Governmental Accounting FINAL

Estimated Revenues

Budgeted inflows expected to be measurable and available.

Appropriations

Legal authorization to spend.

Encumbrances

Commitments to spend (e.g., open POs) used to control the budget.

Revenue Recognition Rule (Governmental Funds)

Revenue must be measurable, available, and legally usable.

Measurable

Amount is known or reasonably estimated.

Available

Collectible within the current period or soon enough thereafter (typically 60 days).

Legally Useable

Government is legally allowed to use the revenue.

General Fund: What is it?

The main operating fund that accounts for resources not restricted to other funds.

General Fund Basis of Accounting

Modified accrual.

General Fund Statements

Balance Sheet; Statement of Revenues, Expenditures & Changes in Fund Balance.

Special Revenue Fund Purpose

Accounts for resources restricted for a specific purpose.

Special Revenue Fund Duration

Exists as long as resources remain restricted for specific purposes.

Special Revenue Fund Basis

Modified accrual.

Special Revenue Fund Statements

Balance Sheet; Statement of Revenues, Expenditures & Changes in Fund Balance.

Capital Projects Fund Purpose

Accounts for financial resources used to construct long-lived assets.

Included Revenues

Typically general obligation bond proceeds.

Excluded Items

Routine capital purchases and capital leases.

Capital Projects Fund Basis

Modified accrual.

Capital Projects Fund Statements

Balance Sheet; Statement of Revenues, Expenditures & Changes in Fund Balance.

Purpose of GCA Fund

Accounts for capital assets not in proprietary funds.

Who owns assets?

The government as a whole.

Types of Capital Assets

Land, Buildings, Equipment, Infrastructure, Construction-in-Progress, Intangibles.

Valuation — Cost

Primary method; record at acquisition or construction cost.

Valuation — Gift

Recorded at FMV at time received.

Valuation — Eminent Domain

Recorded at negotiated purchase price.

Valuation — Escheat

Property transferred to government when no rightful owner comes forward.

GCA Fund Accounts

Asset, Accumulated Depreciation, Net Position.

Fund Interaction Rule

One capital asset transaction affects two funds (e.g., capital projects + GCA).

Purpose of Debt Service Fund

Accounts for inflows/outflows used to repay long-term debt.

Debt Service Fund Requirement

Legally mandated when resources are being accumulated for debt service.

Debt Service Fund Basis

Modified accrual.

Debt Service Fund Statements

Balance Sheet; Statement of Revenues, Expenditures & Changes in Fund Balance.

Purpose of GLTLF

Accounts for long-term liabilities of the government.

GLTLF Basis of Accounting

Accrual.

GLTLF Statements

Balance sheet containing liabilities & net position.

Enterprise Fund Purpose

Accounts for government activities financed by user fees.

Examples of Enterprise Fund

Water, sewer, gas, electricity, garbage, airports.

Rnterprise Fund required when?

Debt secured solely by activity revenues OR laws require cost recovery via fees.

Enterprise Fund Basis

Accrual.

Enterprise Fund Depreciation

Yes, depreciation is recorded.

Enterprise Fund A/R

Uncollectible A/R reduces revenue.

Enterprise Fund Statements

Statement of Net Position; Statement of Revenues, Expenses & Changes in Net Position; Statement of Cash Flows.

Enterprise Cash Flows Requirement

Must use direct method with 4 sections (operating, capital financing, noncapital financing, investing).

Statement of Net Position Sections

Assets; Deferred Outflows; Liabilities; Deferred Inflows; Net Position (3 categories).

Net Position Categories

Net Investment in Capital Assets; Restricted; Unrestricted.

Statement of Activities Purpose

Shows program revenues vs. expenses to find net cost of services.

Program Revenue Types

Charges for services; Operating grants; Capital grants.

Government-Wide General Revenues

Property tax, sales tax.

Fund Balance Categories

Nonspendable, Restricted, Committed, Assigned, Unassigned.

Governmental Statements Provided

Balance Sheet; Statement of Revenues, Expenditures & Changes in Fund Balance; Budget-to-Actual Statement.

Proprietary Statements

Statement of Net Position; Statement of Revenues, Expenses & Changes in Net Position; Statement of Cash Flows.

Operating vs. Nonoperating Revenues

Operating = day-to-day operations; Nonoperating = interest, gains, transfers.

Accountability

Government must justify resource use to citizens.

Interperiod Equity

Current-year revenue should cover current-year services.

Dual Perspective Model

Requires fund-level AND government-wide reporting.

Minimum External Reporting Requirements

MD&A, Basic financial statements, Notes, RSI.

MD&A Purpose

Provides narrative analysis of financial performance based on known facts—NOT forecasts.

Required MD&A Topics

• Discussion of financial statements

• Condensed govt-wide data

• Overall financial position

• Major fund changes

• Budget variance analysis

• Capital asset and debt activity

• Infrastructure reporting

• Known facts expected to affect future operations

Governmental Funds Statements

Balance Sheet; Statement of Revenues, Expenditures & Changes in Fund Balance; Statement of Revenues, Expenditures & Changes in Fund Balance: Budget-to-Actual.

Proprietary Funds Statements

Net Position; Revenues/Expenses/Changes; Cash Flows.

Fiduciary Funds Statements

Statements of Fiduciary Net Position; Changes in Fiduciary Net Position.

Two Government-Wide Statements

Statement of Net Position; Statement of Activities.

Measurement Focus (Gov-Wide)

Economic resources; accrual basis.

Difference from Fund Statements #1

Measurement focus (current financial resources vs economic resources).

Difference from Fund Statements #2

Reporting focus (individual funds vs whole government).

Excluded Funds from Government-Wide

Fiduciary funds.

Three CAFR Sections

Introductory; Financial; Statistical.

Introductory Section Includes

Table of contents, letter of transmittal, org chart, GFOA certificate.

Financial Section Includes

Auditor’s report, MD&A, basic statements, notes, RSI.

Statistical Section Includes

10 years of data—financial trends, revenue capacity, debt capacity, demographics, operations.

NFP Reporting Standards Set By

FASB.

Key Standards for NFP

SFAS 116 & SFAS 117 (ASC 958).

NFP Basis of Accounting

Accrual, economic resources measurement.

NFP Funds?

No fund reporting

NFP Accounting Equation

Assets = Liabilities + Net Assets.

Net Asset Categories

Unrestricted, Temporarily Restricted, Permanently Restricted.

Statement of Financial Position

NFP balance sheet.

Value of Donated Investments

Recorded at FMV at donation.

Pledges Receivable Requirements

Recognize unconditional pledges; record long-term pledges at NPV.

Collections Options

Not capitalize; capitalize post-SFAS116; capitalize all.

Statement of Activities

Revenues by source; expenses by function.

Restricted Contributions Reporting

Recorded under changes in temporarily restricted assets.

Functional Expenses Statement

Required only for VHWOs.

NFP Cash Flow Statement

Similar to business; restricted contributions are financing activities.