Dod Financial Management Regulation Volume 1, Chapter 7

DoD Financial Management Regulation Volume 1, Chapter 7

CHAPTER 7

DEPARTMENT OF DEFENSE STANDARD GENERAL LEDGER

0701 PURPOSE. This chapter prescribes the maintained. Specific internal control standards Department of Defense (DoD) Uniform Chart of to achieve these objectives are: Accounts that is required for use in the accounting systems of the Department. A. Documentation. Internal control systems and all transactions and significant events 0702 GENERAL. are to be documented clearly and the documentation is to be available for examination. A. The DoD Uniform Chart of Accounts provides the basic structure of the DoD Standard B. Recording of Transactions and Events. General Ledger. The DoD Standard General Transactions and significant events are to be Ledger is based upon the U.S. Government recorded promptly and classified properly. Standard General Ledger. The DoD Standard General Ledger incorporates proprietary and C. Execution of Transactions and Events. budgetary accounts. Both the proprietary and Transactions and significant events are to be budgetary accounts are self-balancing within authorized and executed only by persons acting themselves. The budgetary accounts are further within the scope of their authority. divided into accounts applicable to three organi- zational levels within the DoD. The three levels D. Separation of Duties. Key duties and are (1) Departmental level, (2) Intermediate responsibil- ities in authorizing, processing, Command level and (3) Installation level. Bud- recording, and reviewing transactions should be getary accounts applicable to each of the three separated among individuals. levels must be self-balancing within that level. Since installation level budgetary accounts are E. Supervision. Qualified and continuous used to record budget execution transactions, supervision is to be provided to ensure that they are not limited for use at an installation and internal control objectives are achieved. may be used at any, or all, DoD organiza- tional levels. G. Access to and Accountability for Re- sources. Access to resources and records is to be B. Summary and posting accounts have limited to authorized individuals. Accountability been provided and are so designated in the DoD for the custody and use of resources is to be Uniform Chart of Accounts and associated assigned and maintained. Periodic comparison account descriptions. A summary account is an shall be made of the resources with the recorded account that has been subdivided into subsidiary accountability to determine whether the two posting accounts. Accounts that are not further agree. The frequency of the comparison shall be subdivided are posting accounts. Postings a function of the vulnerability of the asset. should not be made to summary accounts. 0704 APPLICABILITY AND SCOPE. 0703 INTERNAL CONTROL STANDARDS. The objectives of internal controls are to reason- A. The DoD Uniform Chart of Accounts is ably assure that (1) obligations and costs comply applicable to all DoD accounting systems for all with applicable law; (2) assets are safeguarded appropriations and funds. against waste, loss, unauthorized use, and mis- appropriation; (3) revenues and expenditures B. A four digit account numbering system are recorded and accounted for properly so that has been provided. In some instances, the accounts and reliable financial reports may be numbering system has been expanded to accom- prepared and accountability of assets may be modate specific DoD needs. The DoD Compo-

87 Volume 1, Chapter 7 DoD Financial Management Regulation nents may expand this numbering system to as D. The DoD Standard General Ledger many alpha/numeric characters as are needed to account structure shall be used to record all of accommodate specific DoD Component subsid- the series of events that occur from the time an iary accounts, provided such expansions contin- appropriation is received until the resources ue to roll up to the basic account structure acquired are used or disposed. A self-balancing provided. The basic structure of the DoD Uni- set of budgetary accounts covers the appropria- form Chart of Accounts consists of: tion, apportionment, allocation, commitment, obligation and expenditure process. Propri- Proprietary Accounts etary asset and liability accounts cover the receipt of funds in the Treasury, the proper 1000 Assets classification of assets (such as receivables, 2000 Liabilities prepayment, inventory and fixed assets), and the 3000 Equity of the U.S. Government recognition and proper classification of liabilities. 5000 Revenue Revenue and expense accounts measure the 6000 Expense realization of revenues from the sale of goods 7000 Gains/Losses/Extraordinary and services, and the recognition of costs Items, etc. through the use and consumption of assets. The financial control provided through accounting Budgetary Accounts records for property provides managers with a tool that will help to discharge effectively their 4000 Budgetary stewardship function for those resources.

0705 BASIC CONCEPT. E. The DoD Standard General Ledger account structure also facilitates the accumula- A. All resources acquired and used, and tion and recording of expenses by major areas of claims against those resources, are to be recorded responsibility or activity. By having a single on the basis of financial transactions (that is, general ledger, expenses incurred by a DoD recordation of amounts in general ledger ac- entity for any given activity for which it is counts shall be transaction driven). responsible, and the associated revenues, if any, can be ascertained by managers with confidence B. The DoD Standard General Ledger shall that the accounting is complete and controlled. be used regardless of the sources of funds. This will be possible regardless of the appropria- However, fund identification of financial resourc- tion or fund that originally financed the cost and es shall be maintained in order to (1) disclose without the need for memorandum accounting compliance with financial authorizations and (2) records. Consistency in the accounting treatment prepare reports on the status of appropriations of similar transactions, through the use of a and funds for the Congress, the Office of Man- uniform structure, creates reliable cost data for agement and Budget, and the Treasury Depart- planning, budgeting and other management ment. purposes.

C. The DoD Standard General Ledger 0706 OBJECTIVES. account structure is intended as the minimum structure required to assure consistent treatment The objectives of the DoD Standard General of similar transactions. Additional subsidiary Ledger are to: accounts may be established as needed to meet specific management requirements. However, A. Establish an account structure for the the prescribed accounts shall be used as general integration of appropriation or fund accounting, ledger control accounts. Structures that are property accounting, revenue accounting and "similar," whether more or less detailed, are not expense accounting. authorized for use. Not all accounts are needed by all accounting entities. B. Provide managers with the visibility over accurate and complete financial data, in-

88 DoD Financial Management Regulation Volume 1, Chapter 7 cluding total operating expenses and total acqui- A. An entry to record budget authority sition cost of real and personal property. (vice budgetary resources) in budgetary accounts requires a corresponding entry to record funds C. Achieve a uniform treatment of similar with Treasury in proprietary accounts. transactions by all DoD Components at all levels. B. An entry to record accrued expenditures D. Establish accounting control over all unpaid in budgetary accounts requires a corre- resources from receipt to consumption or dispos- sponding entry to record accounts payable in al. proprietary accounts.

E. Provide the capability of producing C. An entry to record accrued expenditures significant expense and cost information concern- paid in budgetary accounts requires a corre- ing programs, projects and other activities in sponding entry to record funds disbursed in accordance with internal management needs. proprietary accounts.

F. Provide appropriation and fund data D. An entry to record reimbursements needed to meet reporting requirements of the earned but unpaid in budgetary accounts re- central fiscal agencies and the Chief Financial quires a corresponding entry to record accounts Officers Act of 1990, as well as to provide such receivable in proprietary accounts. other financial data as may be needed for internal and external reporting requirements. E. An entry to record reimbursements earned and paid in budgetary accounts requires G. Facilitate the development of future a corresponding entry to record funds collected accounting improvements. in proprietary accounts.

H. Assure compliance with the Office of F. An entry to record refunds due-accrued Management and Budget pronouncements expenditures in budgetary accounts requires a including those developed by the Federal Ac- corresponding entry to record refunds receivable counting Standards Advisory Board; DoD ac- in proprietary accounts. counting policies and standards set forth in this Regulation; and other applicable regulations 0708 DoD UNIFORM CHART OF ACCOUNTS. promulgated by the central fiscal agencies. A listing of the approved DoD Uniform Chart of Accounts for use within the Department is at 0707 BUDGETARY AND PROPRIETARY AC- Addendum 1. A description of the accounts is at COUNTING RELATIONSHIPS. Addendum 2. Accounts that are underlined in Addendum 1 are summary level accounts. Figure 7-1 illustrates the following budgetary and proprietary accounting relationships.

89 Volume 1, Chapter 7 DoD Financial Management Regulation

FIGURE 7-1