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63 Cards in this Set
- Front
- Back
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What are the functions of Governmental Auditing?
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The audit seeks to discover deviations from accepted standards and instances of illegality, inefficiency, irregularity, and ineffectiveness early enough to take corrective action, to hold violators accountable, and to take steps to prevent further losses.
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What are the functions of Governmental Accounting?
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Accounting is the process of recording all financial transactions – revenues and expenditures – according to clear and usually precise rules, in such a manner that all transactions can be audited independently
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What is fund Accounting?
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Governments adopt fund accounting that separate financial resources into distinct accounting entities, called funds, which are expected to be self-balancing. Fund accounting is an accounting system emphasizing accountability rather than profitability
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What are the 3 types of funds?
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Governmental funds, proprietary funds, fiduciary funds
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What are the 5 types of governmental funds?
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General Fund, Special revenue fund, captial project fund, debt service fund, permanent fund
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What is a General Fund?
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It is a governmental fund. the resources in the fund are available for expenditure for virtually any purpose that the jurisdiction is legally empowered to pursue. revenue include property and income tax receipts
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What is a Special Revenue Fund?
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It is a governmental fund. Receive monies from special sources and are earmarked for special purposes. like gas tax and roads
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What is a Capital Budget Fund?
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It is a governmental fund. account for receipts and expenditures related to projects (e.g., construction of a new park) or for major pieces of equipment (e.g., vehicles for a city fire department). bond sales
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What is a Debt Service Fund?
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It is a governmental fund. accounts for payment of interest and repayment of principal due on long-term debt. revenue from general fund
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What is a Permanent Fund?
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It is a governmental fund. accounts for resources held in trust, where earnings but not principal may be used.
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What are Proprietary funds? What are the 2 types of Proprietary funds?
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Proprietary funds are Business-like funds. Enterprise fund, Internal Service Fund
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What is an Enterprise Fund?
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Accounts for business-type activities of the entity, which are operated for general benefit of the public but are expected to support themselves from their own revenue. toll bridges
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What is an Internal Service Fund?
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includes the financing of goods or services provided by one agency or department to other agencies or departments of the government (e.g., the operations of a motor vehicle maintenance department). customers internal to government
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What is a Fiduciary Fund and what are the 4 types?
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fiduciary funds, accounts for assets held by a government as a trustee for others. Pension Funds, Investment Trust Funds, Agency Funds, Private Purpose Trust Funds.
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What are Pension Funds
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used to pay public employees’ retirement benefits
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What are Investment Trust Funds?
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tracking and reporting gov’t investments
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What are Agency Funds
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gov’t acting as conduit for another body e.g., a city government collecting taxes for the local school district.
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What are Private Purpose Trust Funds?
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other trust-type arrangements e.g., monies held in trust for savings when children grow up and enroll in college or university.
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What is "Accounting Basis"?
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o The basis of accounting refers to the timing of transactions, or when a revenue item is recorded as received by the government and when an expenditure is recorded as having occurred
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What is Cash Accounting?
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tax receipts are recorded when they are actually received by the government and expenditures are recorded when payments are made. It does not provide information about the future (anticipated receipts and expenditures). may suggest financial situation is more secure than it is because it doest account for future obligations, but is simple, accurate picture of cash on hand
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What is Accrual Accounting
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the revenue measure requires an estimate of taxes owed but not yet paid; the expenditure measure requires inclusion of purchases for which payment has not yet been made. The accrual basis is not susceptible to end-of-year cash manipulations. transactions recorded when activities occur, not when payment is made.
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What is Weak modified accrual accounting? (Revenue/spending)
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Revenue: cash + current financial resources
Spending: Cash + Current Liabilities |
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What is Semistrong Modified Accrual? (Revenue/Spending)
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Revenue: cash + current financial resources + noncurrent financial resources.
Spending: cash + current liabilities + long-term liabilities. |
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Pros to Separating Capital Spending from Operating Budgets?
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• Inform long-run financial and economic consequences of spending.
• Public relations value: show citizens funds are being used for the acquisition of useful assets • Help shape the future direction, location, and extent of private economic investments in the community, encourage future economic development • pay as you use |
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Cons to Separating Capital Spending from Operating Budgets?
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• Political logrolling: various political interests agree to help each other, grab bag, every interest can find a project, providing everyone with something means some important needs wont be met.
• separate document, especially when capital projects are financed by borrowing, makes capital costs look costless in the current year |
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What is capital investment planning (CIP)?
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• development of a long-term (5 years is typical) capital investment plan, starting point for point for multiyear infrastructure investments. • Results feed into budget decisions but not everything included in a CIP will make its way into the capital budget as the financial resources may not be available to afford every investment.
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What are the 8 steps to constructing a CIP?
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1) Identify present service characteristics
2) Identify environmental trends 3) Development service objectives 4) Preliminary listing of Capital Projects and Cost Estimates 5) Identify Financial Resources 6) Selecting projects for inclusion in 5 year CIP 7) Identify implications for future recurrent costs 8) Including the first year of the CIP as the capital budget |
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Explain Step 1 of creating a CIP : Identifying present service characteristics
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: inventory of existing infrastructure, services and facilities, size, capacity; quantity of service, number of people served, area covered; quality measures of service provided
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Explain Step 2 of creating a CIP : Identifying environmental trends:
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forecasts to predict future service requirements, population and economic growth, demographic changes > plans for service expansion or contraction
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Explain Step 3 of creating a CIP : Developing service objectives
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defining need for capital investments, judgment of staff, public willingness to pay, forums, referendums
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Explain Step 4 of creating a CIP : Preliminary listing of capital projects and cost estimates:
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based on objectives, not screened for financial feasibility yet
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Explain Step 5 of creating a CIP : Identifying financial resources:
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analyzing jurisdiction’s financial condition, possible sources of financing, long range tax projections, revenue sources specific to individual projects, grants, borrowing
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Explain Step 6 of creating a CIP : Selecting projects for inclusion in 5-year CIP:
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match available resources with preliminary set of projects, select feasible set, reevaluation of objectives because some will be impossible. priorities: replacing deteriorated facilities, meeting population growth, improving quality
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Explain Step 7 of creating a CIP : Identify implications for future recurrent costs
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anticipate cost of keeping facilities operating, long run impact on general fund budget, heavier costs in the long run
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Explain Step 8 of creating a CIP : Including the first year of the CIP as the capital budget
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incorporate plan into the budget, to this point no approval or appropriations of funds has occurred
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What is Fiscal capacity
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the ability of a state to raise revenue to meet its spending requirements
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What is • Total taxable resources (TTR) Index
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: the unduplicated sum of the income flows produced within a state and the income flows received by its residents which a state can potentially tax. estimate of the state’s gross state product. scores above 100 have high ability to generate revenue, below have low ability
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What is • Tax burden/tax effort
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the extent to which a state taps into its available resources. E.g., total state and local taxes as a share of total taxable resources.
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What is • Representative tax system (RTS):
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the amount of revenue a state would raise if national average tax rates were applied to each state’s tax base for 26 individual taxes. measured state’s tax capacity, when divided by population gauged fiscal capacity
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What are theoretical justifications for intergovernmental fiscal assistance?
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1 Solve externalities,
2 Reduce vertical and horizontal fiscal imbalance among governments 3 Stimulate local expenditures on targeted areas |
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Why is Fiscal assistance needed to solve externalities?
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some costs of the failure to provide comparable levels of service are borne by those outside low-service states, benefits, like education also spill over state lines
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What is vertical fiscal imbalance?
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the relative abilities (disparities) of different levels of government to generate needed revenue and to produce specific public services.
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What is Horizontal Fiscal Imbalance?
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Differences in fiscal capacity exist for governments at the same level.
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How does the fed stimulate local expenditures?
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federal grants aimed at inducing state and local gov’t to increase spending in service areas, not replace local funding with federal funding
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What is the Fiscal illusion hypothesis?
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taxpayers will not perceive the full cost of service
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What is the Flypaper effect?
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money sticks to grant area, recipient gov’t spends money in intended area, sometimes even spends more
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3 types of intergovernmental grants?
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Categorical Grant, Revenue Sharing, Block Grant
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2 types of categorical grants?
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Formula based and project based
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What is a formula based categorical grant?
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Lump sum aid is distributed among eligible governments according to a legislatively or administratively determined formula. Eg., Dingell-Johnson Sport Fish Restoration Program.
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What is a Project based grant?
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aid is distributed at the discretion of the administrator for particular projects. These grants are awarded on a competitive basis.
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Criticisms of categorical grants.
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Grants may skew local priorities. pursue projects in areas were grant funding is available, even if an unfunded project would provide greater benefit
Much time and energy are consumed in drafting grant proposals. some jurisdictions lack grantsmanship |
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What is a revenue sharing grant?
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a formula distribution with few or no restrictions on the use of funs provided. Preestablished amounts of aid, use of formulas for distribution, latitude in spending funds on local priorities
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Pros of a revenue sharing grant?
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Jurisdictions received funds without having to make application for these monies.
Jurisdictions had great freedom in deciding which functional areas would receive funds. |
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Criticisms of revenue sharing grant?
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It may provide unneeded monies to some jurisdictions because of floors, to little to others because of ceilings,
no national purpose served |
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What are Block Grants?
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Categoricals” are grouped together so that jurisdictions have greater flexibility within specified program areas. E.g., Community Development Block Grant (CDBG).
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What is the difference between block grants and categorical grants?
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Block grants are usually distributed to general-purpose governments according to a statutory formula, while categorical grants often go to special-purpose governments.
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What are the benefits of block grants?
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Block grants provide more flexibility to state and local governments and reduce the costs of “one size fits all” categorical grants.
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Criticisms of block grants
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consolidation usually results in decreased funding, localities have to achieve the supposed efficiencies of consolidation to prevent service cuts
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Lump-sum grants are _______ and matching grants are _______
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Lump-sum grants are substitutive and matching grants are stimulative
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_______ matching grants are more stimulative than _______ matching grants
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Open-ended matching grants are more stimulative than close-ended matching grants
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______ lump-sum grants may be no different than ______ lump-sum grants
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Specific lump-sum grants may be no different than general lump-sum grants
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Flypaper effect: Lump-sum grants stimulate much ____ spending than central-government tax cuts in the long run
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Flypaper effect: Lump-sum grants stimulate much more spending than central-government tax cuts in the long run
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Fiscal illusion hypothesis: Full costs of local services are not well recognized, and thereby induce a _____ level of spending
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Fiscal illusion hypothesis: Full costs of local services are not well recognized, and thereby induce a higher level of spending
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