22.3 The Statement of Changes in Net Position (SCNP)

3. The Statement of Changes in Net Position (SCNP)

The Statement of Changes in Net Position reconciles the beginning and ending balances of the two equity accounts on the Balance Sheet:

• Column 1: Unexpended Appropriations: Shows beginning balance, appropriations received, appropriations transferred, appropriations cancelled/rescinded, minus Appropriations Used. When an agency incurs an expense funded by appropriations, Unexpended Appropriations is debited (reduced) and Appropriations Used is credited to CRO.
• Column 2: Cumulative Results of Operations (CRO): Shows beginning balance, Appropriations Used (+), Non-Exchange Revenues (+), Imputed Financing Sources (+), Transfers In/Out (+/-), minus the Net Cost of Operations from the Statement of Net Cost. The resulting ending balance rolls forward directly into the Balance Sheet.

4. The Statement of Budgetary Resources (SBR)

Core CGFM Exam Rule: The Statement of Budgetary Resources (SBR) is the ONLY basic federal financial statement that is derived exclusively from budgetary accounts (USSGL 4000 series). All other statements are derived from proprietary accrual accounts.

The SBR demonstrates statutory compliance with the Antideficiency Act and OMB apportionments. It is organized into three balanced sections:

1. Budgetary Resources: Beginning unobligated balances brought forward, appropriations received, borrowing authority, contract authority, spending authority from offsetting collections, and recoveries of prior-year unpaid obligations.
2. Status of Budgetary Resources: Demonstrates how resources were utilized: New obligations and upward adjustments incurred, plus year-end Unobligated Balances (separated into Apportioned, Exempt from Apportionment, and Unapportioned). $\textbf{Total Budgetary Resources} \equiv \textbf{Total Status of Budgetary Resources}$
3. Outlays: Reports Net Agency Outlays, calculated as Gross Outlays minus Actual Offsetting Collections.

5. The Statement of Custodial Activity

Required for agencies whose primary mission includes collecting revenues for the federal government as a whole rather than for their own operational use. Major reporting agencies include the Internal Revenue Service (IRS), U.S. Customs and Border Protection (CBP), and the Department of the Interior (Office of Natural Resources Revenue).

• It reports custodial collections of non-exchange revenue (income taxes, excise taxes, customs duties, mineral leasing royalties).
• It reports the disposition of these collections: cash transferred directly to the Treasury General Fund or to specific recipient trust funds (e.g., Highway Trust Fund, Social Security Trust Fund).
• Because the collecting agency cannot spend these revenues on its own programs, custodial revenues do not appear on the collecting agency's Statement of Net Cost.

6. The Statement of Social Insurance (SOSI - SFFAS 17 & 26)

Mandated by SFFAS No. 17 and SFFAS No. 26, the Statement of Social Insurance reports the long-term actuarial health of the nation's social insurance programs: Social Security (OASDI), Medicare (Hospital Insurance Part A, Supplementary Medical Insurance Parts B & D), Railroad Retirement, and Black Lung.

• 75-Year Valuation Horizon: Actuaries calculate the present value of all estimated future benefit payments to current and future program participants over a 75-year projection horizon.
• Net Social Insurance Shortfall: The statement subtracts the present value of all estimated future tax contributions and dedicated revenues from the projected benefit outlays.
• The resulting net present value represents the long-term actuarial deficit (or surplus) of the social insurance system under current law. This figure is not recorded as a balance sheet liability, but SOSI is an audited basic financial statement of paramount significance to policymakers.

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Summary Comparison of the Six Basic Statements

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The Financial Report of the U.S. Government

Each fiscal year, the Department of the Treasury's Bureau of the Fiscal Service, in coordination with the Office of Management and Budget (OMB), prepares the consolidated Financial Report of the United States Government. This report consolidates the financial operations of the entire executive branch, along with the judicial and legislative branches.

The Governmentwide Treasury Account Symbol Adjusted Trial Balance System (GTAS)

To execute this massive consolidation, federal agencies do not transmit paper statements. Instead, they utilize GTAS, an electronic data submission system managed by Treasury:

• Agencies submit monthly and year-end Adjusted Trial Balances (ATBs) formatted strictly under the United States Standard General Ledger (USSGL).
• GTAS performs hundreds of automated computer validation edits, verifying that budgetary accounts balance internally, proprietary accounts balance internally, and that budgetary and proprietary tracks agree.

Intragovernmental Eliminations

A primary technical challenge in compiling the consolidated report is eliminating intragovernmental transactions (IGTs). Federal agencies buy and sell billions of dollars in services from each other (e.g., GSA leasing office space to the FBI; DoD purchasing fuel from the Defense Logistics Agency; OPM collecting health premiums from HUD). In consolidation:

• Intragovernmental receivables must be matched and eliminated against corresponding intragovernmental payables.
• Intragovernmental sales revenues must be matched and eliminated against intragovernmental purchasing expenses.
• Un-reconciled differences between trading partners represent a primary source of government-wide compilation error.

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The GAO Audit and the Comptroller General's Opinion

Under the Government Management Reform Act of 1994 (GMRA), the Comptroller General of the United States (head of the Government Accountability Office - GAO) is statutory independent auditor of the consolidated financial statements of the U.S. Government.

+-----------------------------------------------------------------------------------+
|              GAO'S THREE PERSISTENT GOVERNMENT-WIDE MATERIAL WEAKNESSES           |
+-----------------------------------------------------------------------------------+
|  1. DEFENSE FINANCIAL MANAGEMENT DEFICIENCIES                                     |
|     • The Department of Defense (DoD) represents the largest share of federal     |
|       assets and budgetary resources, yet continues to receive a disclaimer of     |
|       audit opinion due to non-compliant legacy systems, un-reconciled inventory, |
|       unverified property, and inadequate internal controls.                      |
+-----------------------------------------------------------------------------------+
|  2. INTRAGOVERNMENTAL TRANSACTIONS (IGT) RECONCILIATIONS                          |
|     • Federal agencies fail to adequately reconcile and resolve billions in       |
|       intragovernmental buy/sell transactions with their federal trading partners, |
|       resulting in massive unexplained balance sheet and operating discrepancies. |
+-----------------------------------------------------------------------------------+
|  3. CONSOLIDATION AND COMPILATION DEFICIENCIES AT TREASURY & OMB                 |
|     • Limitations in Treasury's central systems and automated tools to directly   |
|       link audited agency financial statements to the consolidated statements     |
|       without manual adjustments and unresolved reconciliation plugs.             |
+-----------------------------------------------------------------------------------+
|  AUDIT VERDICT: Annual DISCLAIMER OF OPINION on the Consolidated Statements       |
+-----------------------------------------------------------------------------------+

The Historical Audit Verdict: Disclaimer of Opinion

While most individual civilian agencies (such as NASA, Social Security Administration, and the Department of Energy) routinely earn unmodified (clean) audit opinions on their individual agency financial statements, the Comptroller General has consistently issued a Disclaimer of Opinion on the consolidated financial statements of the U.S. Government every year since GMRA audit requirements took effect.

A disclaimer of opinion indicates that the auditor was unable to obtain sufficient, appropriate audit evidence to form an opinion on whether the financial statements are presented fairly. As detailed above, the three persistent material weaknesses—DoD auditability, intragovernmental elimination failures, and compilation processes—prevent the GAO from verifying the integrity of the federal government's consolidated accounts.