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130 Cards in this Set

  • Front
  • Back
Objective of governmental accounting and reporting
accountability

provide useful information
benefit wide range of users
3 primary users of external state and local governmental financial reports
Citizens
Legislative and oversight bodies
Investors and creditors.
Governmental financial info should
Demonstrate operations with legal restraints imposed by citizens
Communicate compliance with laws & regulations related to raising & spending money
Demonstrate interperiod equity - current period expenditures financed with current revenues
To demonstrate full accountability for all activities, information must include
Cost of services
Sufficiency of revenues for services provided
Financial position
What is SEA reporting?
Service Efforts and Accomplishments
3 categories of self-balancing sets of accounts
Governmental
Proprietary
Fiduciary
Funds of a governmental unit use two methods of accounting
Most use modified accrual accounting
Some use accrual accounting
Characteristics of modified accrual accounting
Focus of financial reporting is financial position & flow of available resources

Revenues recognized when available and measureable

Expenditures recorded when goods/services obtained

Expenditures classified by object, function, or character
What are the 5 components of the Comprehensive Annual Financial Report (CAFR)? - general purpose financial statements
1) MD&A - presented before FS
2) Gvt wide FS
3) Fund FS
4) Notes to FS
5) Rew. supplemetary info - presented after FS and notes
What is a component unit?
A legally separate organization for which the elected officials of a primary government are financially accountable
Criteria for identifying a component unit
the primary government can impose its will on the unit

or

the unit is financially dependent on the primary government AND there is a potential for the unit to provide specific benefits to/burdens on the government.
Users should be able to distinguish between ____ & ____
primary government and component units
Component units may be blended when either
Governing body of component is essentially the primary government.

The component provides services almost exclusively for the primary government.

The component unit's total dent outstanding is expected to be repaid by the primary government.
Most components will be ___ presented
discretely
What does the MD&A include?
1. Condensed comparison of CY to PY
2. Analysis of overall fin position & results of ops
3. Analysis of balances and transactions indiv. funds
4. Analysis of significant budget variances
5. Descr. op capital assets and LT debt activity in the period
6. Currently known elements which could/will affect fin. position or results of ops.
What two statements do the Government Wide FS consist of?
Statement of Net Position
Statement of Activities
Characteristics of government wide/overall government reports
1. Do not display info on indiv. funds
2. Exclude fiduciary activities/fiduciary components
3. Distinguish b/w primary gov. and discretely presented components
4. Distinguish b/w gvt type and business type activities of primary gov.
---Gvt type activities = gvnt funds & internal service funds
---Business type activities include enterprise funds only
What measurement focus do government wide FS use?
Economic measurement focus
What basis of accounting do government wide FS use?
accrual
Revenues from exchanges or exchange like transactions are recognized when?
In the period of exchange
Revenues from nonexchange transactions
Derived tax revenues
Imposed nonexchange revenues
Government-mandated nonexchange transactions
Voluntary exchange transactions
Derived tax revenues
imposed on large exchange transactions

recognized as asset & revenue when exchange occurs

ex: retail sales tax
ex: personal income taxes
Imposed nonexchange revenues
Taxes and other assessments by governments that are not derived from underlying transactions.

imposed on nongovernment agencies

recognized as asset when gvt has enforceable claim

recognized as revenues when use of resources are required or permitted

ex: property taxes, special assessments, fines, forfiets
Government mandated nonexchange transactions
provided by one level of government for another

recognized as asset & revenue (or liability & expense) when all eligibility requirements are met

similar treatment for voluntary non exchange transactions
Voluntary exchange transactions
Ex: Federal grant money
What does the statement of net position present?
Assets, liabilities, deferred outflows of resources, and deferred inflows of resources
Net position calculation
Assets + deferred outflows of resources - liabilities - deferred inflows of resources = net position
What are the three categories of net position?
Net assets invested in capital assets, net of related debt

Restricted net position

Unrestricted net position
Net assets invested in capital assets, net of related debt
All capital assets, including restricted assets, net of depreciation & reduced by related debt
Restricted net position
Items with externally imposed restrictions on use
Unrestricted net position
Remainder
Format of Statement of Net Position
All items reported for primary government & component units

For primary government
--separate columns for government-type activities & business type activities
--amts combined in total column

For component units:
--Column is not combined with totals for primary government
What activities are distinguished from eachother on the Statement of Activities?
Self-financing activities vs. those drawing from general revenues
Governmental activities are presented by
function
Business type activities are presented by
business segment
For each government function we report
net expense/revenue
relative burden
items reported separately after net expenses of government's functions:
general revenues
contributions to term & permanent endowments
contributions to permanent fund principal
special items (unusual or infrequent)
extraordinary items (unusual and infrequent)
transfers
Depreciation
indirect expense charged to a function with asset

allocated among functions for shared assets
not required to be allocated to functions for general capital assets
not allocated to functions for eligible general nfrastructure assets
Revenues classified into categories:
1. Amts received from users/beneficiaries of a program - program revenues
2. Amts received from parties outside citizenry - general revenues if unrestricted. program revenues if restricted to specific programs
3. Amts received from taxpayers - general revenues.
4. Amts generated by the government - general revenues
5. Reported separately:
contributions to term/permanent endowments
contributions to permanent fund principal
special & extraordinary items
transfers
Format of Statement of Activities
Internal amounts on gvnt wide FS
eliminated to avoid doubling up
interfund receivables & payables eliminated
amts due between gvt type & business type activities presented as offsetting internal balances
Capital assets include the following
land, land improvements, & easements
bldgs & bldg improvements
vehicles, machinery & equipment
works of art & historical treasures
infrastructure
Internally generated intangibles begin to be capitalized if
Objective and capacity identified
Feasible
intent to complete
Pension plans
Single employer defined benefit plan
or
Agent defined benefit plan

Reports a net pension liability:

portion of actuarial PV of projected benefit payments attributable to past service

-

pension plan's fiduciary net position
Capital assets are reported at ___. This includes
historical cost

Includes: capitalized interest & costs of getting asset ready for intended use
How are capital assets depreciated?
Over useful lives
Inexhaustible assets are not depreciated
Infrastructure assets may be depreciated under the modified approach
What does infrastructure include?
Capital assets with longer lives than most capital assets that are normally stationary
Roads, bridges, tunnels, drainage systems, water & sewer, dams, lighting systems
Governmental funds include:
General fund
Special revenue funds
Capital projects funds
Debt service funds
Permanent funds
Proprietary funds include:
Enterprise funds
Internal service funds
Fiduciary funds include:
Pension & other employee benefit trust funds
Investment trust funds
Private purpose trust funds
Agency funds
Statements of Governmental Funds
Balance sheet
Statement of revenues, expenditures, and cahnges in fund balances

Apply modified accrual accounting
Capital assets & long-term debt not reported as assets or liabilities
Reports include separate columns for each ____ fund and a single column for total of all ____ funds.
major governmental fund; nonmajor funds

General fund is always major
Others can be major if assets, liabilities, revenues, and expenditures meet the 5% and 10% tests
-- Fund atleast 5% of total column in gvt wide FS
-- Fund atleast 10% of government type column in gvnt wide FS
Governmental funds - Balance Sheet
Reports assets, liabilities, and fund balances
Reported separately for each major gvnt fund
Fund balances segregated into reserved & unreserved
Total fund balances reconciled to net position of gvnt activities in gvt wide FS
Governmental funds - statement of revenues, expenditures, & changes in fund balances
Reports inflows, outflows, and balances of current financial resources
Reported separately for each major gvt fund
Revenues classified by major source
Expenditures classified by function.
Governmental funds - statement of revenues, expenditures, and changes in fund balances - format of statement
Revenues
- Expenditures
= Excess (deficiency) of revenues over expenditures
+/- Other financing sources and uses
+/- Special and extraordinary items
= Net change in fund balances
+ Fund balances (beg)
= Fund balances (end)
Statements of Proprietary Funds
Statement of net position
Statement of Revenues, Expenses, and Changes in Fund Net Position
Statement of Cash Flows

Use accrual basis
Include separate column for each enterprise fund meeting 5% and 10% tests
--Fund atleast 5% of "total" column in gvt wide FS
--Fund at least 10% of "business-type" coulmn in gvt wide FS
--Total of all nonmajor enterprise funds in a single column
--Total of all internal service funds in a single column
Four categories of activity for proprietary FS
Operating
Noncapital financing
Capital financing
Investing
Proprietary Funds - Statement of Net Position
Prepared in classified format
Dist. b/w current and noncurrent A/L
Net postion reported in same categories as used in gvt wide fs
Proprietary Funds - Statement of Revenues, Expenses & Changes in Fund Net Position
Amts should eb the same as net position & chages in net position shown for business-type activities in gvt wide FS

Revenues reported by major source
Operating & nonoperating revenues & expenses distinguished
Nonoperating revenues & expenses reported after operating income.
Proprietary Funds - Statement of Revenues, Expenses & Changes in Fund Net Position - Format of statement
Operating revenues (listed by source)
- Operating expenses (listed by categories)
= Operating income or loss
+/- Nonoperating revenues & expenses
= Income before other revenues, expenses, gains, losses and transfers
+/- Capital controbutions, additions to permanent & term endowments, special &extraordinary items, & transfers
= Increase/decrease in net position
+ Net position (beg)
= Net position (end)
Proprietary Funds - Statement of Cash Flows
Shows sources and uses of cash by major classification

Operating
Noncapital financing
Capital financing
Investing

Operating income reconciled to cash flows from operating activities (indirect method)
Statements of Fiduciary Funds
Statement of Net Position
Statement of Changes in Fiduciary Net Position

Use accrual basis

Separate column for each major fiduciary fund and column for total of all nonmajor fiduciary funds
--Major fund selection based on judgment of entity mgt
-No 5% and 10% tests since fiduciary funds werent included in gvt wide FS
Notes to Government FS include:
Summary of significant acct policies
Disclosures on:
-- capital assets & LT liabilities
-- major classes of capital assets
-- donor-restricted endowments
-- segment information
Required supplementary info in addition to MD&A consists of:
1. Schedule of Funding Progress for all Pension Trust Funds
2. Schedule of Employer Contributions to all Pension Trust Funds
3. Budgetary comparison schedules for governmental and special revenue funds
4. Info on infrastructure reported under modified approach
5. Claims to development info for any public entity risk pools
A governmental unit maintains 5 types of governmental funds:
General Fund
Special Revenue Funds
Capital Projects Funds
Debt Service Fund
Permanent Funds
General fund
All activities not accounted for in another fund
Only fund that reports positive unassigned fund balance
Capital projects funds
construction of fixed assets
fund opened when project commences & closed when project complete

Differences in accounting for capital projects fund:
1. budgetary entries generally not made
2. expenditures generally made under contract

proceeds received for project should be accounted for in period received, regardless of when money is spent
Debt Service Fund
Amts used for interest payments are separated from amts used for principal payments
Permanent funds
resources that are legally restricted
___ and ___ are not reported in governmental funds. Instead, they are reported in government wide FS
Fixed Assets and LT debt
Fund balance classifications
Nonspendable (in form (inventory) or legally)
Restricted (by contributor or law)
Committed to specific Purposes (by highest gvnt authority)
Assigned (intended for purpose but not bound to it)
Unassigned (residual of general fund)
A governmental unit will have one general fund. Activities are as follows:
Annual budget recorded at beg of yr
Revenues/expenses are recorded during yr
Adjustments made at BS date
Budgetary accounts closed at YE
J/E for governmental unit adopting annual budget for their general fund
Revenue cycle consists of
Billing revenues (property taxes, collecting billed/unbilled revenues, writing off uncollectible billings)
J/E for billing of revenues
Revenues control = portion of billed taxes expected to be collected during the current year or w/in 60 days of close
Revenues control = portion of billed taxes expected to be collected during the current year or w/in 60 days of close
J/E for collecting billed revenues, writing off uncollectible amounts, collecting unbilled revenues
Spending cycle consists of
Ordering goods & services
Receiving goods & services
Paying for goods & services
J/E for spending cycle
Adjusting J/E at the BS date
J/E at the end of the year to close accts
Proprietary Funds:
Account for governmental activities conducted similarly to business enterprises

Enterprise fund
Internal service fund
Enterprise fund
Used to account for business-type activities
Uses accrual basis
Earned income recognized as operating revenues
Shares taxes reported as nonoperating revenues
Internal service fund:
Used to account for services provided to other gvnt departments on a fee or cost-reimbursement basis
Resources come from billings to other funds
Reported as operating revenues
Fiduciary Funds:
Pension Trust Fund
Investment Trust Fund
Private Purpose Trust Fund
Agency Fund
Pension Trust Fund
Accounts for contributions made by gvnt & employees using accural accounting
Investment Trust Fund
Accounts for assets received from other gvnts units to be invested on their behalf

Uses accrual accounting
Private Purpose Trust Fund
Accounts for resources held on behalf of private persons or organizations

Uses accrual accounting
Agency Fund
Accounts for money collected for fairous funds, other gvnts, or outsiders

Includes only BS accounts

Assets always = Liabilities

Uses modified accrual accounting
Interfund Transactions can include
Nonreciprocal Transfers
Reciprocal Transfers
Reimbursements
Loans
Nonreciprocal Transfers
Reciprocal transfers
Reimbursements
Loans
EPA required procedures for closure/postclosure care of solid waste landfills represent long term obligations accounted for as
LT Debt.

Accounted for during periods of operation
EPA - Cost to be incurred by governmental funds accounted for in ___
general LT debt account group
EPA - Expenditures in governmental funds reduce ___
general long term debt account group balances
EPA - Costs to be incurred by proprietary funds are ___
accounted for directly in funds
For enterprise funds, assets should be
capitalized and depreciated
If a state or local government files for bankruptcy, the A/P should be ___
remeasured based on the Plan of Adjustment
The accounting for special assessment of capital projects depends on the ___
liability of the governmental unit for the special assessment debt

If the gvnt unit is not obligated, use the agency fund


If the gvt unit is primarily or potentially liable, treated like any other capital improvement
--construction activities recorded in capital projects fund and debt principal and interest recorded in debt service fund.
At year end, __ is closed, but not ___
estimated revenues. not fund balance
Donated assets to the gvt are recorded at
FV
Appropriations should be reported as
nonoperating revenues (proprietary funds)
Enterprise funds provide goods and services which are
1. rendered primarily to the general public
2. financed substantially or entirely through user charges
3. Intended to be self-supporting
Governmental financial reports are used primarily to
1. Compare actual results with budgets
2. Assist in evaluating effectiveness and efficiency
3. Assess financial condition and results of operations
In an exchange transaction...
In a non-exchange transaction...
goods or services of equal value are exchanged

one party provides vale for no direct benefit
When an actual expenditure of an amount previously encumbered is known, we do 2 entries
1. reverse the original encumbrance
2. record the expenditure by debiting expenditures and crediting vouchers payable.
J/E for grants
Dr. Grants Receivable
--Cr. Revenues
Dr. Cash
--Cr. Grants Receivable
Under modified accrual accounting, principal and interest on general obligation LT debt are
not recognized as expenditures until due
Property taxes are generally recorded directly into the
General fund
How does an enterprise fund treat fixed assets?
capitalized within the fund since fixed assets used for producttion of goods/services sold
Fixed dollar budgets are not normally adopted for ___funds, therefore they do not incorporate ___.
proprietary, encumbrances
Elements of Service Effort Reporting
Measures of service efforts
Measures of service accomplishments (output measures)
Measures that relate to service effort to service accomplishments (efficiency and cost-outcome measures)
Narrative or explanatory info
How are fixed assets treated in the general fund?
Not recorded. Recorded as expenditures
For public institutions engaged in only business-type activities, the basic FS include:
1. Statement of Net Position
2. Statement of Revenues, Expenses and Changes in Net Position
3. Statement of Cash Flows
Single employer defined benefit plans should ___
discount future benefits regardless of whether the plan is funded
Government wide FS columns
governmental activities
business type activities
total primary governmen
component units
Modified accrual accounting does not recognizes revenues when
funds are transferred between governmental funds

Also, sale of bonds is not revenue. It is an other financing source
In the statement of activities for nongovernmental not for profit organization all expenses are recorded as
decreases in unrestricted net position.
Grants and subsidies to decrease operating deficits should be classified as
noncapital financing activities
Under modified accrual basis, sales tax held by the state which will soon be remitted to the local government
can be accrued by the local government since it is measureable and available

same goes for other firm committments from the state
Sales tax collected by merchants are (accrued/not accrued) under modified accrual accounting
not accrued. cannot be accrued until state holds them for remittance to local gvnt units.
For government wide FS, sales tax revenues are ___
a derived tax revenue and would be accrued
Public colleges that choose to report both gvntal and business type activities should prepare
both government wide and fund financial statements
Business type units are accounted for in
enterprise funds, which require presentation of enterprise fund statements and MD&A an RSE
Routine employer contribution from the general fund to a pension trust fund is
an expenditure from the general fund
Items which are not expenditures from the general fund:
 Operating subsidy transfer to enterprise fund
 Contribution of enterprise fund capital
 Transfer to capital projects fund.
Calculation of available funds
Available funds = appropriations - encumbrances - expenditures
Program revenues:
o Charges for services
o Operating grants and contributions
o Capital grants and contributions
- If a government is obligated in some manner to assume the payment of related debt service in the event of default by property owners, all transactions related to capital improvements financed by special assessments should be reported in the
government wide statements.