Summary of Significant Accounting Policies

Basis of Presentation

These financial statements were prepared to report the financial position and results of operations of the Johnson Space Center (JSC). They were prepared from the books and records of JSC in accordance with the form and content for entity financial statements specified by Office of Management and Budget (OMB) Bulletin 94-01, and JSC's accounting policies which are summarized in this note.

Reporting Entity

JSC is one of ten NASA field centers established to aid NASA in its mission to provide for aeronautical and space activities. JSC's accounting system, called the Interactive Basic Accounting System (IBAS), is a mechanized system that uses the single-source data entry concept to reduce the redundancy of data entry. Multiple transactions are entered into the system simultaneously using transaction codes that instruct the system to post debits and credits to the appropriate general ledger accounts. JSC's systems provide payroll accounting for approximately 3000 employees and process approximately 300,000 non-payroll related accounting transactions monthly. These transactions update the Financial and Contractual Status (FACS) report and the General Ledger. This data provides the basic information necessary to meet internal and external financial reporting requirements and provides both fund control and accountability.

There are seven basic appropriations that require individual treatment in the JSC system of accounting and control. They are Science, Aeronautics and Technology (SAT), Human Space Flight (HSF), Mission Support (MS), Space Flight Control and Data Communications (SFCDC), Research and Development (R&D), Research and Program Management (R&PM), and Construction of Facilities (C of F).

1. The SAT appropriation for program years 1995 and forward provides funding for research and development activities. This includes funds to
• extend our knowledge of the Earth, its space environment, and the universe
• invest in new aeronautics and advanced space technologies that support the development and application of technologies critical to the economic, science and technical competitiveness of the United States


2. The HSF appropriation for program years 1995 and forward provides funding for human space flight activities. This includes funding for
• the International Space Station
• the Space Shuttle program
• payload and utilization operations
• flight support for cooperative programs with Russia


3. The MS appropriation for program years 1995 and forward provides funding for
   • civil service workforce
   • space communication services
   • safety and quality assurance activities
   • maintenance activities
   
   
4. The SFCDC appropriation for program years 1994 and prior provides funding for
   • space flight
   • spacecraft control and communication activities
   • operations, production services, and other activities related to space flight
   
   
5. The R&D appropriation for program years 1994 and prior provides funding for
   • research and development of space vehicles
   • space systems
   • other related activities
   
   
6. The R&PM appropriation for program years 1994 and prior provides funding for
   • civil service salary
   • civil service travel
   • related expenses for civil servants required to manage and conduct programs
   
   
7. The C of F appropriation for program years 1994 and prior provides funding for u construction, repair, rehabilitation and modification of facilities
   • minor construction of new facilities
   • additions to existing facilities
   • facility planning and design

Basis of Accounting
JSC records transactions on an accrual accounting basis and a budgetary basis. Under the accrual method, revenues are recognized when earned and expenses are recognized when a liability is incurred without regard to receipt or payment of cash. Budgetary accounting facilitates compliance with legal constraints and controls over the use of federal funds.

Revenues and Other Financing
Sources JSC receives the majority of the funding needed to support its programs through appropriations. JSC receives both annual and multi-year appropriations that we use, within statutory limits, for operating and capital expenditures. We obtain additional amounts through reimbursements for services performed for the public and other federal agencies. Funds with the U.S. Treasury JSC does not have disbursing authority and does not maintain cash in commercial bank accounts. The U.S. Treasury processes all cash receipts and disbursements. The funds with the U.S. Treasury include appropriated funds and deposit funds received from the public as advance payments for reimbursable services.

Advances
For the most part, JSC funds its University Contracts and Grants program through the use of a letter of credit system and the automated clearinghouse method of providing advance payments of Federal funds to recipient organizations. Recipient organizations provide quarterly financial reporting of cash transactions on Federal Cash Transactions Reports. We maintain detailed accountability records and monitor audits of the grantees by the Defense Contract Audit Agency and NASA's Office of Inspector General.

Accounts Receivable
Other federal agencies owe JSC for the largest portion of these receivables, including cost of research and development of satellites as well as launch services. Non-government customers must provide advance payments that remain on deposit with the U.S. Treasury until JSC performs the services requested.

Operating Materials and Supplies
Operating Materials and Supplies are stated at cost and charged, as used, on a weighted moving average basis. JSC's inventory of Operating Materials and Supplies include the following three types of inventory

• stores stock -- material that is repetitively procured, stored, and issued on the basis of recurring demand
• standby stock -- material held for emergencies
• Government-Owned/Contractor-Held inventories -- material at both contractor and NASA facilities, but under contractor control and accountability and used for programs and projects under contract.

Equipment
Equipment with a unit cost of $5,000 or more and a useful life of 2 years or more, that will not be consumed in an experiment, is capitalized. Equipment with a unit cost of less than $5,000 or having a useful life of less than 2 years is expensed as current year cost. Capitalized cost includes unit cost, transportation and installation charges, handling costs, and storage costs. NASA does not perform depreciation accounting, although an allowance for the use of NASA facilities and equipment is included in charges to non-government reimbursable customers.

Contractor-Held Property
Government-owned/contractor-held property includes real property such as land, buildings and structures, inventories, plant equipment, space hardware, special tooling and special test equipment. Contractors, in accordance with Federal Acquisition Regulations, maintain control and accountability of such property and JSC is precluded from maintaining duplicate records of these assets. Contractors are directed to report, annually, plant equipment costing $5,000 or more and having a useful life of 2 years, which will not be consumed in an experiment. Reporting is also required for special test equipment, special tooling, and designated space hardware that costs $5,000 or more. All construction in progress is reported. Reporting of all such items is required and their total value is included on the financial statement. Contractors report, as of September 30, on a NASA Form 1018, "NASA Property in the Custody of Contractors." The NASA Form 1018 is certified by the contractor's representative and approved by a Government property administrator.

Real Property
Real Property includes land, buildings, and other structures and facilities. It also includes leasehold improvements when the cost of acquiring and improving the asset is $5,000 or more. Land is valued at acquisition cost which, for the most part, may not reflect actual value. Buildings are valued at cost, including the cost of capital improvements and fixed equipment required for functional use of the facility. JSC real property in the hands of contractors is also reported and combined for reporting purposes with JSC-held real property, based on September 30 contractor reporting on the NASA Form 1018. JSC does not perform depreciation accounting for its facilities, but does include a facilities user charge for Non-government reimbursable customers.

Liabilities
Accounts payable includes amounts recorded for receipt of goods or services furnished to the Agency, based on receiving reports and billings rendered. Additionally, NASA recognizes a cost and liability based on constructive delivery, when performing contractors earn a portion of the contract price during the accounting period. This information is provided to JSC, monthly, on NASA Form 533, "Contractor Financial Management Report."

Fund Balances with Treasury
(in thousands)

	Obligated	Unobligated Available	Unobligated Restricted	Fund Balance
Appropriated Funds	$ 1,148,132	$ 195,227	$ 8,273	$ 1,351,632
Deposit Accounts	41
Suspense/Clearing Accounts	29
Total Fund Balance	$ 1,351,702

	Entity Accounts Receivable	Non-Entity Accounts Receivable	Total Accounts Receivable
Intragovernmental	$ 6,387	$ 134	$ 6,521
Governmental	5,194	47	5,241
Total	$ 11,581	$ 181	$ 11,762

	FY 1997	FY 1996 (Restated)	Valuation Method
Stores Stock	$ 1,046	$ 1,841	Weighted Avg
Standby Stock	2,243	2,543	Weighted Avg
	$ 3,289	$ 4,384

Stores Stock is material being held in JSC inventory which is repetitively procured, stored, and issued on the basis of recurring demand.

Standby Stock is material held for emergencies.

	FY 1997	FY 1996	Change
Contractor-Held Materials	$ 593,936	$ 327,462	$ 266,474

		Current	Non-Current	Total
Intragovernmental Liabilities:
	*Liability for Deposit and Suspense Funds	$ 134	$ 0	$ 134
Governmental Liabilities:
	*Liability for Deposit and Suspense Funds	$ 117	$ 0	$ 117
	Accrued Funded Payroll and Benefits	$17,120	$17,120
	Total	$17,237	$ 0	$17,237

*Liabilities include cash advances received from other Government agencies and public reimbursable customers. Also included are funds on deposit with the U. S. Treasury for employees' savings bonds and state tax withholdings.

Liabilities Not Covered by Budgetary Resources:

		Current	Non-Current	Total
Intragovernmental Liabilities:
	Accounts Payable for Closed Appropriations	$ 20	$ 28	$ 28
Governmental Liabilities:
	Accounts Payable for Closed Appropriations	$ 20	$ 10,036	$ 10,036
	Unfunded Annual Leave	27,294	0	27,294
Total		$ 27,294	$ 10,036	$ 37,330

Amounts in the FY 1996 balances have been restated to reflect changes in accounting practice and corrections of reporting errors.

			FY 1996 (Restated)	FY 1996	Change
a. Statement of Financial Position
Assets:
Operating Materials and Supplies			$ 4,384	$ 30,540	$(26,156)
Other Assets			327,462	354,619	(27,157)
Liabilities:
Liabilities Not Covered by Budgetary Resources:
	Governmental Liabilities
		Other Liabilities	37,071	37,101	(30)
Net Position:
Balances
	Invested Capital		4,588,776	4,642,089	(53,313)
	Future Funding Requirements		(37,095)	(37,125)	30
b. Statement of Operations and Changes in Net Position
Non-Operating Changes:
	Invested Capital		$1,249,483	$1,302,796	$(53,313)
	Future Funding Requirements		(4,281)	(4,311)	30

Operating Materials and Supplies, Other Assets and Invested Capital have been restated to reflect changes in accounting policy. Operating Materials and Supplies was reduced to reflect only inventory that has not been expensed to a program.

Other Liabilities and Future Funding Requirements were changed to correct a calculation error made in the previous statements.