U.S. OFFICE OF GOVERNMENT ETHICS
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 2004 AND 2003

NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 A.  Reporting Entity

 The Office of Government Ethics (OGE), a small agency within the executive branch, was established by the Ethics in Government Act of 1978. In partnership with executive branch agencies and departments, OGE fosters high ethical standards for employees and strengthens the public's confidence that the Government's business is conducted with impartiality and integrity.    

B.   Basis of Presentation 

These financial statements are provided to meet the requirements of the Accountability of Tax Dollars Act of  2002. The statements consist of the Balance Sheet, Statement of Net Cost, Statement of Changes in Net Position, Statement of Budgetary Resources, and Statement of  Financing.  

These financial statements have been prepared to report the financial position and results of operations of  OGE.  These statements were prepared from the books and records of  OGE in conformity with accounting principles generally accepted in the United States, and the Office of Management and Budget (OMB) Bulletin No. 01-09, Form and Content of Agency Financial Statements.  

C.  Basis of Accounting

Transactions are recorded on an accrual accounting basis and a budgetary basis.  Under the accrual method, revenues are recognized when earned and expenses are recognized when liabilities are incurred, without regard to receipt or payment of cash.  Budgetary accounting facilitates compliance with legal constraints and controls over use of Federal funds.  

To assist OMB in recommending and publishing comprehensive accounting standards and principles for agencies of the Federal Government, the Secretary of the Treasury, the Comptroller of the United States, the Director of OMB, and the Joint Financial Management Improvement Program (JFMIP) established the Federal Accounting Standards Advisory Board (FASAB) in 1990. The American Institute of Certified Public Accountant's (AICPA) Council designated FASAB as the accounting standards authority for Federal Government entities.   

NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (CONTINUED) 

D.  Revenues & Other Financing Sources 

OGE receives all funding through Congressional appropriation from the budget of the United States. Annual appropriations are used, within statutory limits, for operating and capital expenditures for essential personal property.  Appropriations are recognized as revenues at the time the related program or administrative expenses are incurred. Appropriations expended for capitalized property and equipment are recognized as expenses when an asset is consumed in operations. 

E.  Fund Balance with Treasury 

Funds with Department of the Treasury primarily represent appropriated funds that are available to pay current liabilities and finance authorized purchase commitments.  See Note 2 for additional information. 

F.  Advances and Prepayments 

OGE records payments for goods and services not yet received as advances and reduces the advances by charges to expense as the goods and services are received. See Note 3 for additional information. 

G.  General Property, Plant, and Equipment 

Equipment or software are capitalized if the initial acquisition cost of an individual item or group of items composing a system is $50,000 or more and the useful life is 2 years or more.  Equipment or software with an initial cost less than $50,000 or useful life less than 2 years is expensed when purchased.  Capitalized equipment/software is depreciated on a straight-line basis over the useful life of the asset. Leasehold improvements are capitalized and amortized over the term of the lease. 

H. Liabilities 

Liabilities represent the amount of monies or other resources likely to be paid by OGE as a result of transactions or events that have already occurred.  No liability can be paid, however, absent an appropriation. Liabilities for which an appropriation has not been enacted are, therefore, classified as not covered by budgetary resources, and there is no certainty that the appropriation will be enacted.  Also, liabilities can be abrogated by the Government, acting in its sovereign capacity.

 NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 I.  Accounts Payable 

Accounts payable consists of amounts owed to other Federal agencies and trade accounts payable. 

J.  Annual, Sick, and Other Leave

Annual leave is accrued as it is earned, and the accrual is reduced as leave is taken. Each year, the balance in the accrued leave account is adjusted to reflect current pay rates. To the extent current or prior year appropriations are not available to fund annual leave earned but not taken, funding will be obtained from future financing sources. Sick leave and other types of nonvested leave are expensed as taken. 

K.  Retirement Plans 

OGE employees participate in the Civil Service Retirement System (CSRS) or the Federal Employees' Retirement System (FERS). FERS was established by the enactment of Public Law 99-335. Pursuant to this law, FERS and Social Security automatically cover most employees hired after December 31, 1983. Employees hired before January 1, 1984 elected to join either FERS and Social Security or remain in CSRS. 

All employees are eligible to contribute to the Thrift Savings Plan (TSP). For those employees participating in the FERS, a TSP account is automatically established and OGE makes a mandatory 1 percent contribution to this account. In addition, OGE makes matching contributions, ranging from 1 to 4 percent, for FERS eligible employees who contribute to their TSP accounts. Matching contributions are not made to the TSP accounts established by CSRS employees. 

FERS employees and certain CSRS reinstatement employees are eligible to participate in the Social Security program after retirement. In these instances, OGE remits the employer's share of the required contribution. 

OGE does not report on its financial statements information pertaining to the retirement plans covering its employees. Reporting amounts such as plan assets, accumulated plan benefits, and related unfunded liabilities, if any, is the responsibility of the Office of Personnel Management.  

NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 

L. Imputed Costs/Financing Sources Federal Government entities often receive goods and services from other Federal Government entities without reimbursing the providing entity for all the related costs. In addition, Federal Government entities also incur costs that are paid in total or in part by other entities. An imputed financing source is recognized by the receiving entity for costs that are paid by other entities. OGE recognized imputed costs and financing sources in fiscal years 2004 and 2003 to the extent directed by OMB. 

M.  Contingencies 

There are no commitments or contingencies that require disclosure.

 N.  Expired Accounts and Canceled Authority 

Unless otherwise specified by law, annual authority expires for incurring new obligations at the beginning of the subsequent fiscal year. The account into which the annual authority is placed is called the expired account. For five fiscal years, the expired account is available for expenditure to liquidate valid obligations incurred during the unexpired account period but not previously reported. At the end of the fifth expired year, the expired account is canceled.

 

NOTE 2.  FUND BALANCE WITH TREASURY

 

Appropriated Funds	FY 2004  $3,320,001	FY 2003   $3,109,763
Unobligated Balance
Available	$   277,103	$   425,363
Unavailable	1,109,052	839,891
Obligated Balance not yet Disbursed	1,933,846	1,844,509
Total	$3,320,001	$3,109,763

   

NOTE 3.  OTHER ASSETS                                                                                                                                                                                                                              

OGE has intragovernmental transactions with the Bureau of Public Debt (BPD) for accounting and management services.                                                                                                       

 

Deposit with BPD Total Intragovernmental

FY 2004  $ 7,829

FY 2003   $ 73,997

                                                                                                                      

NOTE 4.  OPERATING LEASE

 OGE occupies office space under a lease agreement that is accounted for as an operating lease. The lease term is for a period 126 months commencing on October 1, 2003 and ends January 31, 2014.

                                                

                   Schedule of Future Operating Lease Payments

 

FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 AFTER FIVE YEARS		$ 1,290,568      1,325,067      1,332,964      1,341,357      1,349,357      5,947,609
TOTAL FUTURE PAYMENTS		$12,586,922

                                   

NOTE 5.  LIABILITIES 

The accrued liabilities for OGE are comprised of program expense accruals, payroll accruals, and annual leave (funded and unfunded) earned by employees. Program expense accruals represent expenses that were incurred prior to year-end but were not paid. Similarly, payroll accruals represent payroll expenses that were incurred prior to year-end but were not paid.         

 NOTE 5.  LIABILITIES (CONTINUED) 

 

                                    Schedule of Accrued Liabilities

 

Intragovernmental	FY 2004	FY 2003
Account Payable Other Accrued Liabilities Unfunded FECA Liability Payroll Taxes & Funded Leave Total Intragovernmental   Liabilities With the Public Account Payable Other Accrued Liabilities Payroll Taxes & Funded Leave Annual Leave (Unfunded)	$          -         17,876         66,938         54,713  $   139,527     $           684       150,399                     400,647       609,124	$       11,454          25,351          84,995            31,791      $     153,591     $    165,504         92,048       171,817       571,808
Total Liabilities With the Public	$ 1,160,854	$ 1,001,177
Total Accrued Liabilities	$ 1,300,381	$ 1,154,768

 

 NOTE 6.  OPERATING/PROGRAM COSTS

              Costs by major budgetary object classification are as follows:

                                                                                      

Budgetary Object Classification	FY 2004	FY 2003
Personnel Benefits Travel Transportation Rents, Communications Printing & Reproduction Other Services Supplies & Materials Equipment Interest and Dividends Total Object Classification	$ 6,813,313               153,424       409,200           5,932       482,006            2,683     1,010,986        135,664        519,250                 21                  $ 9,532,479	$ 6,471,075                   131,969             277,380            5,801     1,171,421            3,252        795,349          96,178        178,801                 60    $ 9,131,286

 

NOTE 7.  NET POSITION 

OGE's net position is composed of unexpended appropriation and cumulative results of operations. Net position as of September 30, 2004 and 2003 consisted of the following: 

 

Unexpended Appropriations:	FY 2004	FY 2003
Unobligated    Available    Unavailable Undelivered Orders    Total Cumulative Results of Operation	$   277,103   1,109,052   1,321,756 $2,707,911    (675,915)	$   425,363      839,891   1,422,141   $2,687,395    (651,386)
Net Position	$2,031,996	$2,036,009