Understanding the AFR and its components

The Chief Financial Officers Act of 1990 requires GSA to prepare an annual report containing audited financial statements and a performance summary. OMB provides detailed guidance regarding the contents and formats to be used for these annual reports. Following that guidance, we prepare this AFR and a separate annual performance report.

Agency financial reports can be daunting to read and understand. You can get a big picture understanding of our agency by reviewing the following parts of the AFR:

• The management’s discussion and analysis section is where GSA’s leadership provides general background information about the agency including the organizational structure, the mission, and the financial and performance results of our major programs and identifies factors that may affect the agency’s operations. As discussed in the auditors’ report (which is found in the financial section), it is important to note that this section of the AFR is not audited by the independent auditor to reach any opinion on its accuracy or completeness.
• The financial section includes the independent auditors’ report, the financial statements, and the notes to the financial statements, and lays out the agency’s financial performance for the year.
  • The independent auditors’ report provides the context behind the audit testing performed and the results of that testing, including whether the auditor found the financial statements to be presented fairly, in all material respects, in accordance with generally accepted accounting principles for federal reporting.
  • The financial statements provide GSA’s financial results, including the balance sheets, the statements of net cost, the statements of changes in net position, and the statements of budgetary resources.
  • The financial statements are presented in two slightly different formats. The first section is called the consolidated financial statements, which displays the summarized GSA totals for the current fiscal year with the prior fiscal year, for comparison. After the notes to the financial statements (see below), you’ll find the same financial statements in an expanded view called the consolidating financial statements. These statements display balances for the major GSA components, specify the amounts eliminated for activities between GSA components, and add up to the agency’s totals. The consolidating statements support OMB Circular A-136 requirements for the AFR to provide financial information associated with major programs. We define the Public Buildings Service and the Federal Acquisition Service as our major programs. The independent auditor audits the PBS Federal Buildings Fund and the FAS Acquisition Services Fund and provides separate audit opinions on the financial presentation of those funds, in addition to auditing the agency as a whole (i.e., the consolidated financial statements).
  • The notes to the financial statements provide additional details and context concerning the balances reported in the financial statements.
• The other information section is where you can find other relevant information about the agency, including the agency’s compliance with laws and regulations. This section of the AFR is also not audited by the independent auditors.

Footnotes are important because they further explain certain financial statement line items, including information about the methodologies used for calculations, valuation, time period, and other data that help you gain a better understanding of the agency.

With the unique missions and purposes of federal agencies, financial reporting focuses on elements such as stewardship over assets, responsibilities for various liabilities, the cost of program activities, and the budgetary control process. Because of these unique operations, there is also a distinct set of accounting standards applicable to federal government reporting.

One difference between commercial companies and federal agencies is that the federal agencies do not exist to generate profit. In fact, unlike GSA, most federal activities do not generate revenues to fund program operations and, instead, depend upon authorization and appropriation acts to provide the financial resources to operate.

According to the Government Accountability Office, the objectives of federal financial reports are for agencies to demonstrate their accountability, provide useful information, and help internal users of financial information improve the government’s management. You should bear in mind that our goal is to demonstrate good financial stewardship over the assets entrusted to us, whereas readers of private industry financial statements may have an interest in investing in a company and want assurances that the information provided is timely, accurate, and can be relied upon to assess their investment value.

Yes, we follow the requirements of the U.S. GAAP for federal financial reporting. The Federal Accounting Standards Advisory Board is designated by the American Institute of Certified Public Accountants as the source of GAAP for federal reporting entities, and issues the accounting standards and principles for the U.S. government.

The balance sheet shows the agency’s assets and liabilities at a fixed point in time. Most of the terms on the balance sheet are familiar to users of financial statements (for example, assets, such as accounts receivable, property, and equipment; and liabilities, such as accounts payable and actuarial liability). On a federal balance sheet, there are a number of unique terms, like “Fund Balance with Treasury” and “Intragovernmental Liabilities.” The Fund Balance with Treasury is akin to a bank account balance; the fund balances represent the amount of money in the agency’s accounts within the U.S. Treasury that is available to spend on projects and expenses for which Congress approved the funds. Intragovernmental liabilities result from business activities conducted between two federal government entities.

The statement of net cost shows the results of operations for our major business areas. It displays revenues earned during the fiscal year for goods and services provided to customers and subtracts expenses incurred to operate our programs to arrive at net cost. A commercial company would call this type of document an income statement. As a reflection of the fact that most federal programs generate little to no resources on their own, expenses are offset by revenues to determine the net cost for the agency.

The statement of changes in net position is similar to a statement of changes in equity for a commercial firm. The statement reflects the impact that the sources and uses of resources have on the financial position of each fund. During FY 2023, we generated resources from operations (the net revenues or costs from the statement of net cost), received appropriations, used appropriations, and transferred funds or property to (or from) the Treasury and other federal agencies.

The statement of changes in net position also reports imputed financing. Imputed financing is related to imputed costs (see below) and occurs when funding for payment of certain program costs is budgeted centrally by another agency. For example, the Federal Employees’ Compensation Program is managed by the Department of Labor, but could be used by GSA employees if they were hurt on the job. Imputed financing represents the amount of these resources other agencies provide that offsets amounts we record as imputed costs during the fiscal year.

Cumulative results of operations are a component of net position on balance sheets, and they represent the historical total for a fund summing revenues, expenses, gains, losses, transfers of assets and liabilities from other agencies, and other financing sources provided to a fund since its inception. It is similar in concept to retained earnings for a commercial firm.

Consistent with accounting standards, we record imputed costs for expenses we incur where funding will be provided by other federal entities.

The statement of budgetary resources is unique to the federal government and it displays the key components of the budgetary control process. The statement shows the various sources of budgetary authority and resources provided to fund agency activities; how much of the total resources were used during the year; and how much was left unspent at the end of the year. Private industry has no similar statement or set of requirements to establish and control budgets in this manner, but there are similarities with budgeting concepts used and reported by U.S. state and local governments.

Appropriation means a provision of law (not necessarily in an appropriations act) authorizing the expenditure of funds for a given purpose. This term is often used to describe the amount of money received or approved for the stated purposes. For a more detailed explanation of appropriations and the federal budget process, you can read OMB’s guidance document, Circular A-11 [PDF].

In federal budgeting and financial management, an obligation means a binding agreement that will result in outlays, immediately or in the future. For example, an agency incurs an obligation when it places an order, signs a contract, purchases a service, or takes other actions that require the government to make payments to the public or from one government account to another.

In the federal government, outlays primarily represent payments made to liquidate obligations of an agency and are referred to as gross outlays. On the statement of budgetary resources, gross outlays are generally equal to cash disbursements. On the statement of budgetary resources, net outlays are the sum of gross outlays minus cash collections received where we’re reimbursed for goods and services we provide. Net outlays may reflect negative amounts when collections exceed disbursements in a fiscal year. This result is not unusual in revolving funds like the Federal Buildings Fund and Acquisition Services Fund. Outlays are a primary measure of government spending.

The unobligated balance is the portion of total budget authority provided as financial resources, where no actions have been taken to spend or obligate funding to pay for goods or services, nor bind the government to pay liabilities.