Note 1. SIGNIFICANT ACCOUNTING POLICIES

A. Basis of Presentation

These financial statements report the combined financial position and results of operations for the US Geological Survey (USGS). They have been prepared as required by the Chief Financial Officers Act of 1990, using the form and content provided by the Office of Management and Budget (OMB) Bulletin 97-01, and Entity and Display, OMB's Statement of Federal Financial Accounting Concepts, Number 2. These statements represent the proprietary accounts of USGS and differ from those used by OMB to monitor and control budgetary resources available to the bureau.

B. Reporting Entity

USGS was established by the Congress in 1879 in response to an important National need for earth science information. In the 1996 Interior and Related Agencies Appropriation Act, National Biological Service (NBS) was merged into USGS. During fiscal year (FY) 1997, the Biological Resources Division's, formerly NBS, accounting system was converted to the Federal Financial System (FFS) of USGS. The accompanying financial statements have been prepared from the bureau's consolidated general ledgers. Included are all funds and accounts under USGS control and allocations from other Federal agency appropriations transferred under specific legislative authority.

C. Basis of Accounting

Transactions are recorded in accordance with the Statement of Federal Financial Accounting Standards except for Managerial Cost Accounting, Accounting for Revenue and Other Financing Sources, and Stewardship Reporting. In addition, transactions are recorded in accordance with accounting standards contained in agency accounting policy and procedure manuals, and accounting principles published by authoritative sources in the public sector. USGS uses the accrual method for recording accounting transactions. Under this method, revenues are recognized when earned and expenses are recognized when goods and services are received, without regard to receipt or disbursement of cash. Transactions affecting budgetary resources are recorded concurrently, facilitating compliance with legal constraints and controls over the use of Federal appropriations.

The Statement of Budgetary Resources contains intra-bureau financial transactions for the USGS which have not been eliminated.

D. Revenues and Other Financing Sources

USGS receives annual, multi-year, and no-year appropriations for mission programs. The majority of the budget authority is received through the annual appropriation, "Surveys, Investigations, and Research." Additional budgetary resources are available for goods and services furnished on a reimbursable basis. USGS has specific legislative authority to record accounts receivable from non-Federal reimbursable customers as budgetary resources. USGS
also has authority to receive contributions from outside organizations to perform work desired mutually by both parties. In addition, USGS receives rental receipts for providing quarters at remote locations for geomagnetic or seismic observations. Revenues are recognized when earned (i.e., goods have been delivered or services rendered). Revenues received in advance of performance are recorded as liabilities until actually earned.

E. Funds with the U.S. Treasury and Cash

All cash disbursements are processed through the Department of Treasury. Cash collections from product sales are received at various sites nationwide and deposited locally in commercial banks designated as Treasury General Account Depositories. Receipts from joint funding agreements with State and local governments are processed through the Treasury's Lock-Box bank in Atlanta, Georgia. Bureau cash balances are reconciled monthly with the Department of Treasury report 6653, Undisbursed Appropriation Account Ledger.

F. Foreign Currency

USGS maintains small balances of foreign currencies to be used to make payments in foreign countries. Those balances are reported at the U.S. Dollar equivalent using the exchange rate in effect on the last day of the reporting period.

G. Inventories

USGS has inventories of supplies and materials used for normal agency operations and inventories of maps, map products, and hydrologic equipment held for sale. Costing methods that approximate historical cost are used to value inventories. General ledger balances are adjusted at year-end. (See Note 5)

H. Property and Equipment

USGS equipment is capitalized at cost if the original acquisition amount is $5,000 or more and the asset has an estimated service life of two years or greater. Equipment with an acquisition cost of less than $5,000 is expensed when purchased. Depreciation is recorded for the entity's equipment using the straight line method. (See Note 6 )

In FY 1997, USGS implemented a capitalization criteria and threshold for buildings and structures. Depending on the availability of records, Facilities, specifically buildings and structures are capitalized at cost if the original acquisition amount is $50,000 or more and depreciation is recorded using the straight line method over the estimated useful live of 30 years. (See Note 6) The implementation of calculating depreciation for building and structures resulted in a prior period adjustment of $12.4 million. (See Note 12)


I. Prepaid and Deferred Charges

Payments in advance of the receipt of goods and services are recorded as prepaid charges at the time of prepayment and recognized as expenditures/operating expenses when the related goods and services are received and accepted.

J. Liabilities

Liabilities represent amounts to be disbursed as the result of a transaction or event that has already occurred. However, no liability can be paid by USGS absent of an appropriation. Liabilities for which an appropriation has not been enacted are classified as unfunded liabilities, and there is no certainty that the appropriation will be enacted. Also, liabilities arising from other than contracts can be abrogated by the Government, acting in its sovereign capacity.

K. Annual, Sick, and Other Leave

USGS recorded an unfunded liability for accrued annual leave. This balance is adjusted at year end to reflect current leave earned but not taken. Sick leave and other types of nonvested leave are expensed when used.

L. Retirement Plan

USGS employees participate in the Civil Service Retirement System (CSRS) or the Federal Employee Retirement System (FERS), to which USGS makes matching contributions. The consolidated financial statements do not report CSRS or FERS assets, accumulated plan benefits, or unfunded liabilities applicable to its employees. Managing and reporting such amounts are the responsibility of the Office of Personnel Management (OPM).

In fiscal year 1997, USGS recognizes its share of the expenses of employee benefit programs and future pension outlays incurred by OPM and the imputed financing source application to the expense. Refer to Note 13 for additional information on imputed financing.

Note 2. FUND BALANCES WITH TREASURY, CASH, AND FOREIGN CURRENCY

The Cash amount includes imprest, petty cash, and change-making funds. Cash in imprest funds is used for various types of small purchases and travel advances. Imprest Fund activity continues to decrease as the use of the Third Party Draft and the IMPAC Bank Card Programs increase. Petty cash and change-making funds are maintained in offices where maps are sold over the counter.

The Foreign Currency amount consists of two Treasury Foreign Transaction Accounts maintained in the Paris and New Delhi overseas disbursing offices.

Note 3. ACCOUNTS RECEIVABLE BILLED

All receivable administrations (billing, debt management, and reporting), with the exception of NMD map and product sales, are administered at headquarters. Receivables as a result of NMD map and product sales are administered at local NMD sites throughout the country.

Note 4. ACCOUNTS RECEIVABLE UNBILLED

USGS has specific legislative authority to enter into reimbursable agreements to perform cooperative work in advance of payment. Accounts Receivable Unbilled includes amounts that have been earned but not yet billed and collected from the reimbursable customer. Billings are prepared in accordance with terms of the reimbursable agreement, which can be quarterly, semi annually, or annually. Many agreements have performance periods ending in September, with bills for collection prepared in the first month of the new fiscal year. As directed by the Department of Treasury, these general ledger balances are not included in the Report on Receivables Due from the Public.

Note 5. INVENTORY HELD FOR SALE

Inventory includes maps, map products, and hydrologic equipment. Maps and map products are located at USGS Rocky Mountain Mapping Center in Denver, Colorado, and at nine Earth Science Information Centers across the United States. USGS hydrologic equipment inventory is located at the Hydrologic Instrumentation Facility (HIF) at the Stennis Space Center in Mississippi. Products located at the HIF can only be sold to Federal agencies. A physical inventory for FY 1997 was taken at the HIF and an adjusting entry was made based on results of the inventory.

Map and map product values are based on either targeted stock levels or actual counts. Targeted stock level is a calculation based on the average monthly demand for a product multiplied by 60 months or the amount needed for a 5-year supply. Out of 85,000 products, actual counts were conducted on more than 75,000 products and inventory balances maintained on a transactional basis. Targeted stock levels were applied to the remaining inventory with a 99 percent confidence level verified through random sampling procedures.

Note 6. PROPERTY AND EQUIPMENT, NET OF DEPRECIATION

USGS Land; Structures and Facilities; and equipment are valued at acquisition cost and depreciated using the straight line method. Of the $264 million in accumulated depreciation, $26.7 million was expensed in FY 1997.

In FY 1997, the Fish and Wildlife Service (FWS) transferred to the USGS Land; Structures and Facilities and equipment in accordance with the 1996 Interior and Related Agencies Appropriation Act merging the National Biological Service (NBS) with the USGS. They were transferred at net book value as of FY 1996. On the FY 1996 financial statements, an imputed cost was included to recognize the use of property, plant, and equipment carried on the FWS financial statements, but used by NBS. Imputed cost for property, plant and equipment are no longer applicable due to the transfer from FWS.

Note 7. CONTINGENT LIABILITIES

The USGS has certain contingent liabilities that may eventually result in the payment of substantial monetary claims to third parties. In addition, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 requires Federal agencies to report sites where hazardous wastes are or have been stored, treated, or disposed of, and also requires responsible parties, including Federal agencies, to clean up releases of hazardous substances. The USGS management, in consultation with the Department of the Interior (DOI) Solicitor, believes such claims will not materially affect USGS's future financial condition.

According to the Office of the Solicitor, DOI, there are no other contingent liabilities that materially affect the financial position or results of USGS operations.

Note 8. NET POSITION

Unexpended Balances consist of funds for the amount of goods and services ordered but not received, or received and not paid, expired authority, and unobligated funds in no-year appropriations that are available for an indefinite period of time.

Note 9. OPERATING EXPENSES

USGS has been issued appropriated funds that are used to pay for one half the cost of any water resource projects carried on in cooperation with any state or municipality. As a means of managing resources in the cooperative effort, total operating expenses include expenditures made directly by the state or municipality.

Note 10. REVENUE COLLECTED

Revenues earned from public sources are derived from States and municipalities for making cooperative topographic and geologic surveys and water resource investigations; proceeds from the sale of photographs, maps, and records; proceeds from the sale of personal property; and reimbursements from permits and licensees of the Federal Energy Regulatory Commission. Revenue earned from other Federal agencies is derived from special-purpose mapping, investigations, and computer services performed at the request of the financing agency, much of which contributes to the basic objectives of USGS. Revenue is also received through the State Department from foreign countries and international organizations for scientific and technical assistance.

Note 11. INTEREST and PENALTIES

This item represents interest and penalties that were assessed in the prior year but waived during the current fiscal year. In accordance with Title 4, Part 102, Section 13(g) of the Code of Federal Regulations (4CFR 102.13(g)), an agency has the right to waive the collection of interest on the debt or any portion of the debt that is paid within 30 days after the date on which interest began to accrue.

Note 12. PRIOR PERIOD ADJUSTMENT

Note 13. IMPUTED PENSION AND OTHER RETIREMENT COST

Accounting for Liabilities of the Federal Government, SFFAS No. 5, requires agencies to recognize the cost of pensions and other retirement benefits during their employees active years of service. The Office of Personnel and Management (OPM) is responsible for paying the cost of these benefits. The OPM actuaries have provided the employing agencies with rates for calculating the estimated cost of pension and other retirement benefits as of September 30, 1997. Using the rates provided by OPM and labor cost data provided by the Department of the Interior, USGS computed the imputed pension expense of $47,777,772 for fiscal year 1997: