Gov-Wide Stmts and Governmental Fund Stmts

2 PDFs in Gov Review Files

What kind of accountability do gov-wide financial statements emphasize?

Operational accountability -> long-term perspective

What two financial statements make up gov-wide reporting?

1. Statement of Net Position (SoNP)

2. Statement of Activities (SoA)

What proprietary funds account for governmental activities?

Governmental funds and the internal service funds

• business-type activities are typically synonymous with enterprise funds (other type of proprietary fund)

What does the Statement of Net Position report?

All assets, deferred outflows, liabilities, and deferred inflows, with the difference reported as net position

Net Position Formula

Assets + Deferred Outflows - Liabilities - Deferred Inflows = Net Position

--> indicates the government's financial position

What does an increase in net position indicate?

a. Financial position is improving

b. Financial position is deteriorating

a. Financial position is improving --> a decrease in net position indicates position is deteriorating

What assets/liabilities appear in the Stmt of Net Position that do NOT appear in governmental fund statements?

Capital assets and long-term obligations

How does the Stmt of Net Position differ from governmental fund balance sheets?

It combines current financial resources with capital assets and long-term debt to provide the full economic picture

What does the Stmt of Net Position do with governmental funds' short-term data?

It consolidates short-term resources with capital assets and long-term obligations

Besides numerical data, what non-financial factors should be considered in assessing financial health?

Tax base changes and infrastructure condition (roads, drainage, sewer lines)

What is the purpose of the Stmt of Activities?

To show how net position changed during the fiscal year

When are revenues and expenses recorded in the SoA?

When the underlying event occurs, regardless of cash timing (accrual basis)

Accrual basis

Revenues and expenses are recognized when earned/incurred, even if cash comes later

What is an example of revenue being recognized before cash is collected?

Uncollected property taxes

How does the SoA classify governmental functions?

1. Governmental activities

2. Business-type activities

What direction does the SoA flow visually?

Left -> Right for Expenses and Program Revenues, then down for General Revenues

What does the upper-right "Net (Expense) Revenue" column show?

Whether each function is self-financing or relies on general revenues

What section appears after General Revenues on the SoA?

Transfers, extraordinary items, and special items

What do taxes dedicated to Specific Purposes classify as?

a. Program revenue

b. General revenues

b. General revenues --> because they are not charges for service or grants for specific programs

What are operating grants used for?

For operating activities (ex: education aid)

What are capital grants for?

For capital purposes (ex: construction)

Why can unrestricted grants be general revenues?

They are not tied to a specific program

What does the Change in Net Position (bottom of SoA) represent?

The overall increase/decrease in the government's financial position for the year

What are governmental activities?

Functions supported mainly by taxes and intergovernmental revenues

What are business-type activities?

Services intended to recover costs through user fees (ex: utilities)

What are Discretely Presented Component Units?

Legally separate organizations the gov is financially accountable for

• reported SEPARATELY

What is the measurement focus of gov-wide statements?

Economic resources --> Reports ALL economic transactions including long-term assets, long-term liabilities, and full costs

What basis of accounting is used in gov-wide financial statements?

Accrual basis

What is the purpose of government-wide financial statements?

To provide a broad overview of a government's finances using accrual accounting + economic resources focus

E.g., To provide a single, consolidated, long-term view of financial health

Why do governmental funds not provide long-term information?

They use modified accrual and emphasize short-run financial resources, not long-term economic consequences

What kinds of revenue qualify as program revenues?

• Charges for services

• Operating grants/contributions

• Capital grants/contributions

What are general revenues?

Revenues not tied to specific programs, such as taxes and unrestricted grants

What comparability problem do gov-wide statements solve?

They consolidate data previously scattered across multiple fund statements using different accounting bases

Modified Accrual Basis

• Revenue is recognized when measurable and available

• Expenditures are recognized when current resources are used

What are the three categories of government funds?

1. Governmental

2. Proprietary

3. Fiduciary

Governmental Funds

Funds used for functions financed primarily by taxes and intergovernmental revenues

Proprietary Funds

Used for activities financed through user charges (business-type activities)

Fiduciary Funds

Funds used to hold resources on behalf of external parties, not the government

What are the two governmental fund statements called?

1. Balance Sheet

2. Statement of Revenues, Expenditures, and Changes in Fund Balances

What financial elements appear in the governmental fund balance sheet?

Current assets, deferred outflows, current liabilities, deferred inflows, fund balance

Which long-term items do governmental funds exclude?

Long-term assets and long-term liabilities

What does the Stmt of Revenues, Expenditures and Changes in Fund Balances track?

Revenues - Expenditures + Other Financing Sources/Uses = Change in Fund Balance

When are expenditures recognized in governmental funds?

When a fund liability is incurred or cash is spent --> Modified Accrual

What are the 3 categories of expenditures?

1. Current

2. Debt Service

3. Capital Outlay

What are Other Financing Sources?

Items such as bond proceeds and transfers in that are NOT revenues

What are Other Financing Uses?

Transfers out or uses of funds that are NOT expenditures

Why are bond proceeds not revenues?

They have to be repaid, so they are't earned resources

What is a Fund Balance?

Fund Balance = Assets + Deferred Outflows - Liabilities - Deferred Inflows

Which fund balance category can ONLY the General Fund use?

Unassigned fund balance

What are the two non-spendable fund balance situations?

1. Not spendable due to form (inventories)

2. Must be held intact legally (permanent fund principal)

What classifies a fund as a major fund?

A fund meeting materiality criteria, plus the General Fund (always major)

Why is reconciliation required for governmental funds?

To bridge the difference between:

• Modified accrual (funds)

• Accrual (gov-wide)

What adjustments commonly appear in the reconciliation to government-wide?

Adding capital assets, subtracting long-term debt, adjusting deferred resources, and converting expenditures to expenses

Capital Outlay (gov funds)

Treated as an expenditure, not as an asset purchase

Debt Service Expenditure

Payments of principle and interest on long-term debt

What 3 statements do proprietary funds use?

1. Stmt of Net Position

2. Stmt of Revenues, Expenditures, and Changes in Fund Balances

3. Stmt of Cash Flows

What statements do fiduciary funds use?

1. Stmt of Net Position

2. Stmt of Revenues, Expenses, and Changes in Fund Balances

Why aren't fiduciary resources part of governmental revenues or expenses?

Because they benefit external parties

Why are fiduciary funds excluded from gov-wide statements?

Their resources cannot be used to provide services to the public

Capital Projects Fund

Used to account for construction/acquisition of major capital assets

Debt Service Fund

Used to accumulate resources to pay principle and interest on long-term debt

Permanent Fund

Principal must be held in perpetuity (not spent)

--> Interest/earnings support government programs

When comparing governmental funds to government-wide, what do readers gain?

A better understanding of long-term impacts of short-term decisions

Why do governments present aggregated "Non-major Funds"?

To simplify presentatino when funds aren't individually material

What is the focus of governmental fund statements?

Near-term financial requirements and spendable resource availability

What is the fundamental equation of the governmental fund Balance Sheet?

Assets + Deferred Outflows = Liabilities + Deferred Inflows + Fund Balance

What types of revenues commonly appear in governmental funds?

Taxes, fees, intergovernmental aid, licenses, permits, etc.

In the Stmt of Revenues, Expenditures, and Changes in Fund Balances, what section are transfers shown?

In the Other Financing Sources/Uses section

Why is comparing fund statements with gov-wide statements useful?

It helps users evaluate the long-term effects of current year activity