the rates 

prevailing at the time of the loan disbursement, is an 

interest rate reestimate for those cohorts made as of 

the date of the financial statements? (SFFAS 18, 

par. 9 (A)) 

 

144. Do technical/default reestimates take into 

consideration all factors that may have affected 

various components of projected cash flows, 

including defaults, delinquencies, recoveries, and 

prepayments? (SFFAS 18, par. 9 (B)) 

 

 

72Cohort, as it is used here, is a budget term that refers to all direct loans or loan guarantees of a program for which a subsidy 

appropriation is provided for a given fiscal year, even if disbursements occur in subsequent years. 
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Costs 

Credit Programs (133 – 180) 

Yes, 

No 

or 

N/A

Explanation 

145. Are technical/default reestimates made each year as 

of the date of the financial statements? (SFFAS 18, 

par. 9 (B)) 

 

146. In a note to the financial statement, does the entity 

display a reconciliation between the beginning and 

ending balances of the following? 

a. the subsidy cost allowances for outstanding 

direct loans 

b. the liability for outstanding loan guarantees 

reported in the entity’s balance sheet 

(SFFAS 18, par. 10)

 

147. Does the reconciliation of beginning and ending 

subsidy cost allowances and loan guarantee liability 

balances include changes in the following? 

a. interest subsidy costs, default costs, fees and 

other collections, and other subsidy costs 

b. interest rate and technical/default reestimates 

c. other adjustments (SFFAS 2, par. 25-29; 

SFFAS 18, par. 10)

 

148. For direct loans, do other adjustments include loan 

modifications, fees received, loans written off, 

foreclosed property or other recoveries acquired, 

and subsidy allowance amortization? (SFFAS 18, 

par. 10) 

 

149. For loan guarantees, do other adjustments include 

loan guarantee modifications, fees received, interest 

supplements paid, claim payments made to lenders, 

foreclosed property or other recoveries acquired, 

and interest accumulated on the loan guarantee 

liability? (SFFAS 18, par. 10) 

 
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Section IV 

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July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-142 

Costs 

Credit Programs (133 – 180) 

Yes, 

No 

or 

N/A

Explanation 

150. In its notes to the financial statements, does the 

entity include a description of the characteristics of 

the program it administers, including the following? 

a. the total amount of direct or guaranteed loans 

disbursed for the current and preceding 

reporting years 

b. interest subsidy costs, default costs, fees and 

other collections, and other subsidy costs 

c. interest rate and technical/default reestimates 

(SFFAS 18, par. 11 (A))

 

151. Does the reporting entity disclose, at the program 

level, the subsidy rates73 for direct loans and loan 

guarantees in the current year’s budget for the 

current year’s cohorts, the following items? 

a. total subsidy cost 

b. interest subsidy costs 

c. default costs (net of recoveries) 

d. fees and other collections 

e. other costs (SFFAS 18, par. 11 (B))

 

152. If the entity uses trend data to display significant 

fluctuations in subsidy rates, are these data 

accompanied by an analysis that explains the 

underlying causes for the fluctuations? (SFFAS 18, 

par. 11 (B)) 

 

 

73The subsidy rate is the dollar amount of the subsidy component as a percentage of the direct loans or loan guarantees 

obligated in the cohort.
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Costs 

Credit Programs (133 – 180) 

Yes, 

No 

or 

N/A

Explanation 

153. Does the reporting entity disclose, discuss, and 

explain events and changes in economic conditions, 

other risk factors, legislation, credit policies,74 and 

subsidy estimation methodologies and assumptions 

that have had a significant and measurable effect on 

subsidy rates, subsidy expenses, and subsidy 

reestimates? (SFFAS 18, par. 11 (C)) 

 

154. Does the disclosure and discussion also include 

events and changes that have occurred and are 

more likely than not to have a significant impact, 

but whose effects are not measurable at the 

reporting date? (SFFAS 18, par. 11 (C)) 

 

155. Are default costs estimated and periodically 

reestimated for each post-1991 loan and loan 

guarantee program on the basis of separate cohorts 

and risk categories? (SFFAS 2, par. 33) 

 

156. In estimating default costs, has the entity 

considered the following factors? 

a. loan performance experience 

b. the current and forecasted international, 

national, or regional economic conditions that 

may affect the performance of the loans 

c. financial and other relevant characteristics of 

borrowers 

d. the value of collateral to loan balance 

e. changes in recoverable value of collateral 

f. newly developed events that could affect the 

loans' performance 

g. improvements in methods to reestimate 

defaults (SFFAS 2, par. 34)

 

 

74Changes in legislation or credit policies include, for example, changes in borrowers’ eligibility, the levels of fees or interest 

rates charged to borrowers, the maturity terms of loans, and the percentage of private loans that are guaranteed. 
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Section IV 

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July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-144 

Costs 

Credit Programs (133 – 180) 

Yes, 

No 

or 

N/A

Explanation 

157. In estimating and reestimating future default costs 

for each group, cohort, and risk category of loan 

and guarantee, has the agency used a systematic 

methodology based on actual historical experience? 

(SFFAS 2, par. 35 & 36) 

 

158. Is interest (at the discount rate in effect when the 

loans were first disbursed) accrued on post-1991 

direct loans, including amortized interest, 

recognized as interest income? (SFFAS 2, par. 37 & 

app. B, part I B (2) & C) 

 

159. Is interest (at the original discount rate) accrued on 

debt to the Treasury arising from post-1991 direct 

loans recognized as interest expense? (SFFAS 2, 

par. 37 & app. B, part I B (2) & C) 

 

160. Is interest (at the discount rate in effect when the 

loans were first disbursed) accrued on liability of 

post-1991 loan guarantees recognized as interest 

expense? (SFFAS 2, par. 37 & app. B, part III B (2) 

& C) 

 

161. Is interest (at the original discount rate) due from 

the Treasury on uninvested funds associated with 

post-1991 loan guarantee liabilities recognized as 

interest income? (SFFAS 2, par. 37 & app. B, 

part III B (2) & C) 

 

162. Are costs for administering credit activities (such as 

salaries, legal fees, and servicing) incurred in 

support of direct loan and guaranteed loan 

programs recognized as administrative expenses 

and not included in direct loan and loan guarantee 

subsidy costs? (SFFAS 2, par. 38) 

 

163. Are administrative expenses for loans and 

guarantees broken out and disclosed by program, if 

material? (OMB Bulletin 01-09, p. 67 & 74, 

section 9.8, item O) 

 
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Costs 

Credit Programs (133 – 180) 

Yes, 

No 

or 

N/A

Explanation 

164. Are losses (as well as valuation allowances and 

corresponding liabilities) of direct loans obligated 

and loan guarantees committed before October 1, 

1991, recognized when it is more likely than not that 

the direct loans will not be totally collected or that 

the loan guarantees will require a future cash 

outflow to pay default claims? (SFFAS 2, par. 39) 

 

Foreclosed properties are assets received in satisfaction of a loan receivable or as a result of 

payment of a claim under a guaranteed or insured loan (excluding commodities acquired 

under price support programs.) All properties included in foreclosed property are assumed 

to be held for sale. Pre-1992 foreclosed property refers to property associated with direct 

loans obligated or loan guarantees committed before October 1, 1991. Post-1991 foreclosed 

property refers to property associated with direct loans obligated or loan guarantees 

committed after September 30, 1991. (SFFAS 3, par. 79 & 80) 

165. If, at the time of the foreclosure, the expected net 

realizable value of pre-1992 foreclosed property is 

less than the cost (i.e., the carrying amount of the 

loan, or for a loan guarantee, the amount of the 

claim paid), is the loss charged to operations and 

tracked in a valuation allowance account? 

(SFFAS 3, par. 86) 

 

166. If the pre-1992 foreclosed asset's net realizable 

value subsequently increases or decreases, does the 

entity credit or charge this amount to results of 

operations and adjust the valuation allowance? 

(SFFAS 3, par. 86) 

 

167. Upon sale of foreclosed property, is any difference 

between the net carrying amount of foreclosed 

property and the net proceeds of the sale 

recognized as a component of operating results? 

(SFFAS 3, par. 89) 

 

168. For post-1991 foreclosed property, is interest 

income accrued from the previous periodic 

adjustment in the carrying amount up to the sale 

date? (SFFAS 3, par. 89) 

 
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Statement of Net Cost 

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Costs 

Credit Programs (133 – 180) 

Yes, 

No 

or 

N/A

Explanation 

169. For post-1991 foreclosed property, is the resulting 

difference between the adjusted carrying amount 

and the net sales proceeds recognized as a 

reestimate of “subsidy expense?” (SFFAS 3, par. 89)

 

170. For pre-1992 foreclosed property, is the difference 

between the adjusted carrying amount and net sales 

proceeds recognized as a gain or a loss on the sale 

of foreclosed property? (SFFAS 3, par. 89) 

 

The term modification, as it applies to direct loans and loan guarantees, means a federal 

government action, including new legislation or administrative action that directly or 

indirectly alters the estimated subsidy cost and the present value of outstanding direct loans, 

or the liability of loan guarantees. The cost of the modification is the excess of the 

premodification value of a direct loan (or postmodification liability of loan guarantees) over 

the postmodification value of a direct loan (or premodification liability of loan guarantees), 

both of which have been discounted at the Treasury rate in effect when the modification 

occurred. (SFFAS 2, par. 41; SFFAS 2, par. 45, notes 3 & 4 & par. 49, notes 6 & 7; SFFAS 19, 

par. 6) 

The book value of the loan or guarantee is discounted at the Treasury rate originally used to 

calculate the present value of the direct loan or loan guarantee liability when the loan was 

originally disbursed. (SFFAS 2, par. 48 & 50, app. B parts I D (4 & 5), II B (4), III B (4), & 

IV B (4)) 

The sale of post-1991 and pre-1992 direct loans is treated as a direct modification of the 

loans sold if the sale proceeds were not included in the cash flows estimates for the initial 

subsidy calculation. The cost of modification is determined on the basis of the 

premodification value of the loans sold. However, if sale proceeds were included in the cash 

flow estimates for the initial subsidy calculation, the effect of the loan sale on the cost of the 

program is recognized in the reestimates. (SFFAS 2, par. 53, Appendix B. par 1F)

171. If pre-1992 or post-1991 direct loans are modified, is 

the excess of the premodification value75 over the 

postmodification value76 recognized as a 

modification expense? (SFFAS 2, par. 45 & app. B, 

parts I D (1-3) & II B (1-3)) 

 

 

75This is the present value of the net cash inflows estimated under premodification terms discounted at the current Treasury 

rate.

76This is the present value of the net cash inflows estimated under postmodification terms discounted at the current Treasury 

rate. 
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Section IV 

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Costs 

Credit Programs (133 – 180)

Yes, 

No 

or 

N/A

Explanation

172. If the cost of modifying pre-1992 or post-1991 loans 

is greater than the decrease in the loans' book value, 

is the difference recognized as a gain?77 (SFFAS 2, 

par. 48 & app. B, parts I D (4 & 5) & II B (4 & 5)) 

 

173. If the cost of modifying pre-1992 or post-1991 loans 

is less than the decrease in the loans' book value, is 

the difference recognized as a loss?78 (SFFAS 2, 

par. 48 & app. B, parts I D (4 & 5), & 

part II B (4 & 5)) 

 

174. If pre-1992 or post-1991 loan guarantees are 

modified, is the excess of the postmodification 

liability79 over the premodification liability80

recognized as a modification expense? (SFFAS 2, 

par. 49 & app. B, parts III D (1-3), & IV B (1-3)) 

 

175. If the cost of modifying pre-1992 or post-1991 loan 

guarantees is greater than the increase in the book 

value of the related loan guarantee liabilities, is the 

difference recognized as a gain? (SFFAS 2, par. 52 

& app. B, parts III D (4 & 5), & IV B (5)) 

 

176. If the cost of modifying pre-1992 or post-1991 loan 

guarantees is less than the increase of the related 

loan guarantee liabilities, is the difference 

recognized as a loss? (SFFAS 2, par. 52 & app. B, 

parts III D (4 & 5) & IV B (5)) 

 

177. If the premodification value of post-1991 and pre1992 loans sold81 exceeds the net proceeds from the 

sale, is the excess treated as the cost of 

modification and recognized as a modification 

expense? (SFFAS 2, par. 45 & 53 & app. B, 

part I F (1)) 

 

 

77A gain from a modification occurs when the cost of a modification is greater than the decrease in book value of a direct loan 

(or increase in the liability of a loan guarantee). (SFFAS 2, par. 46, 48 note 5, 50, & 52 note 8; SFFAS 19, par. 7) 

78A loss from a modification occurs when the cost of a modification is less than the decrease in book value of a direct loan (or 

increase in the liability of a loan guarantee) that was discounted at the Treasury rate in effect when the loan was made. (SFFAS 

2, par. 46, 48 note 5, 50, & 52 note 8; SFFAS 19, par. 17) 

79This is the present value of the net cash flows under postmodification terms discounted at the current Treasury rate. 80This is the present value of the net cash flows under premodification terms discounted at the current Treasury rate. 81This is the present value of the loans’ net cash inflows discounted at the current discount rate.
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Costs 

Credit Programs (133 – 180)

Yes, 

No 

or 

N/A

Explanation

178. If a loan is sold with recourse, is the present value 

of estimated losses under the recourse or guarantee 

obligations recognized as a subsidy expense and as 

a loan guarantee liability? (SFFAS 2, par. 54) 

 

179. If the modification expense arising from a loan sale 

is greater than the book value loss, is the difference 

recognized as a gain? (SFFAS 2, par. 55 & app. B, 

part I F (2)) 

 

180. If the modification expense arising from a loan sale 

is less than the book value loss, is the difference 

recognized as a loss? (SFFAS 2, par. 55 & app. B, 

part I F (2)) 

 
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Section V 

Statement of Changes in Net Position 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-149 

The 39 questions in this section are related to the Statement of Changes in Net Position 

 

 Question Numbers 

 

 1. General 1 - 5 

 2. Budgetary Financing Sources 6 - 22 

 3. Other Financing Sources 23 - 39 

 
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Section V 

Statement of Changes in Net Position 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-150 

General (1 – 5) 

Yes, 

No 

or 

N/A

Explanation 

The Statement of Changes in Net Position reports the change in net position during the 

reporting period. Net position is affected by changes to its two components: Cumulative 

Results of Operations and Unexpended Appropriations. They are broken out into two 

separate columns in the Statement of Changes in Net Position. (OMB Bulletin 01-09, pp. 34 

& 35, sections 5.1 & 5.2) 

1. Do beginning balances of Cumulative Results of 

Operations and Unexpended Appropriations agree 

with the amounts reported as net position on the 

prior year’s balance sheet? (OMB Bulletin 01-09, 

p. 35, section 5.3) 

 
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Statement of Changes in Net Position 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-151 

General (1 – 5) 

Yes, 

No 

or 

N/A

Explanation 

2. Are “beginning balances, as adjusted,” equal to the 

sum of the beginning balances of net position as 

reported on the prior year’s balance sheet, and prior 

period adjustments? (OMB Bulletin 01-09, p. 36, 

section 5.3) 

 

3. When errors82 are discovered after the issuance of 

financial statements, and if the financial statements 

would be materially misstated absent correction of 

the errors, are the corrections made as follows in 

the statement of changes in net position? 

a. If only the current period statement is 

presented, the cumulative effect of correcting 

the error is reported as a prior period 

adjustment to the beginning balance of the 

cumulative results of operations. 

b. If comparative financial statements are 

presented, individual amounts on the financial 

statements are corrected in the earliest affected 

period presented. 

c. If the earliest period presented in the 

comparative financial statements is not the 

period in which the error occurred and the 

cumulative effect is attributable to prior periods, 

the cumulative effect is reported as a prior 

period adjustment to the beginning balance of 

cumulative results of operations in the 

statement of net position for the earliest period 

presented. (SFFAS 21, par. 10 & 11)

 

 

82Errors in financial statements result from mathematical mistakes, mistakes in the application of accounting principles, or 

oversight or misuse of facts that existed at the time the financial statements were prepared. 
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General (1 – 5) 

Yes, 

No 

or 

N/A

Explanation 

4. Is the nature of an error in previously issued 

financial statements and the effect of its correction 

on relevant balances disclosed? (SFFAS 21, par. 10 

(c)) 

 

5. If changes in accounting principles83 would have 

resulted in a change to prior period financial 

statements, are they handled in the following 

manner? 

a. the cumulative effect of the change on prior 

periods is reported as a “change in accounting 

principle” and reported as an adjustment to the 

beginning balance of the cumulative results of 

operations in the Statement of Changes in Net 

Position for the period that the change is made 

b. prior period financial statements presented for 

comparative purposes are presented as 

previously reported 

c. the nature of the changes in accounting 

principle and its effect on relevant balances are 

disclosed in the current period84 (SFFAS 21, 

par. 12 & 13; SFFAS 23, par. 17 & 18)

 

 

83A change in accounting principle is a change from one generally accepted accounting principle to another one that can be 

justified as preferable; this would also include changes occasioned by the adoption of new federal accounting standards. 

84Financial statements of subsequent periods need not repeat the disclosure. 
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Section V 

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July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-153 

Budgetary Financing Sources (6 – 22) 

Yes, 

No 

or 

N/A

Explanation 

The section, “Budgetary Financing Sources,” displays financing sources and nonexchange 

revenue that are also budgetary resources, or adjustments to these resources, as reported on 

the Statement of Budgetary Resources and defined as such by OMB Circular No. A-11, Part 

485 “Instructions on Budget Execution,” as amended. (OMB Bulletin 01-09, p. 36, section 

5.4) 

6. Do budgetary “appropriations received”86 reported 

under “Budgetary Financing Sources” agree with the 

amount reported on the line item “appropriations 

received” in the Statement of Budgetary Resources? 

(OMB Bulletin 01-09, p. 36, section 5.4) 

 

7. Are unexpended appropriations reduced as 

appropriations are used? (SFFAS 7, par. 71) 

 

8. Are unexpended appropriations adjusted for other 

changes in budgetary resources, such as rescissions 

and transfers? (SFFAS 7, par. 71) 

 

9. Do “appropriations transferred in/out (+/-)” equal 

the amount of appropriations received in the 

current or prior year(s) that have been transferred 

in or out during the current reporting year? 

(OMB Bulletin 01-09, p. 36, section 5.4) 

 

10. Do “other adjustments87 (rescissions, etc.) (+/-)” 

include adjustments to either cumulative results of 

operations or unexpended appropriations? 

(OMB Bulletin 01-09, p. 36, section 5.4) 

 

11. Are appropriations used by collecting entities to 

provide refunds of monies deposited to Treasury 

and trust funds reported under “other adjustments 

(rescissions, etc. (+/-))” rather than as an 

“appropriations used?” (OMB Bulletin 01-09, p. 36, 

section 5.4) 

 

 

85OMB Circular No. A-11 superceded OMB Circular No. A-34 in June 2002 and was revised on July 25, 2003. 

86Appropriations received do not include appropriated dedicated and earmarked receipts. Dedicated and earmarked receipts are 

accounted for as either exchange or nonexchange revenue in accordance with SFFAS No. 7) 

87Some examples of adjustments include rescissions of appropriations and cancellations of expired appropriation expenditure 

accounts, which would also be included in line 6, “Permanently not Available” on the Statement of Budgetary Resources. 
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Section V 

Statement of Changes in Net Position 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-154 

Budgetary Financing Sources (6 – 22) 

Yes, 

No 

or 

N/A

Explanation 

12. Are "appropriations used" recognized as a financing 

source when goods and services are received or 

when benefits and grants are provided?88 (SFFAS 7, 

par. 72; OMB Bulletin 01-09, p. 36, section 5.4) 

 

13. Is the amount of appropriations used subtracted 

from unexpended appropriations and added to 

cumulative results of operations for a net zero effect 

on net position as a whole? (OMB Bulletin 01-09, 

p. 36, section 5.4) 

 

14. Do “appropriations89 used” exclude the following? 

a. undelivered orders 

b. unobligated appropriations 

c. dedicated tax receipts, earmarked receipts, and 

donations90 (OMB Bulletin 01-09, p. 36, 

section 5.4)

 

15. Is nonexchange revenue recognized as a financing 

source (and not as a deduction in determining the 

net cost of operations)? (SFFAS 7, par. 60) 

 

16. Does the entity recognize nonexchange revenues, 

such as taxes, if it is legally entitled to the revenue? 

(SFFAS 7, par. 48 & 49) 

 

 

88This is true whether the goods, services, and benefits are payable or paid as of the reporting date and whether the 

appropriations are used for items that are expensed or capitalized. 

89Appropriations used does not increase net position. It is subtracted from “unexpended appropriations” and added to 

“cumulative results of operations,” which are line items on the balance sheet. 

90Those financing sources are reported as either exchange or nonexchange revenue. 
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Budgetary Financing Sources (6 – 22) 

Yes, 

No 

or 

N/A

Explanation 

17. Is nonexchange revenue recognized when the 

government's claim to resources can be 

characterized as follows? 

a. specifically identifiable 

b. legally enforceable 

c. reasonably estimable 

d. more likely than not collectable (SFFAS 7, 

par. 48)

 

18. Is revenue recognized by the recipient entities the 

sum of the following? 

a. cash or cash equivalents transferred to them by 

the collecting entities 

b. the net change in any related interentity 

balances between the collecting and the 

receiving entities (i.e., the amount to be 

transferred to the recipient entities from the 

collecting entity or vice versa) (SFFAS 7, 

par. 60)

 

19. Do “donations and forfeitures of cash and cash 

equivalents” include voluntary gifts and involuntary 

forfeitures of resources to the federal government 

by nonfederal entities? (OMB Bulletin 01-09, p. 37, 

section 5.4) 

 

20. Do “transfers-in/out without reimbursement (+/-)” 

under “budgetary financing sources” include 

intragovernmental nonappropriated91 balance 

transfers in or out during the current reporting 

year? (OMB Bulletin 01-09, p. 37, section 5.4) 

 

21. Is exchange revenue (included in calculating an 

entity’s net cost of operations) required to be 

transferred to the Treasury or another federal entity 

recognized as a transfer out? (OMB Bulletin 01-09, 

p. 37, section 5.4) 

 

 

91Nonappropriated balances include financing sources and revenue not reported as unexpended appropriations. 
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July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-156 

Budgetary Financing Sources (6 – 22) 

Yes, 

No 

or 

N/A

Explanation 

22. Do “other budgetary financing sources” include 

other financing sources that affect budgetary 

resources that have not been covered by the 

preceding questions? (OMB Bulletin 01-09, p. 37, 

section 5.4) 

 
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July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-157 

Other Financing Sources (23 – 39) 

Yes, 

No 

or 

N/A

Explanation 

“Other financing sources,” displays financing sources and nonexchange revenue that do not 

represent budgetary resources as reported on the Statement of Budgetary Resources and 

defined as such by OMB Circular No. A-11, Part 4 (OMB Bulletin 01-09, p. 37, section 5.5) 

23. Do the items reported in the “other financing 

sources” section equal the amounts reported as 

similar line items in the “other resources”92 section 

on the Statement of Financing? 

(OMB Bulletin 01-09, p. 35, section 5.2, pp. 37 & 38, 

section 5.5, p. 46, section 7.2 & p. 48, section 7.3) 

 

24. Is revenue arising from donations of property 

measured at the estimated fair value of the 

contribution at the time of the donation? (SFFAS 6, 

par. 30; SFFAS 7, par. 62, OMB Bulletin 01-09, p. 37, 

section 5.5) 

 

25. Are transferred assets recorded at the book value of 

the transferring entity, or, if the receiving entity 

does not know the book value, is the asset recorded 

at its estimated fair value as of the date of the 

transfer? 93 (SFFAS 7, par. 74; OMB Bulletin 01-09, 

p. 37, section 5.5) 

 

26. When assets94 are transferred in or out by entities 

without reimbursement: 

a. Does the receiving entity recognize the transferin as an increase in financing sources in its 

statement of net position? 

b. Does the transferring entity recognize the 

transfer out as a decrease in financing sources 

in its statement of changes in net position? 

(SFFAS 7, par. 74, OMB Bulletin 01-09, p. 37, 

section 5.5)

 

 

92Other resources increase net position but are not budgetary resources as reported on the “Statement of Budgetary Resources” 

or defined as such in OMB Circular No. A-11, Part 4. OMB Circular No. A-11 superceded OMB Circular No. A-34 in June 2002 

and was revised on July 25, 2003. 

93FASAB Technical Bulletin 2003-1 offers specific guidance dealing with transfers arising from the creation of the Department of 

Homeland Security and other transfers of operations between federal entities directed by the Homeland Security Act of 2002. 

94This amount includes intragovernmental transfers in to or out of capitalized assets during the current reporting year. 
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July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-158 

Other Financing Sources (23 – 39) 

Yes, 

No 

or 

N/A

Explanation 

27. Does the reporting entity recognize an imputed 

financing source for costs funded through other 

federal entities as well as nonreimbursed costs of 

goods and services provided by other federal 

entities? (SFFAS 4, par. 109; SFFAS 7, par. 73; 

OMB Bulletin 01-09, p. 37, section 5.5) 

 

28. Do imputed financing costs reported on the 

Statement of Changes in Net Position equal the 

amount of imputed financing costs as reported on 

the statement of net cost? (OMB Bulletin 01-09, 

p. 37, section 5.5) 

 

29. Do “other financing sources” include other 

financing sources that do not represent budgetary 

resources and that have not been covered by the 

preceding questions (i.e., nos. 23-28)? 

(OMB Bulletin 01-09, p. 38, section 5.5) 

 

30. Is exchange revenue transferred to another 

government entity or to the Treasury recognized as 

a "transfer out" in determining the net results of 

operations? (SFFAS 7, par. 75) 

 

31. Is a gain95 from the modification96 of post-1991 loans 

reported as a reduction in financing source and paid 

to the Treasury as a "modification adjustment 

transfer?" (SFFAS 2, par. 48, & app. B, part I D (5)) 

 

32. Is a loss97 from the modification of post-1991 loans 

reported as a financing source when the reporting 

entity receives from the Treasury a "modification 

adjustment transfer?" (SFFAS 2, par. 48 & app. B, 

part I D (5)) 

 

 

95The excess of the cost of the modification over the decrease in loan book value discounted at the Treasury rate. 

96A modification means a federal government action, including new legislation or administration action, which directly or 

indirectly alters the estimated subsidy cost and present value of outstanding loans or the liability of loan guarantees. (SFFAS 2, 

par. 41) 

97The excess of the decrease in loan book value, discounted at the Treasury rate, over the cost of the modification. 
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Section V 

Statement of Changes in Net Position 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-159 

Other Financing Sources (23 – 39) 

Yes, 

No 

or 

N/A

Explanation 

33. Is a gain98 resulting from a modification of post-1991 

loan guarantees reported as a reduction in financing 

source and paid to the Treasury as a "modification 

adjustment transfer?" (SFFAS 2, par. 52 & app. B, 

part III D (5)) 

 

34. Is a loss99 resulting from a modification of post-1991 

loan guarantees reported as a financing source 

when the reporting entity receives from the 

Treasury a "modification adjustment transfer" to 

offset the difference? (SFFAS 2, par. 52 & app. B, 

part III D (5)) 

 

35. Is a gain on the sale of a post-1991 loan reported as 

a reduction in financing source and paid to the 

Treasury as a "modification adjustment transfer?" 

(SFFAS 2, par. 55 & app. B, part I F (2)) 

 

36. Is a loss on the sale of a post-1991 loan reported as a 

financing source when the reporting entity receives 

from the Treasury a “modification adjustment 

transfer?” (SFFAS 2, par. 55 & app. B, part I F (2)) 

 

37. Does the amount “net cost of operations” reported 

under cumulative results of operations agree with 

“net cost of operations” as reported on the 

Statement of Net Cost and Statement of Financing? 

(OMB Bulletin 01-09, p. 38, section 5.6 & p. 51, 

section 7.7) 

 

38. Is the difference between the net cost of operations 

and the sum of the financing sources (i.e., budgetary 

and other) equal to the ending balance of net 

position as it relates to the cumulative results of 

operations? (OMB Bulletin 01-09, p. 38, section 5.6) 

 

 

98The excess of the cost of the modification over the increase in liability discounted at the Treasury rate. 

99The excess of the increase in liability, discounted at the Treasury rate, over the cost of the modification. 
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Section V 

Statement of Changes in Net Position 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-160 

Other Financing Sources (23 – 39) 

Yes, 

No 

or 

N/A

Explanation 

39. Do the ending balances of the cumulative results of 

operations and unexpended appropriations agree 

with the amounts reported as net position on the 

current year’s balance sheet? (OMB Bulletin 01-09, 

p. 38, section 5.7) 

 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section VI 

Statement of Budgetary Resources 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-161 

The 27 questions in this section concern the Statement of Budgetary Resources. 

Statement of Budgetary Resources (1 – 27) 

Yes, 

No 

or 

N/A

Explanation 

The budget is the primary financial planning and control tool of the government. The 

Statement of Budgetary Resources and the related disclosures provide information about how 

budgetary resources were made available as well as their status at the end of the period. It is 

the only financial statement exclusively derived from an entity’s budgetary general ledger, 

prepared in accordance with budgetary accounting rules, which are incorporated into 

Generally Accepted Accounting Principles (GAAP) for the federal government. (SFFAS 7, 

par. 77; OMB Bulletin 01-09, p. 39, section 6.1) 

1. Is the recognition and measurement of budgetary 

information reported on the Statement of Budgetary 

Resources (SBR) based on budget terminology, 

definitions, and guidance in OMB Circular No. A11,100 Preparation, Submission and Execution of 

the Budget, (July 2003)? (SFFAS 7, par. 78; 

OMB Bulletin 01-09, p. 39, section 6.1) 

 

2. Is information on the SBR consistent with budget 

execution information reported on the Report on 

Budget Execution and Budgetary Resources (SF 

133) and with information reported in the Budget of 

the United States Government? 

(OMB Bulletin 01-09, p. 39, section 6.1) 

 

3. Does the entity disclose and explain any material 

differences between comparable information 

contained in the three reports (i.e., SBR, SF 133 and 

the Budget of the United States Government)? 

(OMB Bulletin 01-09, p. 6, section 1.7 & p. 39, 

section 6.1) 

 

4. Is budgetary information aggregated for purposes of 

the Statement of Budgetary Resources 

disaggregated101 for each of the reporting entity’s 

major budget accounts and presented as required 

supplementary information? (SFFAS 7, par. 78; 

OMB Bulletin 01-09, p. 112, section 11.4) 

 

 

100OMB Circular No. A-11 superceded OMB Circular No. A-34 in June 2002 and was revised on July 25, 2003. 101Small budgetary accounts may be aggregated. 
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Section VI 

Statement of Budgetary Resources 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-162 

Statement of Budgetary Resources (1 – 27) 

Yes, 

No 

or 

N/A

Explanation 

5. Do the major accounts and the aggregate of small 

budget accounts agree, in total, with the amounts 

reported on the face of the Statement of Budgetary 

Resources? (OMB Bulletin 01-09, p. 112, 

section 11.4) 

 

6. Is the budgetary information in the SBR presented 

on a combined basis that is consistent with the 

aggregate of the account-level information 

presented on the SF 133s? (OMB Bulletin 01-09, 

p. 39, section 6.2) 

 

7. Are nonbudgetary credit financing accounts 

reported separately from the budgetary accounts? 

(OMB Bulletin 01-09, p. 40, section 6.3) 

 
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Section VI 

Statement of Budgetary Resources 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-163 

Statement of Budgetary Resources (1 – 27) 

Yes, 

No 

or 

N/A

Explanation 

8. Does the entity include in its SBR the following 

under “Budgetary Resources”? 

a. budget authority, including if applicable 

i. appropriations received 

ii. borrowing authority 

iii. contract authority 

iv. net transfers (+/-) 

v. other 

b. unobligated balances, including if applicable 

i. beginning of period balances 

ii. net transfers, actual (+/-) 

iii. anticipated transfer balances 

c. spending authority from offsetting collections, 

including, if applicable 

i. earned authority that is collected and/or 

receivable from federal services 

ii. changes in unfilled customer orders that 

are advance(s) received, and/or without 

advance(s) from federal sources 

iii. anticipated collections for the rest of the 

year without advances 

iv. transfers from trust funds 

d. recoveries of prior year obligations 

e. budgetary resources temporarily not available 

pursuant to public law 

f. budgetary resources permanently not available 

(OMB Bulletin 01-09, p. 41, section, 6.4; 

SFFAS 7, par. 77)

 
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Section VI 

Statement of Budgetary Resources 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-164 

Statement of Budgetary Resources (1 – 27) 

Yes, 

No 

or 

N/A

Explanation 

9. Do the budgetary resources reported in this section 

agree with the total budgetary resources reported 

for all of the budget accounts on the year-end SF 

133? (OMB Bulletin 01-09, p. 42, section 6.5) 

 

10. Does the line item “appropriations received”102

reported on the SBR equal the amount reported as 

“appropriations received” on the Statement of 

Changes in Net Position? (OMB Bulletin 01-09, 

p. 36, section 5.4 & p. 43, section 6.5) 

 

11. Does the line item entitled “permanently not 

available” on the SBR include items reported under 

“other adjustments (rescissions, etc.)” on the 

Statement of Changes in Net Position? 

(OMB Bulletin 01-09, p. 36, section 5.4 & p. 43, 

section 6.5) 

 

12. Does the entity include the following under “Status 

of Budgetary Resources” on the SBR? 

a. obligations incurred that are 

i. direct and/or 

ii. reimbursable 

b. unobligated balance(s) that are 

i. apportioned 

ii. exempt from apportionment 

iii. otherwise available 

c. unobligated balance(s) not available 

(OMB Bulletin 01-09, p. 42, section 6.4; SFFAS 7, 

par. 77)

 

 

102Appropriations received do not include appropriated, dedicated and earmarked receipts. Dedicated and earmarked receipts, 

typically in special and nonrevolving trust funds, are accounted for as either exchange or nonexchange revenue in accordance 

with SFFAS No. 7. 
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Section VI 

Statement of Budgetary Resources 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-165 

Statement of Budgetary Resources (1 – 27) 

Yes, 

No 

or 

N/A

Explanation 

13. Does the total amount displayed for the “status of 

budgetary resources” section of the SBR equal “total 

budgetary resources” available to the reporting 

entity as of the reporting date? (OMB Bulletin 

01-09, p. 43, section 6.6) 

 

14. Does the status of budgetary resources reported on 

the SBR agree with the total status reported for 

each budget account on the year-end SF 133? 

(OMB Bulletin 01-09, p. 43, section 6.6) 

 

15. Does the entity’s SBR include the following under 

“Relationship of Obligations to Outlays?” 

a. obligated balance, net, beginning of period 

b. obligated balance transferred, net (+/-) 

c. obligated balance, net, end of period that are 

i. accounts receivable 

ii. unfilled customer orders from federal 

sources 

iii. undelivered orders 

iv. accounts payable 

d. outlays that are 

i. disbursements 

ii. collections 

e. less, if applicable, offsetting receipts103 

(OMB Bulletin 01-09, p. 40, section 6.3 & p. 42, 

section 6.4)

 

 

103Offsetting receipts offset budget authority and outlays at the agency level in the Budget of the United States Government, but 

are not reflected in budget execution reports (SF 133s), which provide account-level information only. Since the SBR is an 

agencywide report, offsetting receipts must be included to reconcile to information in the Budget of the United States 

Government. 
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Section VI 

Statement of Budgetary Resources 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-166 

Statement of Budgetary Resources (1 – 27) 

Yes, 

No 

or 

N/A

Explanation 

16. Do the outlays104 reported in “Relationship of 

Obligations to Outlays” section agree with the 

agency outlay totals reported in the Budget of the 

United States Government?

105 (OMB Bulletin 01-09, 

p. 43, section 6.7) 

 

17. Do the outlays also agree with the aggregate of 

outlays reported on the year-end SF 133 for all 

budget accounts, including nonbudgetary financing 

accounts and the disbursements and collections 

reported to Treasury on a monthly basis106 as per 

OMB Circular No. A-11?107 (OMB Bulletin 01-09, 

p. 43, section 6.7) 

 

Offsetting receipts are collections that are credited to general fund, special fund, or trust fund 

receipt accounts and that offset gross outlays. Unlike offsetting collections, which are 

credited to expenditure accounts and offset outlays at the account level, offsetting receipts are 

credited to receipt accounts and offset outlays at the agency or governmentwide level. 

Offsetting receipts may be distributed or undistributed to agencies. Distributed offsetting 

receipts offset the outlays of the agency, while undistributed offsetting receipts offset 

governmentwide outlays. Distributed offsetting receipts typically offset the outlays of the 

agency that conducts the activity, generating the receipts and the subfunction to which the 

activity is assigned. Offsetting receipts are composed of proprietary receipts from the public, 

receipts from intragovernmental transactions, and offsetting governmental receipts. 

(OMB Bulletin 01-09, pp. 43 & 44, section 6.7) 

18. Does the line item “offsetting receipts” on the SBR 

include all distributed offsetting receipts for the 

agency?108 (OMB Bulletin 01-09, p. 44, section 6.7) 

 

 

104Outlays consist of disbursements net of offsetting collections. 105That is, do the outlays agree with the aggregate of the outlays for accounts within the Budget of the United States 

Government? 106Agencies report their disbursements and collections using the SF 224, Statement of Transactions; SF 1219, Statement of 

Accountability; and SF 1220, Statement of Transactions. 107OMB Circular No. A-11 superceded OMB Circular No. A-34 in June 2002 and was revised on July 25, 2003. 108A list of distributed offsetting receipt accounts can be found in the Treasury Annual Report Appendix, Part 4, Other 

Information. 
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Section VI 

Statement of Budgetary Resources 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-167 

Statement of Budgetary Resources (1 – 27) 

Yes, 

No 

or 

N/A

Explanation 

19. Does the agency include the following receipt 

accounts from the Treasury Annual Report

Appendix, Part 4, Other Information/Receipts by 

Department, in the SBR? 

a. Proprietary Receipts from the Public 

b. Intrabudgetary Receipts Deducted by Agencies 

c. Offsetting Governmental Receipts 

(OMB Bulletin 01-09, p. 44, section 6.7)

 

20. Is the amount of distributed offsetting receipts 

reported in SBR the aggregate of cash collected in 

these receipt accounts and reported to Treasury on 

a monthly basis?109 (OMB Bulletin 01-09, p. 44, 

section 6.7) 

 

21. Does the amount of offsetting receipts that are 

distributed to agencies and reported on the SBR 

agree with the deductions for offsetting receipts as 

reported in the Budget of the United States 

Government, if available by the time the financial 

statements must be finalized and submitted 

(OMB Bulletin 01-09, p. 44, section 6.7) 

 

22. Are undistributed offsetting receipts, which are 

credited to governmentwide outlay totals, excluded 

from the SBR? (OMB Bulletin 01-09, p. 44, 

section 6.7) 

 

23. Do the net outlays in the SBR agree with the net 

outlays110 as reported in the Budget of the United 

States Government, if available by the time the 

financial statements must be finalized and 

submitted? (OMB Bulletin 01-09, p. 44, section 6.7) 

 

 

109Agencies use the SF 224, Statement of Transactions; SF 1219, Statement of Accountability; and SF 1220, Statement of 

Transactions. 

110Net outlays are equal to gross outlays less offsetting collections and receipts. 
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Section VI 

Statement of Budgetary Resources 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-168 

Statement of Budgetary Resources (1 – 27) 

Yes, 

No 

or 

N/A

Explanation 

24. Does the entity disclose the amount of direct and 

reimbursable obligations incurred against amounts 

apportioned under category111 “A,” “B,” and “exempt 

from apportionment”? (OMB Bulletin 01-09, p. 93, 

section 9.27) 

 

25. Does the disclosure of the amount of direct and 

reimbursable obligations incurred against amounts 

apportioned under category112 “A,” “B,” and “exempt 

from apportionment” agree with the aggregate of 

the related information as reported on the agency’s 

year-end SF 133, and the amounts reported under 

direct and reimbursable obligations incurred, 

reported on the SBR? (OMB Bulletin 01-09, p. 93, 

section 9.27) 

 

 

111Apportionment categories are to be determined in accordance with guidance provided in OMB Circular No. A-11, Part 4, 

Instructions on Budget Execution, which superceded Circular No. A-34. 112Apportionment categories are to be determined in accordance with guidance provided in OMB Circular No. A-11, Part 4 

Instructions on Budget Execution, which superceded Circular No. A-34. 
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Section VI 

Statement of Budgetary Resources 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-169 

Statement of Budgetary Resources (1 – 27) 

Yes, 

No 

or 

N/A

Explanation 

26. Does the entity disclose the following information 

related to the status of budgetary resources? 

a. the amount of budgetary resources obligated for 

undelivered orders at the end of the period 

b. available borrowing and contract authority at 

the end of the period 

c. repayment requirements, financing sources for 

repayment, and other terms of borrowing 

authority used 

d. amounts adjusted to “budgetary resources 

available at the beginning of the year,” during 

the reporting period, as well as an explanation 

of the adjustments 

e. existence, purpose, and availability of 

permanent, indefinite appropriations 

f. information about legal arrangements affecting 

the use of unobligated balances of budget 

authority, such as time limits, purpose, and 

obligation limitations 

g. explanations of any material differences 

between the budgetary resources reported in 

the SBR and "actual" amounts in the Budget of 

the United States Government113

h. the amount of unfunded liabilities, and an 

explanation that includes identification of 

balance sheet components, when unfunded 

liabilities do not equal the total financing 

sources yet to be provided 

i. the amount of any capital infusion received 

during the reporting period (SFFAS 7, par. 79 & 

209-212; OMB Bulletin 01-09, p. 93 & 94, sections 

9.27-9.34)

 

 

113FASAB Technical Bulletin 2002-2 indicates what disclosures should be made when the entity issues financial statements for a 

given year before the Budget of the United States Government with actual budget numbers for the same fiscal year is published. 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section VI 

Statement of Budgetary Resources 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-170 

Statement of Budgetary Resources (1 – 27) 

Yes, 

No 

or 

N/A

Explanation 

27. In order to ensure consistency between the 

information presented in the SBR and the Budget of 

the United States Government, does the entity do 

the following? 

a. post all known audit adjustments to the Federal 

Agencies Centralized Trial-balance System II 

(FACTS II) during the window of time specified 

for posting corrections to the budget 

information 

b. post all known audit adjustments to OMB’s MAX 

A-11 budget preparation system during the time 

frames provided by OMB (OMB Bulletin 01-09, 

pp. 5 & 6, section 1.7)

 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section VII 

Statement of Financing 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-171 

The 27 questions in this section are related to the Statement of Financing. 

 

Question Numbers 

 

1. Resources Used to Finance Activities 1 - 8 

 

2. Resources Used to Finance Items Not Part of 9 - 14 

 the Net Cost of Operations 

 

3. Components of the Net Cost of Operations that 15 - 24 

 Will Not Require or Generate Resources in the 

 Current Period Resources 

 4. Disclosure Items 25 - 27 
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Section VII 

Statement of Financing 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-172 

Resources Used to Finance Activities (1 – 8) 

Yes, 

No 

or 

N/A

Explanation 

The Statement of Financing is the bridge between an entity’s budgetary and financial (i.e., 

proprietary) accounting. The Statement of Financing articulates the relationship between 

net obligations derived from an entity’s budgetary accounts and net cost of operations 

derived from the entity’s proprietary accounts by identifying and explaining key differences 

between the two numbers. 

Most entity transactions are recorded in both budgetary and proprietary accounts. However, 

because different accounting bases are used for budgetary and proprietary accounting, some 

transactions may appear in only one set of accounts (e.g., accrual of environmental and 

disposal liabilities, which is recorded only in the proprietary records). Furthermore, not all 

obligations or offsetting collections may result in expenses or exchange revenue (e.g., 

purchase of a building is capitalized on the balance sheet in the proprietary accounts but 

obligated and outlayed in the budgetary accounts). 

The statement is structured to first identify total resources used by an entity during the 

period (budgetary and other) and then make adjustments to the resources based upon how 

they were used to finance net obligations or net cost. Budgetary resources reported in this 

statement are those resources as defined in OMB Circular No. A-11114and are also reported on 

the Statement of Budgetary Resources. Other resources reported in this statement are also 

reflected in the Statement of Changes in Net Position. (OMB Bulletin 01-09, p. 45, section 

7.1; SFFAS 7, par. 80 & 95) 

The section “Resources Used to Finance Activities” reflects the budgetary resources obligated 

and other resources that are used to finance the activities of the agency. The obligations of 

budgetary resources are net of offsetting collections, recoveries, and offsetting receipts. The 

other resources are financing sources that increase net position but are not budgetary 

resources. Every line item in this section is mirrored on either the Statement of Budgetary 

Resources or the Statement of Changes in Financial Position. (OMB Bulletin 01-09, p. 47, 

section 7.3) 

1. Is the budgetary information used to calculate net 

obligations115 in the “Resources Used to Finance 

Activities” section of the Consolidated Statement of 

Financing, presented on a combined basis116 to 

enable agreement with similar amounts reported on 

the Statement of Budgetary Resources? 

(OMB Bulletin 01-09, p. 6, section 1.8 & p. 46, 

section 7.1) 

 

 

114OMB Circular No. A-11, Part 4, Instructions on Budget Execution, has superceded OMB Circular No A-34. 115The budgetary information includes the line items (1) “ obligations incurred,” (2) “Less: spending authority from offsetting 

collections and recoveries,” (3) “obligations net of offsetting collections and recoveries,” and 4) “less: offsetting receipts.” 116A combined basis means the aggregation of account-level information as opposed to a consolidation that implies the 

elimination of inter-account transactions. 
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Section VII 

Statement of Financing 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-173 

Resources Used to Finance Activities (1 – 8) 

Yes, 

No 

or 

N/A

Explanation 

2. Does the amount reported as “obligations incurred” 

equal the obligations incurred117 line item as 

reported on the Statement of Budgetary Resources, 

and does this include all budget accounts, including 

nonbudgetary financing accounts? 

(OMB Bulletin 01-09,p. 47, section 7.3) 

 

3. Does the line item “less: spending authority from 

offsetting118 collections and recoveries”119 agree 

with the spending authority from offsetting 

collections and recoveries as reported on the 

Statement of Budgetary Resources, and does this 

include all budget accounts, including nonbudgetary 

financing accounts? (OMB Bulletin 01-09, p. 47, 

section 7.3) 

 

4. Is “Obligations net of offsetting collections and 

recoveries” equal to the difference between 

“obligations incurred” and “spending authority from 

offsetting collections and recoveries?” 

(OMB Bulletin 01-09, p. 48, section 7.3) 

 

5. Does the amount reported as “less: offsetting 

receipts” equal the offsetting receipts120 line item as 

reported on the Statement of Budgetary Resources? 

(OMB Bulletin 01-09, p. 48, section 7.3) 

 

6. Do “net obligations”121 equal the difference between 

“obligations net of offsetting collections and 

recoveries” and “offsetting receipts?” 

(OMB Bulletin 01-09, p. 48, section 7.3) 

 

 

117This is not to be confused with total budgetary resources; e.g., with total appropriations received and available, as the 

statement of financing is not concerned with total resources or restrictions on OMB’s ability to apportion or the agency’s ability 

to allot total resources. (SFFAS 7 Implementation Guide (April 2002), par. 14) 

118“Offsetting” in the term “offsetting collections” means that the resources generated by the collecting activity are added to the 

expenditure accounts and hence “offset” gross obligations. (SFFAS 7 Implementation Guide (April 2002), par. 22) 

119Recoveries are budgetary resources that offset obligations on the Statement of Budgetary Resources, but are not a proprietary 

financing source used to offset costs on the Statement of Net Cost. (OMB Bulletin 01-09, p. 49, section 7.4) 

120Offsetting receipts differ from “offsetting collections.” Offsetting collections are included in the entity’s expenditure account 

and thus are usually available for spending for the purposes of the account without further action by Congress. (SFFAS 7 

Implementation Guide (April 2002), par. 23) 

121Net obligations reflect obligations incurred net of offsetting collections, recoveries, and offsetting receipts. 
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Section VII 

Statement of Financing 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-174 

Resources Used to Finance Activities (1 – 8) 

Yes, 

No 

or 

N/A

Explanation 

7. Does the entity’s Statement of Financing include 

other nonbudgetary resources used to finance 

activities, and do the line item amounts as reported 

on the Statement of Financing equal the following 

corresponding line item amounts reported as “other 

financing sources” on the Statement of Changes in 

Net Position? 

a. donations and forfeitures of property 

b. transfers in/out without reimbursement 

c. imputed financing from costs absorbed by 

others 

d. other (OMB Bulletin 01-09, p. 48, section 7.3)

 

8. Is “total resources used to finance activities” equal 

to the sum of net obligations122 and net other 

(nonbudgetary) resources used to finance 

activities? (OMB Bulletin 01-09, p. 46, section 7.2) 

 

 

122One of the reasons that net obligations does not equal the amount of the net cost of operations is that there are resources that 

are not reported in the Budget of the United States Government that may finance the net cost of operations or other activities 

of the agency. 
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Section VII 

Statement of Financing 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-175 

Resources Used to Finance Items Not Part of 

the Net Cost of Operations (9 – 14) 

Yes, 

No 

or 

N/A

Explanation 

The section, “Resources Used to Finance Items Not Part of the Net Cost of Operations,” in the 

Statement of Financing adjusts total resources used to finance the activities of the entity to 

account for items that were included in net obligations and other resources, but which were 

not part of the net cost of operations. This section would include items in which the expense 

was recognized in a prior period but the budgetary resource and obligation are recognized in 

the current period (e.g., upward/downward reestimates of subsidy expense accrued in the 

prior period but obligated in the current period). It would also include budgetary resources 

and obligations recognized in the current period that do not affect the net cost of operations 

(e.g., the acquisition of assets reflected in net obligations but not in net cost of operations for 

the period). (OMB Bulletin 01-09, p. 48, section 7.4) 

9. Does the line item, “change in budgetary resources 

obligated for goods, services, and benefits ordered 

but not yet provided (+/-),”123 reflect undelivered 

orders, or adjustments thereof, that are included in 

net obligations, but which are not part of the net 

cost of operations? (OMB Bulletin 01-09, p. 48, 

section 7.4) 

 

 

123This line item is used to explain the difference between the total resources used to finance activities and the net cost of 

operations because of the change in “budgetary resources obligated for goods, services, and benefits ordered but not yet 

provided,” i.e., “undelivered orders.” Undelivered orders are part of “obligations incurred,” but they do not affect the net cost 

of operations. Thus, for a transaction involving the placing a $100 undelivered order, obligations incurred would increase by 

$100 but would be shown as a negative or a reduction to total resources used to finance activities. (SFFAS 7 Implementation 

Guide (April 2002), par. 53-55) 
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Section VII 

Statement of Financing 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-176 

Resources Used to Finance Items Not Part of 

the Net Cost of Operations (9 – 14) 

Yes, 

No 

or 

N/A

Explanation 

10. Does the line item, “resources that fund expenses 

recognized in prior periods,”124 reflect the obligation 

of resources that were part of the net cost of 

operations in a prior period? (OMB Bulletin 01-09, 

p. 48, section 7.4) 

 

11. Do the line items included under “budgetary 

offsetting collections and receipts that do not affect 

net cost of operations” reflect offsetting collections 

and receipts125 that are not reported as exchange 

revenue in the Statement of Net Cost? 

(OMB Bulletin 01-09, pp. 48 & 49, section 7.4) 

 

 

124This line item is used to explain differences in resources and net cost of operations caused by expenses, which were accrued 

in previous periods but paid in the current period. If, for example, the amount of annual leave taken or obligated was worth 

$250 but the amount of annual leave earned (i.e., expensed) for the period was $200, the difference of $50 between obligation 

and expense would be shown as a negative. (SFFAS 7 Implementation Guide (April 2002), par. 56-58) 

125Examples of offsetting collections and receipts that are not exchange revenue are (1) collections of subsidy expenses for post 

–1991 credit programs, (2) collections of exchange revenue receivable from the public, and (3) advances (i.e., unfilled customer 

orders) for work not performed, with the caveat that in most cases, orders from the public without advances cannot be 

accepted. This line item is usually shown as a positive, the opposite (i.e., negative) of what is included under the line item, “less: 

spending authority from offsetting collections and recoveries,” unless there is a net decrease in unfilled customer orders. 

(SFFAS 7 Implementation Guide (April 2002), par. 59-61) 
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Section VII 

Statement of Financing 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-177 

Resources Used to Finance Items Not Part of 

the Net Cost of Operations (9 – 14) 

Yes, 

No 

or 

N/A

Explanation 

12. Does the line item, “resources that finance the 

acquisition of assets,” reflect budgetary resources 

obligated126 that are not expenses as reported on the 

Statement of Net Cost? (OMB Bulletin 01-09, p. 49, 

section 7.4) 

 

13. Does the agency include under the line item, “Other 

resources or adjustments to net obligated resources 

that do not affect net cost of operations,” activities127

not otherwise classified under the line items in this 

section of the Statement of Financing? 

(OMB Bulletin 01-09, p. 49, section 7.4) 

 

14. Does the line item, “total resources used to finance 

the net cost of operations,” consist of the difference 

between the line items “total resources used to 

finance activities” and “total resources used to 

finance items not part of the net cost of 

operations?” (OMB Bulletin 01-09, p. 46, section 7.2 

& p. 48, section 7.4) 

 

 

126An example of this activity is the purchase of capital assets. (SFFAS 7 Implementation Guide (April 2002), par. 62) 127This activity may include noncash recoveries of prior year obligations. Recoveries are budgetary resources that offset 

obligations on the Statement of Budgetary Resources, but which are not a proprietary financing source used to offset costs on 

the Statement of Net Cost.
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section VII 

Statement of Financing 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-178 

Components of the Net Cost of Operations that 

Will Not Require or Generate Resources in the 

Current Period (15– 24) 

Yes, 

No 

or 

N/A

Explanation 

The section, “Components of the Net Cost of Operations that will not Require or Generate 

Resources in the Current Period,” identifies (1) items that are recognized as a component of 

the net cost of operations (i.e., current period expenses and exchange revenues) for which 

budgetary resources (and related obligations) will not be provided (or incurred) until a 

subsequent period and (2) items (i.e., current period expenses) that are recognized as a part 

of the net cost of operations for the period but will not generate or require the use of resources 

in the current period. (OMB Bulletin 01-09, p. 49, section 7.5 & p. 50, section 7.6) 

15. Does the line item, “increase in annual leave 

liability,” include the expense related to the 

increase128 in annual leave liability for which the 

budgetary resources will be provided in a 

subsequent period? (OMB Bulletin 01-09, p. 50, 

section 7.5) 

 

16. Does the line item, “increase in environmental and 

disposal liability,” include the expense related to the 

increase in environmental and disposal liability for 

which the budgetary resources will be provided in a 

subsequent period? (OMB Bulletin 01-09, p. 50, 

section 7.5) 

 

17. Does the line item “upward/downward reestimates 

of credit subsidy expense (+/-),” include the 

expense recognized as a result of an upward(+) or 

downward(-) reestimate of credit program subsidy 

cost for which budgetary resources (or obligations) 

will be provided (or incurred) in a subsequent 

period?129 (OMB Bulletin 01-09, p. 50, section 7.5) 

 

18. Are these credit subsidy reestimates reflected as 

liabilities covered by budgetary resources?130 

(OMB Bulletin 01-09, p. 50, section 7.5) 

 

 

128An increase in annual leave liability has no effect on budgetary accounts, because it is not funded on an accrual basis. It is 

financed when it is taken and the amounts are paid to employees who took the leave. Thus, budgetary resources are zero, but 

the net cost of operations includes the amount of accrued leave. (SFFAS 7 Implementation Guide (April 2002), par. 40) 

129The Credit Reform Act of 1990, as amended, provides that agencies will receive subsidies to cover defaults and other 

situations for direct loans and loan guarantees obligated after September 30, 1991. (SFFAS 7 Implementation Guide (April 

2002), par. 66) 

130Budget authority to fund reestimates is permanent and indefinite and no further congressional action is needed to provide the 

resources. 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section VII 

Statement of Financing 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-179 

Components of the Net Cost of Operations that 

Will Not Require or Generate Resources in the 

Current Period (15– 24) 

Yes, 

No 

or 

N/A

Explanation 

19. Does the line item, “increase in exchange revenue 

receivable from the public,” include exchange 

revenue recognized as a component131 of the net 

cost of operations for the period? 

(OMB Bulletin 01-09, p. 50, section 7.5) 

 

20. Does the entity report as “other” under the section 

“Components Requiring or Generating Resources in 

Future Periods,” all other expenses and exchange 

revenue not specifically mentioned in the preceding 

questions that do not require or generate resources 

in the current period but will do so in a subsequent 

period? (OMB Bulletin 01-09, p. 50, section 7.5) 

 

21. Does the line item, “depreciation and amortization,” 

reflect the current period usage of assets132 or 

amortization of liabilities133 for which budgetary 

resources were obligated in a prior period? 

(OMB Bulletin 01-09, p. 50, section 7.6) 

 

22. Does the line item, “revaluation of assets and 

liabilities,” include gains and losses recognized134

during the revaluation of assets or liabilities? 

(OMB Bulletin 01-09, p. 50, section 7.6;) 

 

 

131Absent specific legislation to the contrary, public receivables do not count as budgetary resources until they are collected. 

Hence, the revenue related to accruals of those resources is not reflected in offsetting collection activity at the time they are 

accrued. (SFFAS 7 Implementation Guide (April 2002) par. 70) 

132Budgetary resources are obligated when the asset is acquired, not when it is depreciated or used up. No budgetary resources 

are used when an asset is depreciated. (SFFAS Implementation Guide, par. 44) 

133Budgetary resources are obligated when an allowance (i.e., liability or contra-asset) for a subsidy is set up, and as the 

estimated expenses are realized the allowance account is amortized. The budgetary accounts, which have already recognized 

the obligation and offsetting collection for subsidy expense, are not affected by the transaction. (SFFAS 7 Implementation 

Guide (April 2002), par. 92) 

134Gains are shown as a negative; losses are shown as a positive. 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section VII 

Statement of Financing 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-180 

Components of the Net Cost of Operations that 

Will Not Require or Generate Resources in the 

Current Period (15– 24) 

Yes, 

No 

or 

N/A

Explanation 

23. Does the entity report as “other” under the section 

“components not requiring or generating resources,” 

all other expenses135 and exchange revenue not 

specifically mentioned in the preceding questions 

that will not require or generate resources in the 

current or future periods? (OMB Bulletin 01-09, 

p. 50, section 7.5) 

 

24. Does the sum of the line items “total resources used 

to finance net cost of operations” and “total 

components of net cost of operations that will not 

require or generate resources in the current period” 

agree with the net cost of operations as reported in 

the Statement of Net Cost as well as the Statement 

of Changes in Net Position? (OMB Bulletin 01-09, 

p. 51, section 7.7) 

 

 

135An example of this would be default expenses of pre-credit reform (or pre-1992) loans. 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section VII 

Statement of Financing 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-181 

Disclosure Items (25– 27) 

Yes, 

No 

or 

N/A

Explanation 

25. Has the entity identified and explained in a note to 

the financial statements the relationship between 

amounts reported as “liabilities not covered by 

budgetary resources” reported on the Balance Sheet 

and amounts reported as “components requiring or 

generating resources in future periods” on the 

Statement of Financing? (OMB Bulletin 01-09, p. 94, 

section 9.35) 

 

When budget authority and other resources are allocated to another agency or bureau,136 the 

parent (transferor of the appropriation) should report the activity in its financial statements 

unless the allocation transfer is material to the child’s (recipient of the transfer) financial 

statements. If the allocation transfer is material to the child’s financial statements, the child 

entity should report the activity relating to the allocation in all of its financial statements, 

except the Statement of Budgetary Resources (SBR). In this case, the parent entity should 

continue to report the appropriation and the related budgetary activity in its SBR. It is the 

responsibility of the parent to ensure that the reporting to Treasury, through FACTS I, is 

consistent with the presentation in the financial statements. (OMB Bulletin 01-09, p. 94, 

section 9.36) 

26. When the child entity reports material allocation 

transfers in its Statement of Net Cost, do both the 

parent and the child report a reconciling item on 

their respective Statements of Financing? 

(OMB Bulletin 01-09, p. 95, section 9.36) 

 

27. Do both parent and child entities provide a general 

description of the funds transferred or received, 

including the nature and purpose of the transfer and 

any additional details deemed necessary? 

(OMB Bulletin 01-09, p. 95, section 9.36) 

 

 

136See OMB Circular No. A-11, sections 20.4 (l) and 71.6 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section VIII 

Statement of Custodial Activity 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-182 

The 27 questions in this section are related to the Statement of Custodial Activity. 

 

 Question Numbers 

 

 1. General 1 - 2 

 2. Sources of Collections 3 - 10 

 3. Disposition of Collections 11 - 15 

 4. Disclosures 16 - 19 

 5. Dedicated Collections and 

 Other Accompanying Information 20 - 27 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section VIII 

Statement of Custodial Activity 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-183 

General (1– 2) 

Yes, 

No 

or 

N/A

Explanation 

Entities that collect nonexchange revenue for the General Fund of the Treasury, a trust fund, 

or other recipient entities account for the sources and disposition of these collections in a 

Statement of Custodial Activity. 

An exception to requiring preparation of the Statement of Custodial Activity is made when 

collecting entities have custodial collections that are immaterial and incidental to their 

primary mission. In these cases, the sources and disposition of the collections may be 

disclosed in accompanying footnotes. (OMB Bulletin 01-09, p. 52, section 8.1) 

1. If some of the nonexchange revenue is transferred 

to others and some of the nonexchange revenue is 

retained as a reimbursement for the costs of 

collection, are the transferred amounts reported on 

the Statement of Custodial Activity, and are the 

retained amounts reported on the Statement of Net 

Cost? (OMB Bulletin 01-09, p. 52, section 8.1) 

 

2. If the entity collects exchange revenue (e.g., rents 

and royalties) on behalf of other entities and 

recognizes virtually no costs in connection with 

earning that revenue, does the entity account for it 

as a custodial activity? (SFFAS 7, par. 45) 

 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section VIII 

Statement of Custodial Activity 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-184 

Sources of Collections (3– 10) 

Yes, 

No 

or 

N/A

Explanation 

3. Are the following transactions recognized as taxes 

and other nonexchange revenues from the public? 

a. individual and corporate income taxes, social 

insurance taxes and contributions, excise taxes, 

estate and gift taxes, and customs duties 

b. social insurance taxes and contributions paid by 

federal employees 

c. deposits by states for unemployment trust funds 

d. user fees and harbor maintenance trust fund 

payments 

e. customs service fees 

f. deposits of earnings from the Federal Reserve 

System 

g. donations, except types of PP&E that are 

expensed 

h. fines and penalties 

i. penalties due to delinquent taxes in connection 

with custodial activity 

j. forfeitures (SFFAS 7, par. 49; SFFAS 7, 

Appendix B, par. 242 - 264)

 

4. Does the collecting entity measure taxes and duties 

on a cash basis and then modify that with an accrual 

adjustment to determine the amount of revenue to 

be recognized? (SFFAS 7, par. 49 & 52; 

OMB Bulletin 01-09, p. 54, section 8.3) 

 

5. Except for deposits, are cash collections137 based on 

amounts actually received during the fiscal period 

including withholdings, estimated payments, final 

payments, and collections of receivables? 

(SFFAS 7, par. 50 & 59) 

 

 

137Cash collections include any amounts paid in advance of due dates unless they are deposits. Deposits are amounts voluntarily 

paid to reporting entities, such as those made to stop the accrual of interest or those made pending settlements and judgments.

Such Deposits are separately recognized as deposit liabilities. 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section VIII 

Statement of Custodial Activity 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-185 

Sources of Collections (3– 10) 

Yes, 

No 

or 

N/A

Explanation 

6. Are the components of cash collections classified 

by source and nature of collection, such as by type 

of tax or duty? (OMB Bulletin 01-09, pp. 53 & 54, 

section 8.3) 

 

7. Are cash refunds of nonexchange revenue based on 

refunds of taxes and duties during the period? 

(SFFAS 7, par. 51) 

 

8. Do cash refunds of nonexchange revenue for taxes 

and duties include refund offsets138 and 

drawbacks?139 (SFFAS 7, par. 51) 

 

9. Are cash refunds, if material in relation to gross 

collections, disclosed separately by component in 

the notes to the financial statement? 

(OMB Bulletin 01-09, p.54, section 8.3) 

 

10. Are accrual adjustments,140 if material in relation to 

gross collections, disclosed separately in the notes 

to the financial statement? (SFFAS 7, par. 52; 

OMB Bulletin 01-09, p. 54, section 8.3) 

 

 

138Refund offsets are amounts withheld from refunds on behalf of other agencies and paid to such agencies. 139Drawbacks are refunds of duties paid on imported goods that are subsequently exported or destroyed. 140Accrual adjustments, which modify the net of cash collections and refunds to determine the amount of revenue recognized, 

are the net increases or decreases during the reporting period in accounts receivable, allowance for uncollectable accounts, and 

accounts payable for refunds. 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section VIII 

Statement of Custodial Activity 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-186 

Disposition of Collections (11– 15) 

Yes, 

No 

or 

N/A

Explanation 

11. Do the amounts transferred to others, reported in 

the “disposition of collections” section, identify the 

specific agencies to which collections were 

transferred and the amounts transferred? 

(OMB Bulletin 01-09, p. 53, section 8.2 & p. 54, 

section 8.4) 

 

12. Does the collecting entity report the change in 

liability for accrued and collected revenue yet to be 

transferred? (OMB Bulletin 01-09, p. 53, section 8.2 

& p. 54, section 8.4) 

 

13. Are the amounts of refunds and other payments 

made reported separately in the “disposition of 

collections” section of the Statement of Custodial 

Activity? (OMB Bulletin 01-09, p. 53, section 8.2 & 

p. 54, section 8.4) 

 

14. Are collections retained by the entity separately 

reported as exchange revenue in the Statement of 

Net Cost and treated as a disposition of collections 

revenue in the statement of custodial activity? 

(OMB Bulletin 01-09, p. 52, section 8.1, p. 53, 

section 8.2. & p. 54, section 8.4) 

 

15. In the Statement of Custodial Activity, do total 

sources of collections equal total disposition of 

collections (revenue) so that the net custodial 

activity is zero? (OMB Bulletin 01-09, p. 54, 

section 8.5) 

 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section VIII 

Statement of Custodial Activity 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-187 

Disclosures (16– 19) 

Yes, 

No 

or 

N/A

Explanation 

16. If custodial revenues are immaterial and incidental 

to the entity’s primary mission and are not reported 

separately on the Statement of Custodial Activity, 

are the sources and amounts of the collections and 

amounts to be distributed to others disclosed? 

(OMB Bulletin 01-09, p. 52, section 8.1 & p. 95, 

section 9.37) 

 

17. Does the collecting entity disclose and explain the 

following information? 

a. the basis of accounting when application of the 

general rule for recognizing nonexchange 

revenue (i.e., specifically identifiable, legally 

enforceable, and reasonably estimable) results 

in a modified cash basis of accounting 

b. the specific potential accruals that are not made 

as a result of using the modified cash basis 

accounting 

c. the practical and inherent limitations affecting 

the accrual of taxes and duties 

d. the use of accrual-based accounting, if 

applicable (SFFAS 7, par.48 & 64)

 

18. Do entities that collect taxes and duties disclose the 

following information in a note or narrative? 

a. basis of accounting 

b. factors affecting the collectibility and timing of 

taxes and other nonexchange revenues 

c. cash collections and refunds by tax year and 

type of tax for the reporting period (SFFAS 7, 

par. 65.1 & 65.3; OMB Bulletin 01-09, p. 95, 

section 9.38)

 

19. If trust fund revenues are not recorded in 

accordance with applicable law, do the collecting 

and recipient entities disclose the reasons? 

(SFFAS 7, par. 66) 

 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section VIII 

Statement of Custodial Activity 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-188 

Dedicated Collection and Other Accompanying 

Information (20– 27) 

Yes, 

No 

or 

N/A

Explanation 

Dedicated collections are funds held with the expectation that they will be held for and 

applied to the purposes for which the funds were dedicated. Such funds include all funds 

within the budget classified as trust funds, those funds within the budget that are classified 

as “special funds” but that are similar in nature to trust funds, and those funds within the 

federal universe (inside or outside the budget) that are fiduciary in nature. (SFFAS 7, par. 

83; OMB Bulletin 01-09, p. 95, section 9.39) 

20. Does the management of a reporting entity identify, 

track, and disclose the receipts and expenditures of 

dedicated trust funds, "special funds," and fiduciary 

or deposit funds (both inside and outside the 

budget) for which it is responsible? (SFFAS 7, 

par. 83; OMB Bulletin 01-09, pp. 95 & 96, section 

9.39) 

 

21. Does management provide separate financial 

information about these dedicated funds if they are 

material to the reporting entity, the beneficiary, or 

the contributors? (SFFAS 7, par. 84; 

OMB Bulletin 01-09, pp. 95 & 96, section 9.39) 

 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section VIII 

Statement of Custodial Activity 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-189 

Dedicated Collection and Other Accompanying 

Information (20– 27) 

Yes, 

No 

or 

N/A

Explanation 

22. Is the following information reported for individual 

funds that account for dedicated collections? 

a. a description of each fund’s purpose, how the 

administrative entity accounts for and reports 

the fund, and its authority to use those 

collections 

b. the sources of revenue or other financing for the 

period and an explanation of the extent to 

which they are inflows of resources to the 

government or the result of intragovernmental 

flows 

c. condensed information about assets and 

liabilities showing investments in Treasury 

securities, other assets, liabilities due and 

payable to beneficiaries, other liabilities, and 

fund balance 

d. condensed information on net cost and changes 

to fund balance showing revenues by type 

(exchange or nonexchange), program expenses, 

other expenses, other financing sources, and 

other changes in fund balance 

e. the amounts of any revenues—other financing 

sources or costs attributable to the fund under 

accounting standards—that are not legally 

allowable as credits or charges to the fund 

(SFFAS 7, par. 85; OMB Bulletin 01-09, pp. 95 & 

96, section 9.39)

 

23. If revenues, other financing sources, or costs (such 

as item "e" of the previous question) are associated 

with but not legally allowable to a fund, does the 

larger reporting entity of which the fund is a 

component recognize them? (SFFAS 7, par. 86; 

OMB Bulletin 01-09, p. 96, section 9.39) 

 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section VIII 

Statement of Custodial Activity 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-190 

Dedicated Collection and Other Accompanying 

Information (20– 27) 

Yes, 

No 

or 

N/A

Explanation 

24. If more than one reporting entity is responsible for 

carrying out a program financed with dedicated 

collections, does the entity with the largest share of 

the activity take responsibility for reporting all 

revenues, other financing sources, assets, liabilities, 

and costs of the fund? (SFFAS 7, par. 87) 

 

25. If information on actual collections is not currently 

available from the collecting entity, do the trust 

funds that are legally entitled to receive only excise 

taxes that are actually collected by the collecting 

entity recognize revenue from excise taxes on the 

basis of assessments in lieu of excise taxes actually 

collected? (SFFAS 7, par. 60.1) 

 

26. Is the amount of revenue accrued and recognized by 

the social security trust fund based on the best 

available information (i.e., on the basis of the higher 

of the amount of Internal Revenue Service (IRS) 

assessments or the amounts actually reported by 

employers to Social Security)? (SFFAS 7, par. 60.2) 

 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section VIII 

Statement of Custodial Activity 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-191 

Dedicated Collection and Other Accompanying 

Information (20– 27) 

Yes, 

No 

or 

N/A

Explanation 

27. Does the collecting entity report the following as 

other accompanying information? 

a. income tax burden borne by different classes of 

taxpayers and the effects of tax rates, 

deductions, credits, etc. (required of IRS) 

b. available information on the size of the tax gap, 

including 

i. explicit definitions of the estimated 

amounts reported (e.g., whether the tax 

gap includes estimates on illegally earned 

income) 

ii. appropriate explanations of the limited 

reliability of the estimates 

iii. cross references to portions of the tax 

gap due from identified noncompliant 

taxpayers and importers 

c. appropriate explanations and qualifications, if 

information about tax expenditures related to 

entity programs is present 

d. a description of the basis for the estimates and 

appropriate cautionary language about 

reliability, if information about estimated 

directed flows of resources related to an entity’s 

programs is presented (SFFAS 7, par. 69.1 - 

69.4; OMB Bulletin 01-09, p. 114 section 12.3 & 

p. 115, section 12.4)

 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section IX 

Notes to Financial Statements 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-192 

The five questions in this section are related to the disclosure of significant accounting policies. 

Notes to Financial Statements (1– 5) 

Yes, 

No 

or 

N/A

Explanation 

1. Is a description of the reporting entity presented in 

the disclosure of significant accounting policies, 

along with identification of the entity’s major 

components? (OMB Bulletin 01-09, p. 55, 

section 9.1) 

 

2. Does the entity identify and describe accounting 

principles it follows, and methods of applying those 

principles in a note to the financial statements? 

(OMB Bulletin 01-09, p. 55, section 9.1) 

 

3. Does the entity's disclosure of its accounting 

policies include its rationale for the valuation, 

recognition, and allocation of assets, liabilities, 

expenses, revenues, and other financing sources? 

(OMB Bulletin 01-09, p. 55, section 9.1) 

 

4. Does the entity disclose any significant changes in 

its composition or manner in which it aggregates 

information for financial reporting purposes? 

(OMB Bulletin 01-09, p. 55, section 9.1) 

 

5. If changes in the composition of the reporting entity 

or manner in which the reporting entity aggregates 

information for financial reporting purposes, in 

effect, result in a new reporting entity, has the entity 

restated financial statements for all prior periods 

presented to correspond to the changes? 

(OMB Bulletin 01-09, pp. 55 & 56, section 9.1) 

 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section X 

Supplementary Information 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-193 

The questions related to the Supplementary Information are organized in the following eight 

categories. 

 

 Question Numbers 

 

1. Required Supplementary Stewardship Information: 

 Property, Plant, & Equipment 1 - 14 

2. Required Supplementary Stewardship Information: 

Stewardship Investments 15 - 42 

3. Required Supplementary Information: 

Risk-Assumed Information 43 

4. Required Supplementary Information: 

Custodial Activity 44 - 45 

5. Required Supplementary Information: 

Segment Information 46 - 47 

6. Required Supplementary Information 

Management’s Discussion and Analysis 48 - 61 

7. Required Supplementary Information: 

Deferred Maintenance 62 - 65 

8. Required Supplementary Information: 

Intragovernmental Amounts 66 - 78 

 See Section XI for Social Insurance Information 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section X 

Supplementary Information 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-194 

Required Supplementary Stewardship 

Information: 

Property, Plant, & Equipment (1 – 14) 

Yes, 

No 

or 

N/A

Explanation 

Stewardship reporting requires the federal government to report on its stewardship over 

certain resources entrusted to it and certain responsibilities assumed by it that cannot be 

measured in traditional financial reports. These resources and responsibilities do not meet 

the criteria for assets and liabilities that are required to be reported in the financial 

statements, but are important to understanding the operations and financial condition of the 

federal government at the date of the financial statements and in subsequent periods. 

Stewardship PP&E consists of items whose physical properties resemble those of general 

PP&E traditionally capitalized in financial statements. However, because of the nature of 

these assets, valuation may be difficult, and matching costs with specific periods would not 

be meaningful. 

Stewardship PP&E includes: 

− heritage assets, such as federal monuments and memorials, that are of historical, 

natural, cultural, educational, architectural, or artistic significance and 

− stewardship land, such as national forests and parks that have not been acquired for or 

in connection with general PP&E. (SFFAS 8, par.7-11 & 17; OMB Bulletin 01-09, p. 97, 

section 10.1 and p. 98, section, 10.2) 

1. Except for multi-use heritage assets in which the 

predominant use of the asset is in general 

government operations, are heritage assets reported 

as Required Supplementary Stewardship 

Information (RSSI) accompanying the financial 

statements rather than as asset amounts on the 

balance sheet? (SFFAS 8, par.43; 

OMB Bulletin 01-09, p. 23, section 3.3 & p. 98, 

section 10.2A) 

 

2. Are heritage assets (including multiuse heritage 

assets) reported in RSSI in terms of physical units 

rather than in terms of cost, fair value, or other 

monetary values? (SFFAS 8, par. 46; SFFAS 16, 

par.9; OMB Bulletin 01-09, p. 23, section 3.3 & p. 98, 

section 10.2A) 

 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section X 

Supplementary Information 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-195 

Required Supplementary Stewardship 

Information: 

Property, Plant, & Equipment (1 – 14) 

Yes, 

No 

or 

N/A

Explanation 

3. Does the reporting entity provide relevant RSSI in 

the financial statements, such as the following 

information about its heritage assets? 

a. a description of each major category of heritage 

asset and whether it is collectible or 

noncollectible 

b. a description of the methods of acquisition and 

withdrawal of heritage assets 

c. an accounting for the physical units by major 

category including: 

i. beginning balances 

ii. additions 

iii. withdrawals 

iv. ending balances 

d. a description of the condition of the assets 

unless it is already reported in deferred 

maintenance information included elsewhere in 

the report, in which case a reference to the 

information will suffice 

e. a reference to deferred maintenance 

information, if deferred maintenance is reported 

for the assets (SFFAS 8, par. 50, SFFAS 14, 

par. 10-11; OMB Bulletin 01-09, pp. 99-100, 

section 10.2D)

 

4. Are federal land141 and land rights owned by the 

federal government and not acquired for or in 

connection with other general PP&E reported as 

stewardship land in the RSSI of the financial 

statements? (SFFAS 6, par. 66-68, SFFAS 8, par. 74) 

 

 

141Land is defined as the solid part of the surface of the earth. Excluded from the definition of land are materials beneath the 

surface (i.e., depletable resources such as mineral deposits and petroleum), the space above the surface (i.e., renewable 

resources such as timber), and the outer-continental shelf resources. 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section X 

Supplementary Information 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-196 

Required Supplementary Stewardship 

Information: 

Property, Plant, & Equipment (1 – 14) 

Yes, 

No 

or 

N/A

Explanation 

5. Is stewardship land quantified and reported in terms 

of physical units (e.g., acres) in the RSSI rather than 

in monetary values? (SFFAS 8, par. 75; 

OMB Bulletin 01-09, p. 99, section 10.2C) 

 

6. Is the cost of a structure acquired with stewardship 

land that is to be used in operations included in the 

acquisition cost of the land if one of the following 

conditions applies? 

a. the structure’s value is insignificant compared 

to the value of the land 

b. the structure has little or no inherent value 

c. the structure is merely a byproduct of the 

acquisition of the land (SFFAS 6, par. 70)

 

7. If a significant structure acquired with stewardship 

land has an operating use (e.g., a recently 

constructed hotel or employee-housing block), is its 

cost segregated from the cost of the stewardship 

land acquired and capitalized as general PP&E? 

(SFFAS 6, par. 70; SFFAS 8, par. 78) 

 

8. If the fair value of stewardship land acquired 

through donation or devise is known and material, 

is it disclosed in the notes to the financial 

statements? (SFFAS 6, par. 71; SFFAS 8, par. 79) 

 

9. If the fair value of the stewardship land acquired 

through donation or devise is not estimable, is 

information as to the type and quantity of the assets 

disclosed? (SFFAS 6, par. 71; SFFAS 8, par. 79) 

 

10. Is the cost of stewardship land transferred from 

another federal entity recorded at the book value of 

the land on the transferring entity’s books? 

(SFFAS 6, par. 72) 

 
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Supplementary Information 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-197 

Required Supplementary Stewardship 

Information: 

Property, Plant, & Equipment (1 – 14) 

Yes, 

No 

or 

N/A

Explanation 

11. If stewardship land is transferred from another 

federal entity, and the receiving entity does not 

know its book value, is the transfer disclosed in the 

notes if material? (SFFAS 6, par. 72) 

 

12. Are all transfers of stewardship land disclosed in 

the notes if material? (SFFAS 6, par. 72) 

 

13. Is acquisition cost of stewardship land recorded in 

the following manner? 

a. recognized as a cost in the period incurred 

b. include all costs incurred to bring the 

stewardship land to its intended use, current 

condition, and location (including razing a 

building) 

c. disclosed142 as “cost of stewardship land” 

(SFFAS 6, par. 69 & 73; SFFAS 8, par. 80)

 

 

142Disclosure shall be either on the face of the statement of net cost or in footnotes, depending on the materiality of the amounts 

and the need to distinguish such amounts from other costs relating to measures of outputs or outcomes of the reporting entity. 
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Supplementary Information 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-198 

Required Supplementary Stewardship 

Information: 

Property, Plant, & Equipment (1 – 14) 

Yes, 

No 

or 

N/A

Explanation 

14. With regard to stewardship land, does the reporting 

entity include in its RSSI the following information? 

a. a description, by principal organization, 

significant holdings of stewardship land by 

category of major use143

b. a description of the methods of acquisition and 

withdrawal of stewardship land 

c. an accounting for physical units by major 

category including: 

i. beginning balance 

ii. additions 

iii. withdrawals 

iv. ending balance 

d. the condition of the stewardship land, unless it 

is already reported elsewhere in the report (in 

which case a reference to the information will 

suffice) 

e. a reference to the applicable information if 

deferred maintenance is reported for the assets. 

(SFFAS 6, par. 69 & 73; SFFAS 8, par. 80 & 81; 

SFFAS 14, par. 10 & 11; OMB Bulletin 01-09, 

pp. 99 & 100, section 10.2D)

 

 

143Where parcels of stewardship land have more than one use, the predominant use of the land shall be considered the major 

use. 
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Supplementary Information 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-199 

Required Supplementary Stewardship 

Information: 

Stewardship Investments (15 – 42) 

Yes, 

No 

or 

N/A

Explanation 

Stewardship investments are substantial investments made by the federal government for the 

benefit of the nation. When incurred, they are treated as expenses in calculating net cost, but 

they are also separately reported as RSSI to highlight the extent of investments that are made 

for long-term benefit. (SFFAS 8, par. 12) 

Stewardship investments include: 

nonfederal physical property: federally financed (but not federally owned) purchases, 

construction, or major renovation of physical property owned by state and local 

governments, including major additions, alterations, and replacements, the purchase 

of major equipment; and the purchase or improvement of other physical assets.144

human capital: expenses incurred for programs for education and training of the 

public145 that are intended to increase or maintain national productive capacity and 

that produce outputs and outcomes that provide evidence of maintaining or 

increasing national productive capacity. 

research & development: expenses incurred to support the search for new or refined 

knowledge and ideas and for the application or use of such knowledge and ideas for 

the development of new or improved products and processes with the expectation of 

maintaining or increasing national productive capacity or yielding other future 

benefits. (SFFAS 8, par. 12, 83, 89, 90, & 96; OMB Bulletin 01-09, p. 100, section 

10.3)

15. Are nonfederal physical property investments 

reported in nominal dollars on the basis of 

"expenses incurred" and measured on the same 

basis of accounting used for financial statement 

purposes, including appropriate accrual 

adjustments, general and administrative overhead, 

and costs of facilities? (SFFAS 8, par. 84) 

 

16. Are investments in nonfederal physical property and 

related cash grants recognized and reported as 

expenses in arriving at the net cost of operations? 

(SFFAS 8, par. 85; OMB Bulletin 01-09, p. 100, 

section 10.3A) 

 

 

144Grants for maintenance and operations are not considered investments in nonfederal physical property. 145The definition excludes education and training expensed for federal civilian and military personnel. 
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Supplementary Information 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-200 

Required Supplementary Stewardship 

Information: 

Stewardship Investments (15 – 42) 

Yes, 

No 

or 

N/A

Explanation 

17. Are expenses incurred for nonfederal physical 

property program costs, contracts, or grants with 

split purposes146 reported in RSSI on the basis of a 

logical allocation? (SFFAS 8, par. 86) 

 

18. If an allocation of such program costs, etc. is not 

feasible, is the investment reported on the basis of 

the predominant application of the expenses 

incurred? (SFFAS 8, par. 86) 

 

19. Does the reporting entity provide in its RSSI a dollar 

amount and a narrative description of its investment 

in nonfederal physical property for the year being 

reported on as well as at least the preceding 4 

years? (SFFAS 8, par. 87; OMB Bulletin 01-09, 

p. 100, section 10.3A & p. 102, section 10.3D) 

 

20. Is expense or outlay data for investments in 

nonfederal physical property reported at a 

meaningful category or level (e.g., by major program 

or department)? (SFFAS 8, par. 87; 

OMB Bulletin 01-09, p. 102, section 10.3D) 

 

21. Does the reporting entity also include in its RSSI a 

description of federally owned physical property 

transferred to state and local governments for the 

year being reported on as well as at least the 

preceding 4 years? (SFFAS 8, par. 87; 

OMB Bulletin 01-09, p. 102, section 10.3D) 

 

22. If expense data for the purchase of PP&E for state 

and local governments for the year being reported 

on and for the preceding 4 years are not available, 

does the entity report outlay data, if available? 

(SFFAS 8, par. 87; OMB Bulletin 01-09, p. 102, 

section 10.3D) 

 

 

146An example of an investment with a split purpose is a grant issued to a state to construct segments of the National Highway 

System and to conduct highway research. 
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Supplementary Information 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-201 

Required Supplementary Stewardship 

Information: 

Stewardship Investments (15 – 42) 

Yes, 

No 

or 

N/A

Explanation 

23. If neither historical expense nor outlay data are 

available on stewardship investments for the year 

being reported on and the preceding 4 years, does 

the entity report expense data for the current 

reporting year and such other years, as available? 

(SFFAS 8, par. 87; OMB Bulletin 01-09, p. 102, 

section 10.3D) 

 

24. Are investments in human capital reported in 

nominal dollars on the basis of "expenses incurred" 

and measured on the same basis of accounting used 

for financial statement purposes, including 

appropriate accrual adjustments, general and 

administrative overhead, and costs of facilities? 

(SFFAS 8, par. 91) 

 

25. Are expenses incurred for human capital program 

costs, contracts, or grants with split purposes147

reported in RSSI on the basis of a logical allocation? 

(SFFAS 8, par. 92) 

 

26. If an allocation of such program costs, etc. is not 

feasible, is the investment reported on the basis of 

the predominant application of the expenses 

incurred? (SFFAS 8, par. 92) 

 

27. Does the entity link its investments in human capital 

to outcomes that can be described in financial, 

economic, or quantitative terms? (SFFAS 8, par. 93) 

 

28. If outcome data are not available, does the reporting 

entity report output data that best provide 

indications of the intended program outcomes? 

(SFFAS 8, par. 93) 

 

 

147An example of an investment with a split purpose is a grant issued to a teaching hospital for both medical education and 

medical research. 
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Supplementary Information 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-202 

Required Supplementary Stewardship 

Information: 

Stewardship Investments (15 – 42) 

Yes, 

No 

or 

N/A

Explanation 

29. Does the reporting entity include in its RSSI the 

dollar amount and a narrative description of its 

investment in human capital for the year being 

reported on as well as the preceding 4 years? 

(SFFAS 8, par. 94; OMB Bulletin 01-09, p. 101, 

section 10.3B) 

 

30. If expense data for the investments in human capital 

for the year being reported and for the preceding 

4 years are not available, does the entity report 

outlay data, if available? (SFFAS 8, par. 94; 

OMB Bulletin 01-09, p. 102, section 10.3D) 

 

31. If neither historical expense nor outlay data for the 

investments in human capital are available for the 

year being reported on and the preceding 4 years, 

does the entity report expense data for the current 

reporting year and such other years, as available? 

(SFFAS 8, par. 94; OMB Bulletin 01-09, p. 102, 

section 10.3D) 

 

32. Is expense or outlay data for investments in human 

capital reported at a meaningful category or level 

(e.g., by major program or department)? 

(SFFAS 8, par. 94) 

 

33. Is the investment in research and development 

reported in nominal dollars on the basis of 

"expenses incurred" and measured on the same 

basis of accounting used for financial statement 

purposes, including appropriate accrual 

adjustments, general and administrative overhead, 

and costs of facilities? (SFFAS 8, par. 97) 

 

34. Are expenses incurred for research and 

development program costs, contracts, or grants 

with split purposes148 reported in RSSI on the basis 

of a logical allocation? (SFFAS 8, par. 98) 

 

 

148ibid. 
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Supplementary Information 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-203 

Required Supplementary Stewardship 

Information: 

Stewardship Investments (15 – 42) 

Yes, 

No 

or 

N/A

Explanation 

35. If an allocation of such program costs, etc. is not 

feasible, is the investment reported on the basis of 

the predominant application of the expenses 

incurred? (SFFAS 8, par. 98) 

 

36. Does the entity link its investments in research and 

development to program outcome data via a 

narrative discussion of the major results achieved 

by the program during the year along the following 

lines? 

a. basic research, which refers to an identification 

of any major new discoveries that were made 

during the year

b. applied research, which refers to an 

identification of any major new applications that 

were developed during the year

c. development, which refers to the progress of 

major developmental projects including the 

results with respect to projects completed or 

otherwise terminated during the year and the 

status of projects that will continue 

(SFFAS 8, par. 99)

 

37. If outcome data are not available, does the reporting 

entity use output data149 that best provide 

indications of the intended program outcomes? 

(SFFAS 8, par. 99) 

 

38. Does the reporting entity include in its RSSI the 

dollar amount and a narrative description of its 

investment in major research and development 

programs for the year being reported on as well as 

the preceding 4 years? (SFFAS 8, par. 100; 

OMB Bulletin 01-09, p. 101, section 10.3C & p. 102, 

section 10.3D) 

 

 

149In research and development programs, output data might consist of a number of new projects initiated, or the number of 

projects continued, completed, or terminated. It also might consist of quantitative measures such as publication counts, 

citation counts, patent counts, or scientific and engineering personnel funded. 
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Section X 

Supplementary Information 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-204 

Required Supplementary Stewardship 

Information: 

Stewardship Investments (15 – 42) 

Yes, 

No 

or 

N/A

Explanation 

39. If expense data for the investments in research and 

development for the year being reported and for the 

preceding 4 years are not available, does the entity 

report outlay data, if available? (SFFAS 8, par. 100; 

OMB Bulletin 01-09, p. 102, section 10.3D) 

 

40. If neither historical expense nor outlay data are 

available for the year being reported on and the 

preceding 4 years, does the entity report expense 

data for the current year and such other years as 

available? (SFFAS 8, par. 100; OMB Bulletin 01-09, 

p. 102, section 10.3D) 

 

41. Is expense or outlay data for investments in 

research and development reported at a meaningful 

category or level (e.g., by major program or 

department)? (SFFAS 8, par. 100; 

OMB Bulletin 01-09, p. 102, section 10.3D) 

 

42. Does the entity report in its RSSI the amounts of 

significant contributions from state, local, private, 

and other sources to its investments in nonfederal 

physical property, human capital, and research and 

development?150 (SFFAS 8, par. 88, 95, & 101) 

 

 

150This reporting is encouraged, but is not required. 
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Supplementary Information 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-205 

Required Supplementary Information: 

Risk Assumed Information (43) 

Yes, 

No 

or 

N/A

Explanation 

Risk-assumed information is generally measured by the present value of unpaid expected 

losses net of associated premiums based on the risk inherent in the insurance or guarantee 

coverage in force. (SFFAS 5, par. 105 & 106; OMB Bulletin 01-09, p.103, section 10.4A) 

43. Does the entity include as Required Supplementary 

Information (RSI) the current amount and periodic 

changes of "risk assumed" arising from insurance 

and guarantee programs? (SFFAS 5, par. 105, 106, 

110; SFFAS 25, par. 2; OMB Bulletin 01-09, p. 103, 

section 10.4A) 

 
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Supplementary Information 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-206 

Required Supplementary Information: 

Custodial Activity (44 – 45) 

Yes, 

No 

or 

N/A

Explanation 

44. Do entities that collect taxes and duties provide the 

following supplementary information relating to 

their potential revenue and custodial 

responsibilities? 

a. the estimated realizable value, as of the end of 

the reporting period, of compliance assessments 

and, if reasonably estimable, pre-assessment 

work in process, based on management’s best 

estimate that is appropriately identified as to 

their reliability 

b. if reasonably estimable, other claims for refunds 

not yet accrued but likely to be paid when 

administrative action is complete, based on 

management’s best estimates 

c. amount of assessments defined as written-off 

(i.e., no further collection potential) that 

continues to be statutorily collectable 

d. amounts by which trust funds may be 

overfunded or underfunded in comparison with 

the requirements of the law, if reasonably 

estimable (SFFAS 7, par. 67.1-67.4; 

OMB Bulletin 01-09, pp.112-113, section 11.5)

 

45. If the entity receiving funds from the collecting 

entity is itself a trust fund, does it provide as 

supplementary information amounts by which 

related trust funds may be overfunded or 

underfunded in comparison with the requirements 

of the law, if reasonably estimable? (SFFAS 7, 

par. 67.4, 68; OMB Bulletin 01-09, p. 113, 

section 11.5) 

 
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Supplementary Information 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-207 

Required Supplementary Information: 

Segment Information (46 – 47) 

Yes, 

No 

or 

N/A

Explanation 

46. Do all franchise and other intragovernmental 

support revolving funds report the following 

supplementary information? 

a. a brief description of the services provided by 

the fund and the identity of the fund's major 

customers (i.e., organizations that account for 

more than 15 percent of the fund's revenues) 

b. a summary for the reporting period, by product 

or line of business, including the following items

i. the full cost of goods and services 

provided 

ii. the related exchange revenues 

iii. the excess of full costs over exchange 

revenues (OMB Bulletin 01-09, p. 113, 

section 11.6)

 

47. If a franchise fund or other intragovernmental 

support revolving fund is not separately reported on 

the entity's principal statements, does the entity 

report as supplementary information a summary of 

the fund's assets, liabilities, and net position that 

includes the following items as of the reporting 

date? 

a. fund balance 

b. accounts receivable 

c. property, plant, and equipment 

d. other assets 

e. liabilities due and payable for goods and services 

received 

f. deferred revenues 

g. other liabilities 

h. cumulative results of operations 

(OMB Bulletin 01-09, p. 113, section 11.6)

 
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Supplementary Information 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-208 

Required Supplementary Information: 

Management’s Discussion and Analysis 

(48 – 61) 

Yes, 

No 

or 

N/A

Explanation 

48. Does the entity include as RSI a section devoted to 

management discussion and analysis (MD&A) of 

the financial statements and related information? 

(SFFAS 15, par. 1; SFFAC 3, par. 1 & 2; 

OMB Bulletin 01-09, p. 105, section 11.1) 

 

49. In general, does the MD&A provide a clear, concise, 

and balanced description of the reporting entity and 

its mission, activities, program and financial 

performance, systems, controls, legal compliance, 

financial position, and financial condition? 

(SFFAS 15, par. 1; SFFAC 3, par. 1; 

OMB Bulletin 01-09, p. 105, section 11.1) 

 

50. Does the MD&A, at a minimum, contain sections 

that address the following items concerning the 

entity? 

a. mission and organizational structure 

b. performance goals, objectives, and results 

c. financial statements 

d. systems, controls, and legal compliance 

e. forward-looking information, either as a 

separate section of MD&A or incorporated with 

the sections listed above 

f. important problems that need to be addressed 

and action taken or planned, either as a separate 

section of the MD&A or incorporated with the 

sections listed above (SFFAS 15, par. 2-4; 

OMB Bulletin 01-09, pp. 105 & 106, section 

11.1A)

 
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Supplementary Information 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-209 

Required Supplementary Information: 

Management’s Discussion and Analysis 

(48 – 61) 

Yes, 

No 

or 

N/A

Explanation 

51. Does the MD&A limit itself to the most important 

matters that could, for example, have the following 

impact? 

a. lead to significant actions or proposals by top 

management of the reporting unit 

b. be significant to the managing, budgeting, and 

oversight functions of Congress and the 

administration 

c. significantly affect the judgment of citizens 

about the efficiency and effectiveness of their 

federal government (SFFAS 15, par. 5 & 6)

 

52. Does the MD&A section on the entity’s mission and 

organizational structure contain a brief description 

of the mission(s) of the entity and its related 

organizational structure, that is consistent with the 

entity’s strategic plan? (OMB Bulletin 01-09, p. 106, 

section 11.1B) 

 

53. Are the entity’s programs and financial results 

expressed in terms of objective and relevant 

measures that disclose the extent to which its 

programs are achieving their intended objectives? 

(OMB Bulletin 01-09, p. 106, section 11.1C) 

 

54. Has the entity attempted to develop and report 

objective measures that provide information about 

the cost effectiveness of programs? 

(OMB Bulletin 01-09, pp. 106 & 107, section 11.1C) 

 

55. Are the performance measures presented in the 

MD&A consistent with the measures previously 

included in the budget and planning documents? 

(OMB Bulletin 01-09, p. 107, section 11.1C) 

 

56. Does the entity explain what needs to be done and 

what is planned to improve financial or program 

performance? (OMB Bulletin 01-09, p. 107, 

section 11.1C) 

 
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Section X 

Supplementary Information 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-210 

Required Supplementary Information: 

Management’s Discussion and Analysis 

(48 – 61) 

Yes, 

No 

or 

N/A

Explanation 

57. Does the entity’s discussion of performance goals, 

objectives, and results indicate the extent to which 

its programs are achieving their intended goals and 

objectives, and are these clearly linked to cost 

categories (responsibility segments) featured in the 

Statement of Net Cost? (OMB Bulletin 01-09, p. 106, 

section 11.1C) 

 

58. Does the MD&A section on the entity’s performance 

goals, objectives, and results also provide the 

following information? 

a. a discussion of the strategies and resources 

the agency uses to achieve its performance 

goals 

b. a clear picture of planned and actual 

performance 

c. an explanation of the procedures that 

management has designed and followed to 

provide reasonable assurance that reported 

performance information is relevant and 

reliable 

d. an explanation of performance trends 

e. an evaluation of the significance of underlying 

factors that may have affected the reported 

performance (OMB Bulletin 01-09, p. 106, 

section 11.1C)

 

59. In reporting on the status of systems and internal 

controls that support preparation of the financial 

statements, performance information, and 

compliance with applicable laws, does the entity 

describe material problems revealed by audits or 

otherwise known to management as well as 

corrective actions taken or planned? 

(OMB Bulletin 01-09, p. 107, section 11.1E) 

 
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Section X 

Supplementary Information 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-211 

Required Supplementary Information: 

Management’s Discussion and Analysis 

(48 – 61) 

Yes, 

No 

or 

N/A

Explanation 

60. Does the entity’s discussion of the possible future 

effects of existing events and conditions include at 

least the following information? 

a. demographic characteristics 

b. claims 

c. deferred maintenance 

d. commitments 

e. major unfunded liabilities (OMB Bulletin 01-09, 

p. 108, section 11.1F)

 

61. Does the entity note the following in the section on 

limitations of the Financial Statements? 

a. the principal financial statements have been 

prepared to report the financial position and 

results of operations of the entity, pursuant to 

the requirements of 31 U.S.C. 3515(b) 

b. while the statements have been prepared from 

the books and records of the entity in 

accordance GAAP for federal entities and the 

formats prescribed by OMB, the statements are 

in addition to the financial reports used to 

monitor and control budgetary resources which 

are prepared from the same books and records 

c. the statements should be read with the 

realization that they are for a component of the 

U.S. government (OMB Bulletin 01-09, p. 108, 

section 11.1G) 

 
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Section X 

Supplementary Information 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-212 

Required Supplementary Information: 

Deferred Maintenance (62 – 65) 

Yes, 

No 

or 

N/A

Explanation 

Maintenance is the act of keeping fixed assets in acceptable condition. Maintenance includes 

preventive maintenance, normal repairs, replacement of parts and structural components, 

and other activities needed to preserve the asset so that it continues to provide acceptable 

services and achieves its expected life. 

Maintenance excludes activities aimed at expanding the capacity of an asset or otherwise 

upgrading it to serve needs different from, or significantly greater than, originally intended. 

Deferred maintenance is maintenance that was not performed when it should have been, or 

was scheduled to be, and that, therefore, is put off or delayed for a future period. (SFFAS 6, 

par. 77 & 78) 

62. Does the entity report under required 

supplementary information the following 

information for each major category of its PP&E 

(i.e., general PP&E, heritage assets, and 

stewardship land)? 

a. the identity (e.g., building, equipment, land) of 

each major class of asset for which maintenance 

was deferred 

b. the method of measuring deferred maintenance 

(SFFAS 6, par. 83; SFFAS 14, par. 1; 

OMB Bulletin 01-09, pp. 108-109, section 11.2) 

 

Amounts reported for deferred maintenance may be measured using condition assessment 

surveys or life-cycle cost forecasts. 

Condition assessment surveys are periodic inspections of PP&E, based on generally accepted 

and consistently applied methods, to determine PP&E’s current condition and the estimated 

cost to correct any deficiencies. (SFFAS 6, par. 81) 

Life-cycle costing is an acquisition or procurement technique that considers operating, 

maintenance, and other costs in addition to the acquisition cost of assets. (SFFAS 6, par. 

82) 
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Section X 

Supplementary Information 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-213 

Required Supplementary Information: 

Deferred Maintenance (62 – 65) 

Yes, 

No 

or 

N/A

Explanation 

63. If the condition assessment survey method is used 

to measure deferred maintenance, is the following 

information presented for each major class of PP&E 

in supplementary information? 

a. a description of requirements or standards for 

acceptable operating condition 

b. any changes in the condition requirements or 

standards 

c. asset condition and a range estimate of the 

dollar amount of maintenance needed to return 

it to its acceptable operating condition 

(SFFAS 6, par. 83)

 

64. If the total life cycle cost method is used to measure 

deferred maintenance, is the following information 

presented for each major class of PP&E? 

a. the original date of the maintenance forecast 

and an explanation for any changes to the 

forecast 

b. prior-year balance of the cumulative deferred 

maintenance amount 

a. the dollar amount of maintenance that was 

defined by the professionals who designed, 

built, or managed the PP&E as required 

maintenance for the reporting period 

b. the dollar amount of maintenance actually 

performed during the period 

c. the difference between the forecast and actual 

maintenance 

d. any adjustments to the scheduled amounts 

deemed necessary by the managers of the PP&E 

e. the ending cumulative balance for the reporting 

period for each major class of asset 

experiencing deferred maintenance 

(SFFAS 6, par. 83)

 
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Section X 

Supplementary Information 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-214 

Required Supplementary Information: 

Deferred Maintenance (62 – 65) 

Yes, 

No 

or 

N/A

Explanation 

65. If management elects to break out deferred 

maintenance by critical and noncritical amounts 

needed to bring each class of asset to its acceptable 

operating condition, does it also include its 

definition of these categories? (SFFAS 6, par. 84) 

 
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Section X 

Supplementary Information 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-215 

Required Supplementary Information: 

Intragovernmental Amounts (66 – 78) 

Yes, 

No 

or 

N/A

Explanation 

Intragovernmental amounts represent transactions between federal entities included in the 

Financial Report of the United States Government. These transactions include activities 

with federal CFO Act and non-CFO Act entities as identified in the Treasury Financial 

Manual. (OMB Bulletin 01-09, p.109, section 11.3) 

66. Does the entity report, as required supplementary 

information and intragovernmental amounts, the 

following items? 

a. assets 

b. liabilities 

c. nonexchange revenue 

d. for certain reporting entities, earned revenue 

from trade (buy/sell) transactions along with the 

gross cost to generate such revenue 

(OMB Bulletin 01-09, p. 109, section 11.3)

 

67. Does the entity report intragovernmental assets, 

liabilities, and earned revenue from trade 

transactions and nonexchange revenue by trading 

partner (i.e., reciprocal federal entity)? 

(OMB Bulletin 01-09, p. 109, section 11.3) 

 

68. Does the entity report intragovernmental gross cost 

to generate earned revenue from trade transactions 

by budget functional classification? 

(OMB Bulletin 01-09, p. 109, section 11.3) 

 

69. Do intragovernmental asset and liability categories 

reported as required supplementary information 

agree with the intragovernmental asset and line 

items reported on the balance sheet? 

(OMB Bulletin 01-09, p. 109, section 11.3)

 

70. Are transactions with components of federal 

departments and agencies (e.g., Forest Service of 

the USDA) not reported separately, but included in 

the activity reported for the federal department or 

agency? (OMB Bulletin 01-09, p. 109, section 11.3) 

 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section X 

Supplementary Information 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-216 

Required Supplementary Information: 

Intragovernmental Amounts (66 – 78) 

Yes, 

No 

or 

N/A

Explanation 

71. Are all intragovernmental amounts net of intraentity transactions? (OMB Bulletin 01-09, p. 109, 

section 11.3) 

 

72. Does the entity reconcile intragovernmental asset, 

liability, and revenue amounts with its trading 

partners at least quarterly? (OMB Bulletin 01-09, 

pp. 109 & 110, section 11.3) 

 

73. Do intragovernmental assets and liabilities reported 

as required supplementary information (RSI) agree 

with the intragovernmental asset and liability line 

items and totals on the reporting entity’s 

consolidated agencywide balance sheet? 

(OMB Bulletin 01-09, pp. 110 & 111, section 11.3) 

 

74. For each intragovernmental asset and liability line 

item on the consolidated agencywide balance sheet, 

does the entity identify in the supplementary 

information the trading partner balances that make 

up the line item?151 (OMB Bulletin 01-09, pp. 110 & 

111, section 11.3) 

 

75. If intragovernmental transactions with a trading 

partner are material in one asset or liability category 

but immaterial in another category, does the entity 

report transactions with the trading partner for each 

category? OMB Bulletin 01-09, pp. 110 & 111, 

section 11.3) 

 

76. If the entity has total intragovernmental earned 

revenues from trade transactions (net of intra-entity 

activity) of greater than $500 million, does it report 

such intragovernmental revenues by trading 

partner? (OMB Bulletin 01-09, p. 111, section 11.3) 

 

 

151Reporting entities may aggregate trading partners whose individual totals for a particular asset category collectively comprise

less than 20 percent of the total asset line item category. 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section X 

Supplementary Information 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-217 

Required Supplementary Information: 

Intragovernmental Amounts (66 – 78) 

Yes, 

No 

or 

N/A

Explanation 

77. If the entity reports intragovernmental earned 

revenues, does it also report, by budget functional 

classification, the gross cost of goods, services, and 

other transactions that generated the 

intragovernmental earned revenues?152 

(OMB Bulletin 01-09, p. 111, section 11.3) 

 

78. Does the entity report, by trading partner, 

intragovernmental nonexchange revenues 

transferred in and out? (OMB Bulletin 01-09, p. 112, 

section 11.3) 

 

 

152The costs that generate intragovernmental earned revenues may not be intragovernmental in and of themselves. For example, 

if the General Services Administration (GSA) sells pencils to Agency A, GSA would report the revenue earned by selling the 

pencils to Agency A (intragovernmental) and report the cost of purchasing those pencils from Vendor B (public) by budget 

functional classification. 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section XI 

Social Insurance 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-218 

The 24 questions in this section are related to social insurance programs covered by SFFAS 17. 

Social Insurance Programs (1 – 24)

Yes, 

No 

or 

N/A

Explanation 

Social insurance programs covered by SFFAS 17, Accounting for Social Insurance, have the 

following five common characteristics. 

a. financing from participants or their employers 

b. eligibility from taxes or fees paid and time worked in covered employment 

c. benefits not directly related to taxes or fees paid 

d. benefits prescribed in law 

e. programs intended for the general public 

The following social insurance programs are specifically covered by SFFAS 17. 

a. Old-Age, Survivors, and Disability Insurance (OASDI, i.e., Social Security) 

b. Hospital Insurance (HI or Medicare Part A) and Supplementary Medical 

Insurance (SMI or Medicare Part B) 

c. Railroad Retirement Benefits (RRB) 

d. Black Lung Benefits 

e. Unemployment Insurance (UI) (SFFAS 17, par. 14 &, 15; OMB Bulletin 01-09, 

pp.103 & 104, section 10.4B)

On July 17, 2003, FASAB issued SFFAS 25, Reclassification of Stewardship Responsibilities 

and Eliminating the Current Services Assessment. For periods beginning after September 

30, 2004, the information required by paragraphs 27(3) and 32(3) of SFFAS 17 (checklist 

questions 17-20 below) shall be presented as a basic financial statement and other social 

insurance information shall be presented as Required Supplementary Information (RSI), 

except to the extent that the preparer elects to include some or all of that information in notes 

that are presented as an integral part of the basic financial statements. 

FASAB issued an exposure draft in March 2004, which would amend SFFAS 25 to make the 

significant assumptions underlying projections and estimates (other information required 

by SFFAS 17)153required disclosures to the social insurance basic financial statement. 

Although earlier implementation is encouraged, for periods ending as of or before September 

30, 2004, all social insurance information required by SFFAS 17 can be presented as 

Required Supplementary Stewardship Information (RSSI). 

 

153As discussed in checklist question 5 below. 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section XI 

Social Insurance 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-219 

Social Insurance Programs (1 – 24)

Yes, 

No 

or 

N/A

Explanation 

1. In general, does the entity responsible for a given 

social insurance program provide a clear and 

concise description of the program including its 

financing, calculation of benefits, and actuarial 

status154? (SFFAS 17, par. 24; OMB Bulletin 01-09, 

p.104, section 10.B) 

 

2. Does this description include the following 

information? 

a. discussion of the long-term sustainability and 

financial condition of the program 

b. an illustration and explanation of the long-term 

trends revealed in the data (SFFAS 17, par. 24; 

OMB Bulletin 01-09, p.104, section 10.B)

 

3. Does the reporting entity describe statutory or other 

material changes, and implications thereof, 

affecting the program after the current fiscal year? 

(SFFAS 17, par. 24) 

 

4. Are projections and estimates based on the entity’s 

best estimates of demographic and economic 

assumptions? (SFFAS 17, par. 25) 

 

5. Does the entity disclose significant assumptions 

used in making estimates and projections? 

(SFFAS 17, par. 25) 

 

6. Are all projections and estimates made as of a date 

(i.e., the valuation date) as close to the end of the 

fiscal year (i.e., current year) being reported on as 

possible and no more than 1 year prior to the end of 

the current year? (SFFAS 17, par. 26) 

 

7. Does the entity consistently follow this valuation 

date from year to year? (SFFAS 17, par. 26) 

 

 

154This is the status of a program based on statistical calculations and actuarial assumptions about future economic, 

demographic, and other conditions and events. 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section XI 

Social Insurance 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-220 

Social Insurance Programs (1 – 24)

Yes, 

No 

or 

N/A

Explanation 

8. Does information on the financial and actuarial 

status of the social insurance programs include 

actuarial projections that are indicative of long-term 

sustainability and show the annual cash flows in 

nominal dollars for current and future participants? 

(SFFAS 17, par. 27 (1)) 

 

9. Are the actuarial projections of cash flow amounts 

reported for at least every fifth year in the 

projection period? (SFFAS 17, par. 27 (1) (a)) 

 

10. Does the cash flow information show the following 

amounts? 

a. total cash inflow from all sources (i.e., by and 

on behalf of participants) less net interest on 

intragovernmental borrowing and lending 

b. total cash outflow (SFFAS 17, par. 27 (1) (a))

 

11. Does the narrative accompanying the cash flow data 

include identification of any year or years during the 

projection period when cash outflow exceeds cash 

inflow, with and without interest on 

intragovernmental borrowing or lending (the “crossover points”)? (SFFAS 17, par. 27 (1) (a)) 

 

12. Does the narrative provide an explanation of the 

significance of the cash flow “cross-over points” 

where cash outflows begin exceeding cash inflows? 

(SFFAS 17, par. 27 (1) (a)) 

 

13. Do the cash flow projections (net of interest on 

intragovernmental borrowing/lending) for Social 

Security and Medicare Part A include an estimate of 

cash flows as a percentage of taxable payroll? 

(SFFAS 17, par. 27 (1) (b)) 

 

14. Do the cash flow projections (net of interest on 

intragovernmental borrowing/lending) for Social 

Security and Medicare (Parts A & B) include an 

estimate of cash flows as a percentage of gross 

domestic product? (SFFAS 17, par. 27 (1) (b)) 

 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section XI 

Social Insurance 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-221 

Social Insurance Programs (1 – 24)

Yes, 

No 

or 

N/A

Explanation 

15. For Social Security and Medicare, Part A programs, 

does the entity’s cash flow information show its 

estimate of the ratio of the number of contributors 

to the number of beneficiaries during the same 

projection period as for cash flow projections? 

(SFFAS 17, par. 27 (2)) 

 

16. At a minimum, is the ratio of contributors to 

beneficiaries for Social Security and Medicare, 

Part A reported for the beginning and end of the 

projection period? (SFFAS 17, par. 27 (2)) 

 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section XI 

Social Insurance 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-222 

Social Insurance Programs (1 – 24)

Yes, 

No 

or 

N/A

Explanation 

17. For all enumerated social insurance programs 

except Unemployment Insurance (UI), does the 

responsible entity present a statement of actuarial 

present values of the following items?155

a. all future expenditures during the projection 

period related to benefit payments 

i. to or on behalf of current participants 

who have not yet attained retirement age 

ii. to or on behalf of current participants 

who have attained retirement age 

iii. to or on behalf of those who are expected 

to become plan participants 

b. all future contributions and tax income (from 

taxation of benefits) during the projection 

period 

i. from or on behalf of current participants 

who have not yet attained retirement age 

ii. from or on behalf of current participants 

who have attained retirement age 

iii. from or on behalf of those who are 

expected to become plan participants 

c. cash flow during the projection period156 

(SFFAS 17, par. 27 (3) (a)–(g); OMB Bulletin 01-

09, p. 104, section 10.4B)

 

 

155For periods beginning after September 30, 2004 this information shall be presented as a basic financial statement rather than 

as a component of RSSI (SFFAS 25, par. 6 & 7) 

156Cash flow during the projection period is derived from subtracting the actuarial present value of future contributions and tax 

income during the projection period (17b above) from the actuarial present value of future expenditures for the projection 

period (17a above). 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section XI 

Social Insurance 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-223 

Social Insurance Programs (1 – 24)

Yes, 

No 

or 

N/A

Explanation 

18. With the exception of Unemployment Insurance 

(UI), does the entity disclose the accumulated 

excess of all past cash receipts, including interest 

on investments, over all cash disbursements within 

the social insurance program represented by the 

fund balance at the valuation date?157

 

(SFFAS 17, par. 27 (3) (h)) 

 

19. Does the entity also disclose how it calculated the 

actuarial net present value of future benefits and 

contributions from or on behalf of current 

participants of all social insurance programs except 

UI?158 (SFFAS 17, par. 27 (3) (i)) 

 

20. If available, does the entity provide estimates of the 

actuarial present values and fund balances of the 

social insurance programs (except UI) under its 

purview for each of the 4 preceding years?159

 

(SFFAS 17, par. 27 (3) (j)) 

 

21. For all social insurance programs except UI, does 

the responsible entity illustrate the sensitivity of the 

projections of cash flows and actuarial present 

values to changes in the most significant individual 

assumptions? (SFFAS 17, par. 27 (4) (a)) 

 

22. At a minimum, do the Social Security and Medicare 

programs analyze assumptions regarding the 

following factors? 

a. birth and death rates 

b. net immigration 

c. real wage differential 

d. real interest rate (SFFAS 17, par. 27 (4) (a))

 

 

157For periods beginning after September 30, 2004 this information shall be presented as a basic financial statement rather than 

as a component of RSSI (SFFAS 25, par. 6 & 7) 

158ibid. 159ibid. 
Reporting 1050 – Checklist for Federal Accounting, Reporting, and Disclosures 

Section XI 

Social Insurance 

July 2004 GAO/PCIE Financial Audit Manual – Part II Page 1050-224 

Social Insurance Programs (1 – 24)

Yes, 

No 

or 

N/A

Explanation 

23. Does the sensitivity analysis for UI programs show 

the effects of increasing the unemployment rate as 

follows? 

a. by approximately one percentage point 

b. to a level sufficient to put stress on the system 

(e.g., to simulate the largest recession occurring 

within the last 25 years) 

(SFFAS 17, par. 27 (4) (b); OMB Bulletin 01-09, 

p. 104, section 10.4B)

 

24. Does information on the UI program provide a stateby-state analysis illustrating the relative solvency of 

individual state programs, including the ratio of 

each state’s current accumulated fund balance to a 

year’s projected benefit payments based on the 

highest level of annual benefit payments 

experienced by that state over the last 20 years? 

(SFFAS 17, par. 27 (5); OMB Bulletin 01-09, p.104, 

section 10.4B)