The strategic and tactical activities conducted by a financial officer in the federal government are very similar to those conducted in the private sector. The purpose of this article is to illuminate some of the similarities and differences between accounting in the federal government and accounting for other organizations or firms.

Accounting at the NIH
The NIH is a $17 billion 15,000-person medical research enterprise with the primary mission of improving the health of humankind. We accomplish this mission by funding research grants and contracts to perform basic, applied, and developmental research throughout the world. In addition, we conduct basic, applied, and developmental research on a 300-acre "campus" located in Bethesda, Maryland.

Accounting at the NIH is conducted under the umbrella of Federal Accounting Standards (FAS), which represent Generally Accepted Accounting Principles (GAAP) in the federal government. In addition to these accounting standards, we have treasury responsibilities for cash receipts and disbursements that we conduct under the framework of treasury fiscal requirements promulgated by the U.S. Department of the Treasury.

For each appropriation, we must account for proprietary accounts, such as assets, liabilities, and net position (equity), and budgetary accounts, such as budgetary resources provided by type of authority, commitments and obligations against those resources, and the status of the budgetary resource by type of authority.

Fiscal Years Gone By
Adding to the complexity of federal government accounting, for each of these 30 appropriations there are actually 6 separate fiscal years for which we must account and maintain an independent, balanced general ledger. For example, during Fiscal Year (FY) 2000, we record accounting transactions for new obligations, accruals and disbursements that occur against FY 2000 obligations. In addition, we record and account for accruals and disbursements against FYs 1995, 1996, 1997, 1998 and 1999 obligations, and we must maintain the separate fiscal year distinction for all transactions. Thus, our 30 appropriations result in 180 separate self -balancing general ledgers.

We develop cost-based prices, sell goods and services to the NIH "subsidiaries" and other federal agencies, bill customers for goods and services provided, account for sales, account for cost of goods sold for our four inventories, and account for and report operating expenses similar to a for profit firm. Since we do not make a profit, we strive to establish prices that allow us to break even by year-end for each of these lines of business.

We have implemented activity based management and costing for several of these fee for service activities to help ensure that we are competitive with the private sector and that we add value to our stakeholders.

We engage in some of the same strategic planning and analytical studies used in the private sector to position ourselves in light of our stakeholders' needs, to assess the value of information technology, to develop options for financing research and administrative programs, and to streamline administrative support costs.

Finally, we prepare several financial statements, including a Balance Sheet, a Statement of Net Cost, and Statement of Changes in Financial Position, a Statement of Budgetary Resources, a Statement of Financing, and a Statement of Custodial Responsibility.

Annually, we undergo an audit by an independent firm of Certified Public Accountants. These CPAs use generally accepted auditing standards to audit our accounting transactions, our internal controls, and our compliance with laws and regulations. We receive an audit opinion on the fairness of our financial statements.

First published on July 3, 2000.