Governmental Financial ReportingThe Reporting Entity

Chapter 5 – Part 3Fund Financial Statements

Review of the Financial Reporting Model

Chapter 5 – Part 2

The Financial Reporting Model

Financial reporting model defines contents of external financial reports– June 1999 = GASB No. 34

Current reporting model based on– Accountability

Fiscal– Complied with revenue & expenditure decisions of public

Operational– How efficiently business-type activities met operating

objectives

– Information useful for decision making

The Financial Reporting Model

Minimum reporting requirements for external general purpose FS

1. Management’s Discussion & Analysis (MD&A) Classified as Required Supplementary Information

2. Basic Financial Statements (BFS) Covered by audit opinion

3. Required Supplementary Information (RSI) Other than MD&A

Government-wide financial statements

– Statement of Net Assets

– Statement of Activities

Fund financial statements

Notes to the financial statements

Basic Financial Statements

Comprehensive Annual Financial Report (CAFR)

Goes beyond GASB requirements for general purpose external reporting

Include non-GAAP information & GAAP based information

Fund Level Financial Statements

Chapter 5 – Part 3

Fund Level Financial Statements

Short-term focus - financial accountability Reported based on type of fund

– Governmental funds - modified accrual– Proprietary funds - essentially same as for-profit

entities

Information on fund level financial statements must be reconciled to information reported in GWS

Fund Level Financial Statements

Present all categories of funds– Governmental– Proprietary– Fiduciary

Fund Level Financial Statements

Presented for major funds & nonmajor funds in the aggregate– Page 131

Two governmental fund financial statements Three proprietary fund financial statements Two fiduciary fund financial statements

The Concept of Major Funds

Prior to the implementation of GASB No. 34, the emphasis on fund statements was to prepare them by fund type & fund category. While the fund category statements remain, the emphasis is no longer on fund type but major funds.

Major Fund Steps

Always general fund May designate additional funds as

major ISF never major fund

Major Fund Steps

A two step process– 10% test

Item for fund type

– 5% test Same item for all fund types

Major fund exercise

Governmental Fund Financial Statements

Balance sheet – page 133– Assets in order of liquidity– Liabilities in order of liquidation– Fund balance

Reserved– Not available for appropriation

Inventories, long-term interfund loans, encumbrances, etc. Designated

– Self imposed limitation on use of funds Unreserved & undesignated

Governmental Fund Financial Statements

Statement of revenues, expenditures & changes in fund balance – page 135– Detailed revenues– Detailed expenditures– Other financing sources & uses– Special & extraordinary items

Extraordinary– Unusual & infrequent

Special– Unusual OR infrequent & within control of management

Not so special– Unusual OR infrequent & NOT within control of management

Governmental Fund Financial Statements

Required reconciliation to GWS – page 133 & 136– Balance sheet to statement of net assets

Adjust for economic resource items– Capital assets & LTD

– Statement of revenues, expenditures, & changes in fund balance to statement of activities Adjust for accrual items

– Depreciation– Revenues deferred because not available – Accrued interest on LTD– Reclassify principle paid on LTD & purchases of capital assets– Gains/losses

Proprietary Fund Financial Statements

Statement of net assets OR balance sheet – page 142– Statement of net assets = assets – liabilities = net assets– Balance sheet = liabilities + net assets = assets

Presentation– Assets in order of liquidity, liabilities in order of liquidation– Net assets

Invested in capital assets net of related debt Restricted

– Distinguish between legal & contractual Unrestricted

Proprietary Fund Financial Statements

Statement of revenues, expenses & changes in fund net assets – page 144– Operating revenues & expenses

Directly related to goods/services provided by fund

– Nonoperating revenues & expenses Nonexchange Investment income

Proprietary Fund Financial Statements

Statement of cash flows – page 145– Only fund category for which SCF is required– Direct method must be used– Four categories of cash flows

Operating Noncapital financing

– Interfund transfers Capital & related financing Investing

Fiduciary Fund Financial Statements

• Statement of fiduciary net assets – page 146

• Statement of changes in fiduciary net assets – page 147• Not for agency funds

• Four columns max• Pension trust

• Investment trust

• Private purpose trust

• Agency

Class Exercises – Part 3

Chapter Problem 5-2 & 5-3 on page 180

NOTE: These are not part of your required assignment for this chapter. They simply represent things we will discuss in class for this part of Chapter 5.