1. Determine Different Accounting Methods Used by Different Fund Types
Principles of Cost Analysis and Management

2. Food for Thought
Q1. Does the way governmental activities are funded have an impact on how governmental activities are managed? Q2. How? Why or why not?

3. Terminal Learning Objective
Action: Determine Different Accounting Methods Used by Different Fund Types
Condition: FM Leaders in a classroom environment working individually and as a member of a small group, using doctrinal and administrative publications, self-study exercises, personal experiences, practical exercises, handouts, and discussion.
Standard: With at least 80% accuracy (70% for international learners):
Identify different types of funds
Classify funds by funding mechanism
Classify funds by purpose
Read and Review a Case Study

4. Review: Fund Accounting
Tracks flow of resources through funds
Characteristics of funds:
Separate accounting entity within a larger government entity
Self-balancing set of accounts
Produces its own financial statements

5. Types of Funds General Fund Special Funds Trust Funds Revolving Funds
Agency Funds
Management or Working Funds

6. The General Fund Revenue from general sources
Expended for general purposes
A government entity must have ONE general fund
The General Fund of the United States has many subsidiary appropriation funds
Each appropriation fund has budgetary accounts and proprietary accounts

7. Special Funds and Trust Funds
Account for resources designated for specific programs or activities
Typically financed by dedicated fees
Track expenditures for these specific purposes
Ex. National Wildlife Refuge Fund
May be legally designated as trust funds
Ex. Social Security’s Old Age and Survivors Insurance Fund

8. LSA #1 Check on Learning
Q1. Name the threes characteristics of funds? Q2. Which fund type accounts for resources designated for specific programs or activities?
A1.
Q1. Name the threes characteristics of funds?
A1.
1. Separate Accounting Entity within a larger government entity.
2. Self-balancing set of accounts
3. Produces its own financial statements.
Q2. Which fund type accounts for resources designated for specific programs or activities?
A2. Special Fund (or Trust fund, if legally designated as such.)
A2.

9. Appropriated Fund Reporting
The General Fund, special funds, and trust funds are financed by appropriations.
Budgetary resources are reported according to budgetary basis
Proprietary accounts are reported according to accrual basis

10. Non-Appropriated Funds
Receive no appropriated funding
Do not maintain budgetary accounts
Do not use the obligation process
Report according to the accrual basis

11. LSA #2 Check on Learning
Q1. Which funding mechanism requires both the budgetary and the proprietary accounts? Q2. Which funding mechanism does not require the obligation process?
A1.
Q1. Which funding mechanism requires both the budgetary and the proprietary accounts?
A1. Appropriated Funding
Q2. Which funding mechanism does not require the obligation process?
A2. Non-appropriated funding
A2.

12. Revolving Funds
Generate revenues by providing services to general public or to other government entities
Must set user fees to cover costs of providing services
Resources carry over or “revolve” from one period to the next (do not expire)
Ex. U.S. Postal Service

13. Deposit Funds Account for resources that belong to other entities
Other government agencies
Other funds within the same agency
Non-federal entities
For every asset held there is an equal liability
Ex. State income taxes withheld from federal employees’ payroll

14. Management or Working Funds
Provide goods and services to appropriated funded programs and departments
May pool appropriations from multiple reporting entities to accomplish a common purpose
Ex. Bureau of Land Management Working Capital Fund

15. LSA #3 Check on Learning
Q1. Which type of fund has an equal liability for every asset it holds?
Q2. Which type of fund provides goods and services to the general public or other governmental entities?
A1. Deposit fund
Q1. Which type of fund has an equal liability for every asset it holds?
A1. Deposit fund
Q2. Which type of fund provides goods and services to the general public or other governmental entities?
A2. Revolving Fund
A2. Revolving Fund

16. LSA #3 Summary
During this lesson, we discussed the six different types and the three characteristics of funds, and gave in-depth descriptions on each. We also classified these funds by both Mechanism and Purpose. We will now conduct a case Study based on this information.

17. BLM Working Capital Fund
Read the case study:
A Case Study in the Management and Accounting of Capital Assets:
The Bureau of Land Management’s (BLM) Working Capital Fund (WCF)

18. BLM Working Capital Fund (Cont.)
Q1. What are capital assets? Q2. Who are the customers of the Working Capital Fund? Q3. What are the revenue sources? Q4. How does this meet the definition of a working or management fund?
Q1. What are Capital Assets?
A1.
have an estimated useful life of 2 or more years,
are not intended for sale in the ordinary course of business, and
are intended to be used or available for use by the entity.
Q2. Who are the customers of the Working Capital Fund?
A2. Operating entities at BLM, the different divisions under its decentralized management structure.
Q3. What are the revenue sources?
A3. The fund uses two revenue sources: maintenance fees and fixed ownership fees. The maintenance fee covers all operating expenses for vehicles. The fixed ownership fee charges each decentralized operation's appropriated budget for a monthly amount calculated to accumulate the cash funds needed for equipment replacement at the end of the asset's useful life. Fees are kept in reserve for vehicle replacement.
Q4. How does this meet the definition of a Working or Management fund?
A4. Provide goods and services to appropriated funded programs and departments; Pools appropriations from multiple reporting entities to provide these services.

19. BLM Working Capital Fund (Cont.)
What services are provided?
How are appropriations “pooled”?
How did using the Working Capital Fund impact the customers of the fund?
Understanding true cost of operations
Dealing with political environment
Choosing assets appropriate to operational needs
Managing and maintaining assets
Q1. What services are provided?
A2. The services provided are: A) maintenance, and B) accumulation of funds for replacement.
Q2. How are appropriations “pooled”?
A2. In two ways: The various departmental appropriations are pooled so that the cost of ownership of a particular type of asset is an average cost for the BLM as a whole. Also, with the cost of ownership fee, the organization is essentially pooling the appropriations for multiple periods to provide for replacement of the asset at the end of its useful life.
Q3. How did using the Working Capital Fund impact the customers of the fund?
Understanding true cost of operations
Dealing with political environment
Choosing assets appropriate to operational needs
Managing and maintaining assets

20. BLM Working Capital Fund (Cont.)
Under the accrual basis, capital assets are a cost of doing business in the periods the assets are used.
The consumption of the useful life of a capital asset is called depreciation.
Under the budgetary basis, the cost of a capital asset is an expenditure in the period it is purchased.

21. Working Capital Fund Example: Accrual Basis
Performance reflects costs that are not cash flows of the period.
A $100K truck depreciated straight line over 5 years puts $20K cost into each year.
Book value of the asset is reduced annually until zero value.

22. Working Capital Fund Example: Budgetary Basis
Budgets recognizes 100% of asset in year of acquisition
A $100K truck depreciated
Is recognized as a $100K expenditure when bought
Subsequent years see no effect

23. Working Capital Fund Example: Problems of Government
Annual performance is distorted
Asset acquisition becomes a big ticket item subject to political climate
Maintenance of asset sometime avoided on logic that asset has zero value

24. BLM Working Capital Fund Example: Behavior Impacts
Acquisition specifications became more conservative
As managers more clearly recognized tradeoffs with operating budgets
Maintenance was performed diligently
To stretch useful life
Since already pre-paid (via allocation)

25. BLM Working Capital Fund Example: Bottom Line
Annual performance was more clear
Capital assets needs declined

26. TLO Check on Learning
Quickly break the learners in two groups. Have each group as a group write down one question from this lesson, give about two minutes. Once the groups have their question written, pass it to another group to answer it. Facilitate a discussion on each question.

27. Lesson Summary
Determining Different Accounting Methods Used by Different Fund Types is a lesson designed to for the learners to apply the cost management processes. Cost management is an integral part of the Army‘s stewardship. Financial managers throughout all levels of FM operations – from strategic to tactical – must have a good understanding of costs and manage costs carefully, Now, you should be able to identify the different types of funds used, classify the funds by funding mechanisms and by purpose.
What are your questions?

28. Practical Exercise

29. TLO Summary
Action: Determine Different Accounting Methods Used by Different Fund Types
Condition: FM Leaders in a classroom environment working individually and as a member of a small group, using doctrinal and administrative publications, self-study exercises, personal experiences, practical exercises, handouts, and discussion.
Standard: With at least 80% accuracy (70% for international learners):
Identify different types of funds
Classify funds by funding mechanism
Classify funds by purpose
Read and Review a Case Study