21.2 Non-FBWT Budgetary Authority (Offsets)

4. Non-FBWT Budgetary Authority (Offsets)

Certain forms of budgetary authority allow an agency to incur legal obligations before actual cash is credited to FBWT. In the Status schedule, these accounts are deducted as offsets so that the sum of budgetary statuses matches the actual asset balance in Account 1010:

• Borrowing Authority Realized but Unexercised: The statutory right to borrow from Treasury or the Federal Financing Bank; obligations may be incurred against this authority before the loan proceeds are drawn down into FBWT.
• Contract Authority: Statutory authority to award contracts in advance of an appropriation; FBWT cash is only provided when Congress subsequently passes an appropriation to liquidate contract authority.
• Unfilled Customer Orders without Advance: Reimbursable orders from other federal agencies where the ordering agency has not provided cash in advance; the performing agency incurs obligations against the order, but FBWT is not credited until performance occurs and Treasury settles the interagency bill.

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Mandatory FBWT Reconciliation Requirements

Because FBWT is the linchpin of federal accountability, agencies are subject to strict, continuous reconciliation protocols under Treasury Financial Manual (TFM) Volume I, Part 2, Chapter 5100. Discrepancies between agency accounting ledgers and Treasury records can obscure Antideficiency Act violations, enable fraud, or trigger audit disclaimers.

+-----------------------------------------------------------------------------------+
|                      THE FBWT THREE-WAY RECONCILIATION TRIANGLE                   |
+-----------------------------------------------------------------------------------+
|                               Agency General Ledger                               |
|                               (USSGL Account 1010)                                |
|                                     /       \                                     |
|                                    /         \                                    |
|                                   /           \                                   |
|      Monthly Reconciliation      /             \   Monthly Statement of           |
|      via CARS Account Statement /               \  Transactions (SF 224 /         |
|                                /                 \ SF 1219 / SF 1221)             |
|                               /                   \                               |
|                              v                     v                              |
|                     Treasury CARS             Treasury Fiscal                     |
|                   Account Statement  <----->  Service Reporting                   |
|                    (Agency Level)             (Government-Wide)                   |
+-----------------------------------------------------------------------------------+

Core Reporting Systems and Forms

1. Central Accounting Reporting System (CARS): Operated by the Treasury Bureau of the Fiscal Service, CARS is the central accounting hub for the federal government. CARS generates daily and monthly CARS Account Statements (formerly known as the SF 6653 / Undisbursed Appropriation Account Ledger) showing all warrant issuances, non-expenditure transfers, deposits, and disbursements processed by Treasury for each TAS.
2. Statement of Transactions (SF 224): Non-delegated disbursing agencies (agencies that rely on Treasury Regional Disbursing Offices to make payments) submit a monthly SF 224 reporting all collections, disbursements, and inter-entity payments processed during the month. Treasury compares the agency's SF 224 with actual payments executed by the disbursing system.
3. Statement of Accountability (SF 1219) & Statement of Transactions (SF 1221): Utilized by agencies with statutory delegated disbursing authority (such as the Department of Defense, State Department, and U.S. Coast Guard). The Disbursing Officer submits SF 1219 to account for monthly cash balances, vouchers paid, and deposits credited.
4. G-Invoicing (Government Invoicing): Mandated by Treasury for all federal agencies to manage intragovernmental Buy/Sell transactions. G-Invoicing enforces standardized General Terms & Conditions (GT&C), orders, and performance data, eliminating transaction disputes and ensuring buyer and seller agencies record identical FBWT movements and intragovernmental eliminations.

Root Causes of Reconciliation Discrepancies

• Timing Differences: In-transit deposits credited by Treasury after month-end, or checks issued by the agency that have not yet cleared the banking system.
• Classification Discrepancies: Disbursements charged by Treasury to an incorrect TAS or agency location code (ALC).
• Undistributed Intergovernmental Payments: Intragovernmental payments initiated through the Intra-Governmental Payment and Collection (IPAC) system that the receiving agency has not yet matched to an internal purchase order, leaving the balance in a suspense account (USSGL 1010 / 1420).

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Accounting for Property, Plant, and Equipment (PP&E)

Under FASAB standards, federal property is categorized into two distinct classes based on its operational purpose and historical nature: General PP&E and Stewardship PP&E.

1. General PP&E (SFFAS 6)

General Property, Plant, and Equipment is capital property utilized to provide general government services or goods. Under SFFAS No. 6, Accounting for Property, Plant, and Equipment, an asset is capitalized on the Balance Sheet if it satisfies three criteria:

1. It has an estimated useful life of two or more years;
2. It is not intended for sale in the ordinary course of operations; and
3. Its acquisition cost meets or exceeds the agency's established capitalization threshold (established by agency policy, subject to OMB and auditor review, typically ranging from $25,000 to $250,000).

Capitalized Acquisition Costs

Acquisition cost includes all reasonable and necessary costs incurred to bring the asset to its intended operating condition and location: invoice purchase price, transportation charges, installation, site preparation, engineering designs, and environmental testing. General PP&E is depreciated systematically over its useful life using the straight-line depreciation method. Land is capitalized at historical cost but is never depreciated.

Construction in Progress (CIP)

Costs incurred for capital construction or major software development projects are accumulated in Construction in Progress (USSGL Account 1720). While in CIP, the asset is not depreciated. Once the asset is completed, inspected, and placed into operational service, it is transferred from Account 1720 to the appropriate General PP&E asset account (e.g., Buildings, Equipment), and depreciation commences.

2. Internal Use Software (SFFAS 10)

Under SFFAS No. 10, Accounting for Internal Use Software, software developed internally, purchased commercially off-the-shelf (COTS), or contractor-developed specifically for federal agency operations must be accounted for across three distinct development phases:

• Preliminary Design Phase: Involves evaluating conceptual alternatives, assessing technical feasibility, and reviewing vendor proposals. All costs incurred during this phase are expensed immediately as operational research costs.
• Development Phase: Involves design of the chosen alternative, coding, installation of hardware, and testing. All costs incurred during this phase (direct labor, contractor fees, software licenses) are capitalized as software in development once management authorizes funding and it is probable the project will be completed.
• Post-Implementation / Operational Phase: Involves end-user training, data conversion, bug fixes, and ongoing maintenance. All operational phase costs are expensed immediately. Minor enhancements that do not extend functionality or useful life are expensed as maintenance.

Internal use software is amortized systematically over its estimated useful life (typically 3 to 10 years) using straight-line amortization.