Acc 330 Exam 1 material (Ch.1, 2 & 3)

General purpose governments

federal governments, state governments, cities, towns, townships, villages, counties, boroughs and parishes

special purpose governments

independnt school systems, public colleges/universities, public hospitals, fire protection districts

Non Profits

usually except from federal/state/local taxation

• do not expect to receive repayment or proportional benefits

• lacks profit/motive

• absence of transferable rights

Governmental organizations

people have the power, people then delegate power to elected officials. They have the power to tax

FASB

Financial Accounting Standards Board

• Businesses (for profit) organizations

• non governmental not for profit

GASB

Governmental Accounting Standards Board

• state and local government organizations

• governmental not for profit

FASAB

Federal Accounting Standards Advisory Board

• federal governments and its agencies and department

• comptroller general, director of the office of management and budgets, treasury

accountability

requires governments to justify the raising and use of public resources (taxes)

Interperiod equity

governments obligation to disclose if current year revenues were sufficient to pay for current year benefits (services)

Objectives of financial reporting for state and local

• compare actual financial results with the legally adopted budget

• assess financial condition and result s of operations

• assist in determining compliance with finance related laws, rules and regulations

• assist in evaluating efficiency and effectiveness

Objectives of financial reporting for federal government

• budgetary integrity

• operating performance

• stewardship

• adequacy of system and controls

Objectives of financial reporting for not for profit

• making resource allocation decisions

• assessing services and the ability to provide services

• assessing management stewardship and performance

• assessing economic resources, obligations, net resources and changes in them

minimum requirements for general purpose external government financial reporting

• managements discussion and analysis (MD&A)

• government wide financial statements

• fund financial statements

• notes to the financial statements

• required supplementary info

Government wide financials

overview of governments net position, and changes in net position

• long term view (Accrual accounting)

• has expenses and goes with the flow of economic resources

fund financial statements

more detailed financial information

• short term view (annaul)

• modified accrual accounting

• has expenditures and goes with the flow of current financial resources

proprietary funds

report on business like activities
- internal service fund
i.e: ISU catering for the college

fiduciary funds

report on fiduciary (trust and agency) activities

Comprehensive annual financial reporting (CAFR)

provides more detail, conformity and GASB

Intro: title, contents, letter of transmittal, other

Financial: Auditors report, MD&A, basic financials, RSI (required supplementary info), other

Statistical: demographic, economic data, financial trends, fiscal capacity, operating info

Performance & accountability report (PAR)

major federal agencies and departments must prepare PAR including annual performance report (APR), annual finanicals

Performance & accountability report (PAR) sections

• MD&A, overview of PAR, description of mission

• Performance section - APR, agencies performance and progress in achieving performance goals

• basic financial statements: balance sheet, statement of net cost, statement of changes in net position, statement of budgetary resources, statement of custodial activities and statement of social insurance

• other accompanying info: tax burden, tax group, challenges facing management and revenue forgone

Not for profit organizations financial reporting

provide decision useful financial info to resource providers such as donors, members and creditors

• statement of financial position (balance sheet)

• statement of activities (Income statement)

• Statement of cash flows

statement of financial position

balance sheet

Statement of Activities

income statement

objectives

provide info that can be used to assess a governments accountability, assist users in making economic, social and political decisions

Primary users

those external to government; principally, citizens, legislative, and oversights bodies and creditors

usefulness

understandable, reliable, relevant, timely, consistent, comparable

3 areas from concept #3

• recognition in the financial statements

• disclosures in the notes to the financial statements

• presentation as required supplementary info or presentation as supplementary info

Required supplementary info (RSI)

• provide information that is essential

• without RSI info can not be placed in the proper context i.e.: MD&A, budget to actual schedule, and several pension disclosures

other supplementary info

• information that is useful

• not essential to understand the financial statements

Assets

resources with present service capacity that the government presently controls

deferred outflows of resources

consumption of net assets by the government that applies to a future reporting period (Similar to prepaid expense)

Liabilities

present obligations to sacrifice resources that the government has little or no discretion to avoid

Deferred inflows of resources

acquisition of net assets by the government that applies to a future reporting period (Similar to unearned revenue)

Net position is residual =

assets + Deferred outflows - Liabilities - deferred inflows

revenue

collection of some taxes

remeasurement

historical cost, fair value, replacement cost, settlement amount

government activity examples

• protection of life and property (police/fire)

• public works (streets, highways, bridges, buildings)

• culture and recreation

• educational and social services

• general administration support (accounting)

expenses

costs that expire/used up in providing services (prepaid insurance, depreciation)

expenditures

amount of resources used to acquire an asset or service
- generally recognized when obligation is paid from current resources

Governmental fund examples

• general fund

• special revenue funds

• debt service funds

• capital project funds

• permanent funds

enterprise fund

provide service to users (sewer and water services)

Custodial fund

one group (Fund) is collecting all money to distribute to the others

Trust funds

pension trust fund, investment trust fund and private purpose trust funds

Property tax receivable (Current)

if collection is expected within 60 days after the fiscal year end

Property tax receivable (Non-Current)

if collection is expected in greater than 60 days after the fiscal year end (Deferred inflow)
- take out revenue and place it in deferred inflow account

Fund balance classifications

• non spendable

• restricted

• committed

• assigned

• unassigned

Non-spendable Fund Balance

This amount is earmarked for prepaid expenses, they are funds that cannot be spent because of external imposed limitations.
- law or contract it can not be spend (inventory)

Restricted Fund Balance

A classification of fund balance reported in governmental-type funds to indicate net resources of the fund that are subject to constraints imposed by external parties or law.

Committed Fund Balance

Fund balance amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the government's highest level of decision-making authority should be reported as committed fund balance.

Assigned Fund Balance

Fund balance amounts that are constrained by the government's intent to be used for specific purposes but are neither restricted nor committed. Intent should be expressed by (1) the governing body itself or (2) a body (e.g., a budget or finance committee) or official to which the governing body has delegated the authority to assign amounts to be used for specific purposes.

unassigned fund balance

A classification of fund balance reported in governmental-type funds. This is the residual fund balance category for the General Fund and is used to report negative fund balances in other governmental funds. (amount remaining)

Major fund reporting test

1. 10% test: total of assets, liabilities, revenue or expenses/expenditures is 10% or more of the total governmental fund

2. 5% test: some element is 5% or more of total governmental fund AND enterprise fund

non major funds

- all other funds are combined into a single column

government wide financials

expenses - program revenues = Net (expenses) revenues

functions

group related activities that are aimed at accomplishing a major service or regulatory responsibility --> Public safety

Programs

group activities, operations or organizational units that are directed to the attainment of specific purposes or objectives --> Highway beautification

Direct expenses

reported on the line for specific function or program

Indirect expenses

reported as a separate line item and not allocated to any function/program
- interest on general long term liabilities

Program revenues

reported separately from general revenues in government wide operation statement

general revenues

not linked to any specific purpose

Charges for services

both governmental and business type activities; forfits, fines, licenses, permits, fire/EMS,
- you get changed a fee for something you use

operating grants and contributions

restricted for operating purposes by other governments, organizations or individuals

capital grants and contributions

restricted for capital acquisitions by other governments, organizations or individuals

special items

items within managements control that may be EITHER unusual in nature OR infrequent

extraordinary items

items or events that are BOTH unusual AND infrequent

Transfers

transfers between governmental activities and business type activities

Fund balance =

current assets + deferred outflows of resources - current liabilities - deferred inflows of resources

other financing sources

transfers into a fund and the proceeds of debt issues and sales of general government assets

• doesn't meet the definition of revenues

• increasing effect on fund balances i.e.: proceeds of assets sale, bind proceeds, transfer of resources

other financial uses

transfers of financial resources from one fund to another fund

• doesn't meet definition of expenditures

• decreasing effect on fund balance

• i.e.: debt restructuring, transfers of resources of other funds

budgets

legally binding
- you can get in trouble if you go over budget, so budgets get revised to avoid issues

Budgetary accounts

• estimated revenues

• appropriations

• estimated other financing sources

• estimated other financing uses

• encumbrances

** budgetary accounts have the opposite balances of operating accounts **

** budgetary accounts have the opposite balances of operating accounts **

appropriation

legal authorization to expend cash or other financial resources for goods, services and facilities to be used for a specific purpose in an amount not to exceed those authorized

Major revenue sources

• taxes

• ad valorem property taxes

• tax levy processes

• special assessments

• licenses/permits

• intergovernmental revenues

• charges for services

• fines and forfeits

• sales tax

• interest and penalties

• misc. revenues

• escheats

encumbrances

amounts a government has committed to pay for goods or services that were not received prior to year end

** encumbrances filled do not have to be the same as original encumbrance amount **

** encumbrances filled do not have to be the same as original encumbrance amount **

** appropriation --> encumbrance --> expenditure --> disbursement **

** appropriation --> encumbrance --> expenditure --> disbursement **

Budgetary accounts