Financial Reporting1

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Overview

• Financial Statements• Financial Position• Summary of Significant Accounting Policies

(SSAP)• MD&A• Investments• Pensions• Program Revenue• Segment Reporting• Internal Service Funds• Internal Financial Reporting• Odds & Ends

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Financial Statements

• GAAP– MD&A

&– Basic financial statements

• Government wide statements• Fund level statements• Notes to financial statements

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Financial Statements

• GAAP– Required supplementary information (RSI)

• Budget – actual comparison– Option to report in basic financial statements– General Fund & major Special Revenue Funds with

legally adopted budgets– Reconcile budget basis to GAAP

• Modified approach – Maintain up to date inventory– Condition assessment – every three years– Annual amount to maintain condition– Document preservation level – current level or better

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Financial Statements

• GAAP– Required supplementary information (RSI)

• Pensions – Schedule of employer contributions– Schedule of funding progress

• OPEB– Schedule of employer contributions– Schedule of funding progress

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Financial Statements

• Not GAAP– CAFR– Supplemental information

• Combining statements– Nonmajor funds– Component units

» Major & nonmajor funds

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Financial Statements

• Government wide financial statements– Economic resources & full accrual

• Net assets, revenues, expenses

– Governmental & Business-type Activities• Fiscal & operational accountability

– Interfund balances eliminated if appropriate • Same governmental or business unit

– Fiduciary funds EXCLUDED

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Financial Statements

• Fund level financial statements– Governmental funds

• Fund balance, revenues, expenditures, other sources & uses

– Proprietary funds• Net assets, operating & nonoperating

– Fiduciary funds– Fiscal accountability– Required to reconcile to government-wide

financial statements (FS)• Fund balance to net assets• Change in fund balance to change in net assets

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• Component units (CU) are reported by:– Discrete presentation

• Separate column– Separate column for major CUs

» Nonmajor CUs aggregated

– Blended presentation• CU’s financial information included with

appropriate funds of the primary government (PG)

Financial Statements

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Financial Position

• Financial Position– Focus on existing resources/claims as of

9/30/xxxx– Focus of general purpose external financial

reporting• Statement of Net Assets

– Government wide– Proprietary & fiduciary funds

• Balance Sheet– Governmental funds

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Summary of Significant Accounting Policies (SSAP)

• Disclosure of accounting policies required by GAAP … includes:– Selection of accounting treatment when

choices available

– Accounting principles & methods peculiar to government

• Measurement focus & basis of accounting

– Unusual/innovative GAAP applications

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Management’s Discussion & Analysis (MD&A)

• Management’s Discussion & Analysis– May/may not be in scope of FS audit

– Narrative introduction overview & analysis

– Focuses on relationship of governmental funds & governmental activities as reported in government wide statements

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Investments

• Report investments at fair value– Governmental funds– Proprietary funds– Fiduciary funds– Land & other real estate held by

endowments

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Investments

• Report investments at fair value:– All funds (Governmental, Proprietary,

Fiduciary)– GASB # 52 - Land & other real estate held as

investments by endowments• Establishes reporting standards

– “Fair value”– Methods & assumptions used to determine it– Changes = investment income

– GASB # 53 – Accounting & Financial Reporting for Derivative Instruments

• Extensive disclosure requirements:– Instrument type (swap, lock ,option ,cap ,collar etc.)

Disclose objectives, terms & risks

Disclose methods & assumptions used to determine “fair value”

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Pensions

• Net Pension Obligation (NPO)– Positive NPO occurs when employer fails

to fully fund annual required contribution (ARC)

• Report as long term liability in government-wide statements

– Negative NPO occurs when ARC is overfunded

• Report as asset in government-wide statements

– Debt issued to fund ARC reduces NPO

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OPEB

• Disclose in notes:– Description of benefits

• Implicit subsidy• Explicit subsidy

– Description of significant accounting policies

– Funding policy– Funding status– OPEB cost & net OPEB obligation*– Actuarial assumptions (major)

* Difference between amounts expensed & contributions made/benefits paid

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Program Revenues

• Taxes do not qualify– Even if voted/restricted for specific

purpose

• Grants– Operating– Capital– Reimbursement type grants qualify

• When restricted to specific program

• Charges for services

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Segment Reporting

• Segment Disclosure– Footnotes– Required when revenue backed debt is

outstanding– Not required for segments that are major

enterprise funds– Key factor in condensed financial

statements

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Internal Service Funds

• Incorporated into government wide statement as part of the governmental activities– Business type activities if most customers,

etc. from proprietary funds

• Revenues = “Billings to Departments” • Surplus treated as a reduction of

expenses in all participating funds– “Excess of Billings Over Costs”

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Internal Financial Reporting

– Occurs as often as management deems necessary

– May be on budgetary basis (or not)– Does not need to follow GAAP– Allows management to monitor compliance

with legal & contractual provisions– Provides management information on current

financial performance

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Odds & Ends“Current” Fund Balance

• Reserved Fund Balance*– Not available for spending

• Inventories, long term loan receivable, encumbrances

– Legal restrictions narrower than purpose of fund

• Unreserved Fund Balance*– Available for appropriation

• Unreserved Designated Fund Balance– Management’s intended use - limitations self-imposed– e.g. capital projects expenditure carryover from prior year ;

“hurricane reserve” etc.

• Unreserved Undesignated Fund Balance– Available*GASB # 54 - Fund Balance Reporting and Governmental Fund Type

Definitions Periods beginning after June 15, 2010 ( i.e. FY 2011)

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Odds & EndsGASB # 54 New fund balance

1. Nonspendable Fund Balance– Not in spendable form

• Inventories• long term receivables• Prepaid items

2. Restricted Fund Balance– Amounts constrained as being used for

specific purpose by:• External parties• Constitutional provisions• Enabling legislation

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Odds & EndsGASB # 54 New fund balance

3. Committed Fund Balance– Constraint on use self-imposed; using

highest level of decision making authority• Stabilization funds• Capital project carryovers

4. Assigned Fund Balance– Amounts intended to be used for specific

purpose– Intent expressed by governing body or

authorized official• Stabilization funds• Capital project carryovers

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Odds & EndsGASB # 54 New fund balance

5. Unassigned Fund Balance– Available

• Everything not covered in previous two slides

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• Other points– Special Revenue Fund

• Required to account for specific revenue sources committed to specific purposes

– Capital Projects Fund• For “projects” not equipment units

– Encumbrances• Reported in notes

– Fund Balance policies• Note disclosure (next slide)• Esp. Committed & Assigned Fund Balance

Odds & EndsGASB # 54 New fund balance

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• Other points– New Note Disclosures:

• Fund Balances & Procedures– Committed Fund Balance– Assigned Fund Balance– Fund Balance Classifications

• Encumbrances– Stabilization Arrangements (if any)– Minimum Fund Balance Policy– Purpose of each Major Special Revenue Fund

• Statistical Section:– Revise (Prospective) to reflect new categories

• Change: – Letter of Transmittal, MD&A and Notes from old

terminology to new

Odds & EndsGASB # 54 New fund balance

Odds & Ends

OLD FB NEW FB

RESERVEDFUND BALANCE

NONSPENDABLE FUND BALANCE

Inventory etc.

RESTRICTEDFUND BALANCE

External party

UNRESERVED FB

UNRESERVEDDESIGNATED FB

COMMITTED FBASSIGNED FB

Gov’t self-imposedMgt.

UNRESERVEDUNDESIGNATED FB

UNASSIGNED FB Available

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Odds & Ends

• Security lending agreements– Have broker fees associated– Could be backed by letter of credit– Governments receive collateral– Asset & liability

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Odds & Ends

• GASB #56 – Codification of Accounting & Financial Reporting Guidance contained in the AICPA Statements on Auditing Standards– Effective on issuance (March 2009)– Covers:

• Related party transactions• Subsequent events• Going concern

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Odds & Ends

• Non-Exchange transactions– Derived Tax Revenues

• Sales tax, income tax, fuel tax

– Imposed non-exchange revenues• Property taxes (Ad valorem & personal), fines &

forfeits

– Government mandated non-exchange transactions

• Formula grants

– Voluntary non-exchange transactions• Reimbursement grants & donations

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Odds & Ends

• Note Disclosure – No need to disclose that a situation is not

applicable (i.e. negative disclosure) ---with two exceptions:

• Situations where GAAP specifically require disclosure of whether a given set of circumstances applies

• Situation in which absence of a given set of circumstances is so unusual that omission would be viewed as a material oversight