NOTES TO PRINCIPAL STATEMENTS Note 1. Summary of Significant Accounting Policies Reporting Entity The accompanying principal statements present the financial position, cost of operations, significant cash flows, and budget and actual expenses of the United States General Accounting Office (GAO), an agency of the legislative branch of the federal government. The financial activity presented relates primarily to the execution of GAO's congressionally approved budget. GAO's budget consists of an appropriation covering salaries and expenses and a building expenditure fund. The principal statements do not include the effects of centrally administered assets and liabilities related to the federal government as a whole, such as borrowing, which may in part be attributable to GAO. Basis of Accounting Under the authority of the Chief Financial Officers (CFO) Act of 1990, GAO participated with the Office of Management and Budget (OMB) and the Department of the Treasury in the establishment of the Federal Accounting Standards Advisory Board (FASAB). FASAB's purpose is to consider and recommend accounting principles, standards, and requirements to GAO, Treasury, and OMB. The Comptroller General, the Secretary of the Treasury, and the Director of OMB (the three principals of FASAB) decide upon new principles, standards, and requirements after considering FASAB's recommendations. The resulting standards are issued by GAO and OMB. Pending issuance of a sufficiently comprehensive set of accounting standards, and in accordance with interim guidance agreed to by the three principals, GAO prepared its principal statements based upon the following hierarchy of accounting principles and standards: the accounting principles, standards, and requirements approved by the three principals; form and content requirements for financial statements included in OMB Bulletin No. 94-01 (Form and Content of Agency Financial Statements); and the accounting principles and standards included in title 2 of GAO's Policy and Procedures Manual for Guidance of Federal Agencies. These principles differ from budgetary reporting principles. The differences relate principally to the capitalization and depreciation of property and equipment, and the recognition of other long-term assets and liabilities in the accompanying principal statements. Also, for purposes of the principal statements, budgetary appropriations are realized as a financing source as accrued expenses are recognized. Basis of Presentation GAO's 1994 principal statements have been prepared in accordance with the requirements of the CFO Act of 1990 and OMB Bulletin No. 94-01. Form and content changes in the principal statements include the following: Statements of Financial Position - Assets are classified as entity and nonentity based upon whether or not GAO has the authority to use the assets in its operations, and liabilities are classified based upon whether or not budget authority or other resources are available to cover the liabilities. Statements of Cash Flows - The Statements of Cash Flows are supplemented by a reconciliation of expenses to be funded by future appropriations to net cash used for operating activities. The difference between property and equipment purchases on the accrual basis and on the cash basis is shown on the reconciliation as a property and equipment accrual adjustment. Funds With the U.S. Treasury GAO's receipts and disbursements are processed by the U.S. Treasury. Funds with the U.S. Treasury represent appropriated funds available to pay current liabilities and to finance authorized purchase commitments. Accounts Receivable GAO's accounts receivable are due principally from federal government corporations and other federal agencies for audit and other reimbursable services. Accounts receivable which are not intended to be used in meeting GAO's operational needs, and which GAO is required by law to transfer to the Treasury, are classified as non-entity assets. Property and Equipment GAO's headquarters building in Washington, D.C., was capitalized at its depreciated value at the time of transfer from the General Services Administration on October 28, 1988. It is depreciated on a straight-line basis over 25 years. Other property and equipment costing more than $5,000 are capitalized at cost and depreciated. Bulk purchases of lesser-value items that aggregate more than $100,000 are also capitalized at cost. Depreciation is calculated on a straightline basis over the estimated useful life of the property, ranging from 2 to 20 years. Annual, Sick, and Other Leave Annual leave is accrued as it is earned, and the accrual is reduced as leave is taken. The accrued leave liability is principally long-term in nature. Sick leave and other types of leave are expensed as leave is taken. Contingencies GAO has certain claims and lawsuits pending against it. Where claims are expected to result in payments, and the payment amounts can be reasonably estimated, appropriate provision has been included in the accompanying principal statements. In the opinion of management and legal counsel, the resolution of other claims and lawsuits will not materially affect the financial position or operations of GAO. GAO's operations do not require permanent capital and are not expected to generate an operating surplus or deficit. The composition of GAO's net position is as follows: The increase in capitalized assets from fiscal year 1993 to 1994 of $13,275,000 resulted primarily from purchases of computers, other equipment, and building improvements less depreciation. Unliquidated obligations represent purchase commitments. The increase in unobligated appropriations from fiscal year 1993 to 1994 |