Step-by-step explanation:
The Statement of Federal Financial Accounting Concepts (SFFAC) provides a framework for federal financial reporting that emphasizes the importance of stewardship and adequacy of systems and controls. Here are some examples of how these concepts work in practice:
Stewardship: Stewardship refers to the responsibility of federal agencies to manage their financial resources in a responsible and accountable manner. Under SFFAC, federal agencies are expected to implement strong internal controls and risk management practices to ensure the proper stewardship of public funds. For example, an agency may establish policies and procedures to ensure that all financial transactions are properly authorized, recorded, and reported.
Adequacy of systems and controls: Adequacy of systems and controls refers to the ability of an agency's financial systems and internal controls to support the agency's financial reporting needs. Under SFFAC, federal agencies are expected to have financial management systems and internal controls that are designed to provide reliable, timely, and relevant financial information. For example, an agency may need to upgrade its financial management systems to ensure that they can handle new financial reporting requirements or changes in accounting standards.
Integration of stewardship and adequacy of systems and controls: Stewardship and adequacy of systems and controls are closely related and should be integrated in the agency's financial management practices. For example, an agency may need to ensure that its internal controls and risk management practices are designed to address key financial risks and vulnerabilities, such as fraud or cybersecurity threats. The agency may also need to periodically review its financial management systems and controls to ensure that they remain adequate and effective in supporting its financial reporting needs.
Overall, the concepts of stewardship and adequacy of systems and controls are important components of federal financial management, and agencies are expected to incorporate them into their financial management practices to ensure the responsible stewardship of public funds and the reliability of financial reporting.