govt. reporting - 1 governmental reporting city council budgetary hearing

Govt. Reporting - 1

GOVERNMENTAL REPORTING

City Council

Budgetary Hearing

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GOVERNMENTAL REPORTING MODEL

S ta tem en t o fA c tiv it ies

S ta tem en t o fN e t A sse ts

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G ov e rn m e ntF u n ds

P ro pr ie ta ryF u n ds

F idu cia ryF u n ds

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R econ c ilia t ionS che du les

O th erN o tes

N o te s toF in an cia l S ta te m e n ts

M D & A

B ud ge ta ryC o m p ar iso ns

In fra s tru ctu reA sse ts

R eq u iredS u pp . In fo rm ation

G ov e rn m e nt E n ti tyR e po r ts

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Overview

A government should establish those funds required by law and the specific operating and management needs of the government entity

A general rule is that all activities should be accounted for in the general fund unless specifically required by law or the different measurement focus used for proprietary and fiduciary funds

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Governmental Funds Worksheets

Each of the five governmental funds will report two fund-based financial statements:

– The balance sheet – The statement of revenues,

expenditures, and changes in fund balance

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Special Revenue Funds

Special revenue funds account for the proceeds of specific revenue sources that are restricted for specified purposes

Includes resources and expenditures for operations, such as public libraries, when a separate tax is levied for their support

Accounting for special revenue funds is the same as for the general fund

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Capital Projects Funds

Capital projects funds account for financial resources that are specified for the acquisition or construction of major capital facilities or improvements that benefit the public

– A separate capital projects fund is created at the time the project is approved and ceases at its completion

– Uses the modified accrual basis of accounting

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Capital Projects Funds

– No fixed assets or depreciation are recorded

– No long-term debt is recorded– Typically do not have annual operating

budgets– A capital budget is prepared as a basis

for selling bonds to finance a project, and the capital budget is the control mechanism for the length of the project

– The capital budget for the project may, or may not, be formally recorded in the accounts

– The fund records capital outlays as expenditures

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Debt Service Funds

Debt service funds account for the accumulation and use of resources for the payment of general long-term debt principal and interest

General long-term debt obligations:– Serial bonds– Term bonds– Special assessment bonds– Notes and warrants– Capital leases

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Debt Service Funds

The accounting and financial reporting for debt service funds are the same as for the general fund

The modified accrual basis of accounting is used

– Only that portion of the long-term debt that has matured and is currently payable is recorded

– Interest payable on long-term debt is not accrued; interest is recognized as a liability only when it comes due and payable

Budget entries are not required, but often used

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Permanent Funds

Permanent funds are established in those cases in which there is a donor restriction that the fund principal must be preserved but the income from these permanent funds is required to be used to benefit the government’s programs or its general citizenry

The modified accrual basis of accounting is used in this fund and the financial statements for the permanent funds are the same as for all other governmental funds


Governmental Funds Financial Statements

The required financial statements are (1) the governmental funds balance sheet and (2) the governmental statement of revenues, expenditures, and changes in fund balance

– The statements will be prepared for each individual governmental fund and these individual fund statements are the foundation for the financial statements prepared for the governmental entity



– The fund-based financial statements for the governmental entity’s annual report separately report only major governmental funds, not necessarily individually each of the five governmental funds

– GASB 34 specifies that the general fund is always a major fund

– Some of the other governmental funds may not be determined to be major funds, and these non-major funds are aggregated and reported in a single column as other governmental funds



Both of the following criteria should be met to be classified as major :

1. 10 percent criterion: Total assets, liabilities, revenues, or expenditures/expenses of that individual governmental or enterprise fund are at least 10 percent of the corresponding total for all funds of that category or type

2. 5 percent criterion: Total assets, liabilities, revenues, or expenditures/expenses of the individual governmental fund or enterprise fund are at least 5 percent of the corresponding total for all governmental plus enterprise funds combined


Enterprise Funds

Enterprise funds accounts for operations of governmental units that charge for services provided to the general public

– They have a measurement focus of all economic resources and use the accrual basis of accounting

– They report fixed assets, which are depreciated, and long-term debt, if issued,

– They focus on income determination and capital maintenance


Enterprise Funds

The financial statements for proprietary funds are very similar to those for commercial entities:

1. The statement of net assets (balance sheet),

2. The statement of revenues, expenses, and changes in fund net assets (income statement)

3. The statement of cash flows Budgeting in the proprietary funds also has

the same role as in commercial entities


Enterprise Funds

Financial statements for the proprietary funds

– If a governmental entity has more than one enterprise fund, each must be individually assessed by both the 10 percent criterion and the 5 percent criterion tests to determine whether it is a major fund


Enterprise Funds

Statement of net assets – Proprietary funds report their own fixed

assets, investments, and long-term liabilities

– GASB 34 specifies that the net assets section be separated into three components: 1. Invested in capital assets, net of related debt2. Restricted because of restrictions beyond

the government’s control3. Unrestricted


Enterprise Funds

Statement of revenues, expenses, and changes

– A separation of operating and nonoperating revenues and expenses is made to provide more information value regarding the operations of the proprietary funds


Enterprise Funds

Statement of cash flows – Because of the large number of capital

asset acquisition and financing transactions, the GASB specified four sections:1. Cash flows from operating activities2. Cash flows from noncapital financing

activities3. Cash flows from capital and related

financing activities4. Cash flows from investing activities


Internal Service Funds

Internal service funds account for the financing of goods or services provided by one department or agency to other departments or agencies on a cost-reimbursement basis

– These services are not available to the general public, making it different from the enterprise fund

– Accounting and financial reporting for internal service funds are the same as for enterprise funds or for commercial entities


Internal Service Funds

The accrual basis is used to measure revenue and expenses

– The balance sheet may include fixed assets, which are depreciated, and long-term debt, if issued

– The statement of revenue, expenses, and changes in fund net assets reports the income for the period

– The statement of cash flows is also required


Trust Funds

Trust funds are a fiduciary fund type that accounts for resources held by a government unit in a trustee capacity

The governmental unit acts as a fiduciary for monies or properties held on behalf of individuals, employees, or other governmental agencies


Trust Funds

The accrual basis of accounting is used – The financial statements required are the

statement of fiduciary net assets, and the statement of changes in fiduciary net assets

– The statement of fiduciary net assets includes all trusts and agency funds

– The statement of changes in fiduciary net assets includes only the trust funds because agency funds do not have a net asset balance


Trust Funds

Private-purpose trust funds account for trust agreements for which the principal and/or income benefits specific individuals, private organizations, or other governments


Agency Funds

Agency funds are a fiduciary fund type that accounts for resources held by a governmental unit as a custodial agent for individuals, private organizations, other funds, or other governmental units

– Uses the accrual basis of accounting– Because these funds are custodial in

nature, assets always equal liabilities and there is no fund equity

– The financial statement for agency funds is the statement of fiduciary net assets


The Government Reporting Model

GASB 34 specifies the reporting model

What organizations comprise the reporting entity?

– The primary government– A component unit for which the primary

government is financially accountable– Any organization that has a significant

relationship with the primary government


The Government Reporting Model

What constitutes financial accountability?

– Financial accountability is evidenced when the primary government appoints a majority of the organization’s governing board

– Financial accountability may also exist if the organization has a separately elected or appointed board but fiscally depends on the primary government for the financial resources required to operate


GOVERNMENT-WIDEStatement of Net Assets

Format: Assets – Liab. = Net Assets Columns for:

– Governmental activities (excluding fiduciary)• Includes Internal Service Fund

– Business-type activities– Total of the above– Component units (shown separately)

• Distinguishable• Own taxing authority


GOVERNMENT-WIDEStatement of Activities

Full accrual Format: Based on functions or programs Expenses include depreciation General revenues (shown at bottom)

– Not tied to specific program– Includes:

• Contributions to permanent endowments• Special items• Extraordinary items


BUDGETARY COMPARISONS

Original budget and final budget

Same format as original budget

Variance column is encouraged


OTHER REQUIREDSUPPLEMENTARY INFORMATION

MD&A Infrastructure Assets

– Roads, sewer systems, etc.

– Modified approach (no depreciation)• Manages infrastructure assets through up-

dated inventory, periodic assessment, estimates annual amount to preserve assets

• Documents eligible infrastructure assets are being preserved

Other note disclosures


CONVERSION OF STATEMENTSGovernment Funds to Government-

wide

Convert expenses to full accrual Change special items (proceeds on

sale of land to gain on sale of land) Adding internal service funds to

governmental activities Eliminating interfund activities Eliminating fiduciary funds


CONVERSION OF STATEMENTSGovernment Funds to Government-

wide Record capital assets, remove expenditures

for capital outlays, record depreciation

Change “proceeds on bonds” to liabilities, change expenditures for principal payments to debt reduction, adjust for interest accruals

Convert revenue recognition to full accrual

Continued


RECONCILIATION SCHEDULES

Fund balances in Governmental Fundsto

Government-wide Net assets

Net change in Governmental Fund Balancesto

Government-wide change in Net assets