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FAR > 2400: Governmental Accounting & Reporting > Flashcards

2400: Governmental Accounting & Reporting Flashcards

1
Q

4 categories of nonexchange revenues

GOV

A
  1. Derived Tax revenues (Income & Sales Tax)
  2. Imposed nonexchange revenues (Property Taxes)
  3. Government Mandated nonexchange transactions (Federal Grant*)
  4. Voluntary nonexchange transactions (Federal Grant*)

depending on terms*

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2
Q

Define the relationship between general and program revenues and give examples.
GOV

A

Program Revenues are from the program itself or parties outside tax payers/citizenry that reduce use of general revenues. (Restricted grants/contributions)

Unrestricted grants/contributions are general revenues.

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3
Q

According to GASB, accountability is the cornerstone of governmental financial reporting. State and define the three subobjectives of accountability required in reporting?

A

Interperiod Equity - was current-year revenue sufficient to cover current-year services
Budgetary/Fiscal Compliance - were resources obtained/used according to legally adopted budget and in compliance with other legal/contractual requirements
Service Efforts/Costs/Accomplishments - info to assess each of these areas

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4
Q

How are restricted and unrestricted grants to proprietary funds reported by governments?

A

nonoperating revenues

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5
Q

How are restricted capital grants reported by governments?

A

capital contributions

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6
Q

What are the three categories of funds in governmental accounting?

A
  1. Governmental
  2. Proprietary (Business like)
  3. Fiduciary (Trust or Agency. Trust does not equal Agency)

Agency not reported in Statement of Changes in Net Position only in Statement of Net Position. There are no operating activities in Agency Funds therefore no changes. Assets = Liabilities

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7
Q

Define Governmental Funds including five types and the equation.

A

Funds used to finance and account for general governmental activities:

  1. General (limit 1)
  2. Special Revenue
  3. Capital Projects
  4. Debt Service
  5. Permanent (restricted)

CA - CL - = FB (Similar to Working Capital)
Current* assets - Current* liabilities = Fund Balance
(Financial assets - deferred outflows) - (Related liabilities - deferred outflows) = Net Position
*Current = within the current year + usu. 60 days

General Capital Assets and General Long-Term (non interfund) Liabilities are not included in Governmental Funds and are reported only on government-wide financial statements.
Other Capital Assets and Other Long-Term Liabilities are reported in Proprietary or Fiduciary Funds.

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8
Q

Define Proprietary Funds including two types and the equation.
GOV

A

Funds used to finance and account for government’s self-supporting business-lie activities:

  1. Enterprise (business-like)
  2. Internal Service (may fund other funds)

Assets - Liabilities = Net Assets (All not just current)
Measures Revenue and Expenses but not Net Income/Loss

3 Categories of Fund Net Position: Net Investment in Capital Assets, Restricted, Unrestricted

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9
Q

Define Fiduciary Funds including 4 types and the equation.

GOV

A

Trust or Agency Funds to account for resources and related liabilities held by a government for the benefit of others:

  1. Private-purpose (report principal and income)
  2. Investment
  3. Pension
  4. Agency (temporary, custodial)

Assets = Liabilites

Net Position/Changes in Net Position

No obligation by gov, just collection and disbursment BUT Agency is different than other fiduciary.

Agency reported only in Fiduciary Statement of Net Position not reported Fiduciary Statement of Changes in Net Position. No Fiduciary reported in Government-Wide Statements.

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10
Q

What is a reciprocal interfund activity?

GOV

A
  • affects two funds as result of a loan or a service provided
  • symmetrical transaction between two funds
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11
Q

What are the “government-wide” basic financial statements (GWFS)?

A

statement of net position
statement of activities

accrual basis
overall info without funds
distinguish governmental from business-type
(all governmental funds reported in gov activities, proprietary/enterprise funds reported in business-like activities, proprietary/INTERNAL SERVICE reported in gov or business–DEPENDS on which funds serviced by activity)
exclude fiduciary

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12
Q

What are the “governmental funds” basic financial statements (GFFS)?

A

balance sheet

statement of revenues, expenditures and change in fund balances

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13
Q

What are the “proprietary funds” basic financial statements (PFFS)?
GOV

A

statement of net position
statement of revenues, expenses and changes in fund net position
statement of cash flows

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14
Q

What are the “fiduciary (trust) funds” basic financial statements (FFFS)?
GOV

A

statement of net position

statement of changes in fiduciary net position

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15
Q

What method must be used to prepare a proprietary funds statement of cash flows?
GOV

A

Direct Method

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16
Q

According to International Accounting Standards (IAS) 20 when is income from governmental funds recognized?

A

Only when there is reasonable assurance that (1) the entity will comply with the terms and that (2) the grant will be received.

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17
Q

What is the primary purpose of the statement of activities of the government-wide financial statements?

A

To assess Operational accountability. It is the only report of operations using all economic resources.

fund and budgetary accounting - Financial accountability
budgetary accounting - Fiscal accountability
fund and government-wide - Functional accountability

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18
Q

What is the primary difference between and exchange and a nonexchange transaction?
GOV

A

An exchange transaction involves giving and receiving equal value (service, utility). Nonexchange transaction involves receiving without providing or vice versa (tax, grant)

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19
Q

What are primary characteristics of an enterprise fund (a type of proprietary fund)?
GOV

A

Pricing policies establish fees/charges to recover costs.
Must be used if financed with debt soley (not partially) secured by an activity’s revenues.
Required by law to cover its costs by fees/charges not taxes/similar revenues.

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20
Q

What type of proprietary fund is used if the primary government is the predominant customer?

A

Internal Service Fund

If not the predominant customer, but incidental participant then Enterprise.

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21
Q

What are the primary objectives of financial reporting according to GASB?

A

For use in making economic, social and political decisions & Assessing Accountability (which includes assessment of sufficiency of current revenues versus burden to future taxpayers).

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22
Q

Define discretely presented components and describe their presentation on government-wide statements of (1) activities and (2) net position.

A

Components that are not part of the primary government in substance that are presented in columns to the right (after) primary information on each statement.

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23
Q

What are the 3 Budgetary Accounts employed in Governmental Funds*?

*Not used in Proprietary or Fiduciary unless dependent upon annual budgets and legislative appropriations.

A
  1. Estimated Revenues (officially approved estimates of asset inflows, DR)
  2. Appropriations (officially approved estimates and authorizations of asset outflows. CR)
  3. Encumbrances (estimated total cost used to record charges against appropriations, has a contra Outstanding/Reserve account)
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24
Q

What are the 4 Actual Accounts employed in Governmental Funds?

A
  1. Revenues
  2. Expenditures
  3. Other Financing Sources - Nonrevenue increases (interfund transfers, capital asset sales, bond proceeds)
  4. Other Financing Uses - Nonexpenditure decreases (interfund transfers)
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25
Q

What are the 2 Deferred Accounts employed in Governmental Funds?

A
  1. Deferred Outflows

2. Deferred Inflows

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26
Q

What is the Equity Account and its 5 classifications employed in Governmental Funds?

A

Fund Balance
Classifications:
1. Nonspendable (inventory, supplies, prepaids)
2. Restricted (externally enforceable)
3. Committed (by formal action)
4. Assigned (intent)
5. Unassigned (residual amount in General and may be negative, only used when negative in other than general funds)

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27
Q

What is Encumbrance Accounting and are the journal entries?

GOV

A

It is used to prevent overexpenditure of appropriations and demonstrate compliance with legal requirements.

PO issued/K approved:
Encumbrances (Control) DR (expected expense)
Encumbrances Outstanding (Reserve) CR

(Reversed upon receipt of goods/services. Separate transaction to record actual expense.)

Encumbrances = Encumbrances Outstanding (Any difference is attributable to error.)

Unencumbered appropriations =
Appropriations - (Encumbrances + Expenditures)

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28
Q

Define 2 bases of accounting and when they are used.

GOV

A
  1. Economic Resources Measurement focus/Accrual Basis used where revenues and expenses are recorded i.e. in Government Wide, Proprietary Funds (Enterprise/Internal Service) and Fiduciary (Agency/Trust):

operating income, changes in net position (cost recovery), financial position and cash flows

  1. Current Financial Resources measurement focus/Modified Accrual Basis used where revenues and expenditures are recorded i.e. in Governmental Funds (General, Special Revenue, Capital Projects, Debt Service and Permanent):

changes in financial position (flow of resources) and financial position

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29
Q

Attributes of Modified Accrual - Governmental FUND Accounting
GOV

A
  1. Recognize Revenue when susceptible to accrual i.e measurable (levy approved) and AVAILABLE (legally and within the current period or “early enough”/usually 60 days into the next)
  2. Record Expenditures when liabilities incurred/assets expended except:
    Inventory/Prepayments allowable when purchased (normal) or consumed (modification permitted)
    Debt Service Fund Interest/Retirement of Principal at due date (modification required)
    Unmatured noncurrent liabilities are long-term until recognized/recorded in year due (modification required)

when acquired unless exception/modification for consumed/ due

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30
Q

What is the fund-based operating statement requisite for each fund type?
GOV

A

Governmental Funds - Statement of Revenues, Expenditures and Changes in Net Position (GAAP basis/Budgetary Basis - if budget non-GAAP, reconciliation is supplemental):

  1. Operations, capital outlay, debt service
  2. Other financing sources/uses (interfund transfers)
  3. Special Items (unusual or infrequent, controlled by mgmt)
  4. Extraordinary

Proprietary Funds - Statement of Revenues, Expenses and Changes in Net Position:

  1. Operating Rev/Exp
  2. Nonoperating Rev/Exp - includes operating grants/contributions
  3. Capital/Endowment grants/contributions
  4. Special Items
  5. Interfund transfers (w/o requirement for repmt.)

Fiduciary Funds - Changes in Net Position

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31
Q

Which government investments must be stated at fair value?

A

Required:
Participating interest-earning contracts (CDs affected by interest rate changes)
External Investment Pools
Open-end Mutual Funds
Debt Securities (Treasury Bills)
Equity Securities (C/S, warrants, options, rights)

Exempt (optinal) = nonparticipating (most cd’s), money market or participating with maturity <= 1 year

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32
Q

What are the 3 categories of net position reported for government-wide and proprietary funds?

A
  1. Net investment in capital assets
    CA - Accum Depr + Dfrd Out - Related Debt - Dfrd In
  2. Restricted net position
    RA - Liab - Dfrd In (Separate Expendable & Nonexpendable/Permanent)
  3. Unrestricted net position
    UA - noncap Debt + Dfrd Out - Dfrd In
33
Q

What are the 3 sections of the Comprehensive Annual Financial Report (CAFR)?
GOV

A
  1. Introductory (not required for MEFRR*)
  2. Financial (MEFRR + additional CAFR requirements)
  3. Statistical (not required for MEFRR*)

*Minimum External Financial Reporting Requirements

34
Q

What are Introductory section components of CAFR?

GOV

A

Requisite:

  1. Table of contents
  2. Letter(s) of transmittal
  3. Items deemed appropriate by mgmt

Common:
Officials List
Org Chart
GFOA Award

35
Q

What items are required by Minimum External Financial Reporting Requirements (MEFRR)?
GOV

A 
Mgmt Discussion & Analysis (MD&A)
Government-Wide Financial Stmts (GWFS)
Governmental Fund Fin Stmts (GFFS)
Proprietary (PFFS)
Fiduciary (FFFS)
Notes to Fin Stmts (NFS)
Other required supplementary info (RSI)
36
Q

What are Financial section components of CAFR?

GOV

A
  1. Auditor’s Report
  2. MEFRR
  3. Combining Financial Statements (Nonmaj Gov, Nonmar Enterprise, Internal Svc, Trust, Agency individual stmts presented side by side)
    4a. Individual Fund Statements (one fund in more detail due to materiality or need to present budget/actual)
    4b. Schedules
  4. Narrative Explanations (Notes to Combining/Indiv)
37
Q

What are Statistical section components of CAFR?

GOV

A

Statistical Tables, generally for the last 10 years) about:

  1. Financial Trends (GW net position/changes, GF balances/changes)
  2. Revenue Capacity (Bases, Rates, Payers, Property Tax)
  3. Debt Capacity (Outstanding/Bonded Ratios, Direct/Overlapping Debt, Limitations)
  4. Demographic/Economic (Indicators/Employers)
  5. Operating (Employees, Indicators, CA)
38
Q

Describe MD&A requirements and components.

GOV

A

Presented prior to basic financial statements (BFS), required to accompany BFS, relates only to BFS, basis is strictly KNOWN facts, conditions, decisions.

Focus is PG, distinguishes for components
Includes L/T and S/T analysis
Compares current year to prior
Requisite/Only Topics:
1. discuss BFS
2. present GW fin info
3. analysis of GW fin pos and results ops
4. analysis of bals/trans individual funds
5. analysis sig var Gen Fund budget/budget changes/actuals
6. CA and LT Debt activity
7. conditions & act/est mtnce/preservation of infrastructure CA
8. known facts, cond, dec material effect on net pos/res ops

39
Q

What may be included in RSI after notes in MEFRR?

GOV

A
  1. Budgetary Comparison for General/Major Special Rev Funds
  2. Infrastructure CA info (modified approach*)
  3. Pension/Postemployment benefits schedules
  • unlimited life assets with no depreciation, capitalize only additions/improvements, expense otherwise
  • include 3 most recent condition assessments, est amt to maintain/preserve beg FY and actuals last 5 yrs
40
Q

How do governmental fund revenues differ from commercial concept of revenues?

A
  1. levied (taxes) or result from other nonexchange transactions
  2. related financial resources must be legally and physically available for use to be recognized (otherwise liability exists for deferred revenues)
41
Q

When should property taxes be recorded as deferred revenue?

GOV

A

If the receivable is collected or recognized in advance of being levied.

42
Q

If actual historical cost of general infrastructure assets is not available, how is the asset reported?
GOV

A

At estimated historical cost

43
Q

How is the adoption of the operating budget recorded in the general ledger?
GOV

A

Debit Estimated Revenues and credit Appropriations (approved expenses) and debit/credit Budgetary Fund Balance account for the difference.

Periodically compare debit balance in Estimated Revenues with credit balance in Revenues.

44
Q

What is a current refunding and how is it recorded?

GOV

A

Using proceeds of new debt to retire old debt. Proceeds are not revenue. Payment of old debt not expenditure. Net proceeds (less any attorney or uw) are other financing sources

Record in GWFS:

Deferred Interest - Difference between reacquisition costs (call premium and issuance costs) of old debt and net carrying value of new (net of premium/discount) are amortized over the shorter of the life remaining on the old or the new as a component of interest.

Premium/discount on new amortized over life of the new.

45
Q

What are significant unspent proceeds?

GOV

A

Deferred Inflows
These are substracted from each category of net position (net investment in capital assets, restricted and unrestricted)

Deferred outflows are added back to net inv in cap ass and unrestricted np

46
Q

What is a Special Item?

GOV

A

a) unusual and infrequent transaction*
b) significant transaction under mgmt’s control

  • if only a not b, then Extraordinary Item

Both items are reported separately at the bottom of Statement of Activities

47
Q

Where are narrative explanations of combining and individual fund statements presented?
GOV

A

Directly on statements, divider pages or separate section.

NOT Notes, RSI or MD&A

48
Q

Define expenditure.

GOV

A

A decrease in the financial resources of a governmental entity

Recorded under Modified Accrual Basis when measurable, related liability incurred except for unmatured interest and principal on l/t debt which is recognized when due (Current financial resources measurement)

Unlike expenses, include capital outlays for general assets and repayment of principal of general l/t liabilities
Assets are recorded, capitalized or depreciated within any fund

49
Q

How are employer pension contributions reported?

GOV

A

Expenditures*
From governmental fund such as general fund

*reciprocal interfund activity if trust fund is part of the government rather than independent payee

50
Q

Define nonreciprocal interfund activity and give examples.

GOV

A

routine or recurring operating transfer between funds, not a loan intending to be repaid
“other financing use (donor) / source (recipient)”

general fund contributes capital to enterprise fund
general fund transfer to capital projects fund
general fund operating subsidy to enterprise fund

51
Q

Define derived tax revenues.

GOV

A

taxes assessed on Exchange transactions

52
Q

What are the criteria for reporting as a major fund?

GOV

A

General Fund (ALWAYS major)

Funds in which the following of any fund are 10% or more of the corresponding total of that category for relevant governmental or enterprise funds AND > 5% of the combined governmental/enterprise total by category:

assets & deffered outflows
liabilities & deferred inflows
revenues
expenditures (expenses)

> = 10% G Total for G funds OR >= 10% E Total for E funds
AND >= 5% Overall Totals by Category

Does not apply to Internal Service Funds (combined for financial reporting and presented individually with combining statements)

53
Q

What is the primary focus of governmental fund accounting?

A

sources, uses and balances of financial resources
(current financial resources management)

compliance (legal/contractual)

Financial Control/Legal Restrictions

54
Q

For an imposed nonexchange form of tax, when are assets (cash or receivables) recognized?

A

The earlier of:
Period when enforceable legal claim arises
Period received ( equate to period FOR which tax is levied not actual date of levy)

55
Q

How does a government account for a contributed asset?

A

Government funds do not capitalize or depreciate assets only recognize expenditures.

In the case of a contributed assets, no asset or expenditure is recognized.

56
Q

How are interfund receivable and payables accounted for?

GOV

A

As assets and liabilities.

They are not netted.

57
Q

How is interest derived from borrowings to support programs reported?

A

As a direct expense of the program

Remaining interest is reported as a separate line as an indirect expense

Indirect expense is not reported at the bottom (?), may be allocated but allocation not required.

Interest from long term debt is generally indirect, reported separately and not allocated.

58
Q

How are revenues, discounts and allowances reported?

A

Report revenue in a single amount net of discounts or allowances (with discounts and allowances parenthetically disclosed on the face).

59
Q

How is impairment of a capital asset of a general/governmental fund reported?

A

Capital assets are not reported in general funds due to reporting from current financial resources perspective

Reported as a Program Expense in the Statement of Activities in Government-Wide statements unless stated separately as an Extraordinary (unusual and infrequent) or Special (unusual, infrequent and sig trans under mgmt control) item.

60
Q

How are the costs of securities lending transactions recorded?
GOV

A

As expenditures or expenses in the operating statements

NOT netted with interest revenue or income

61
Q

Minimum requirements for Budgetary Comparison Schedule

GOV

A

Original budget
Final budget
Actual inflows, outflows and balances
(Variance presentation is encouraged but not required)

62
Q

Reporting for a bequest in which principal is maintained and use of earnings for a specific purpose
GOV

A

Governmental Funds -

Principal -
Permanent (Gov) Fund - Statement of revenues, expenditures and changes in fund balance
Included in Statement of Net Position (GW)

Earnings -
Special (Gov) Fund - Statement of revenues, expenditures and changes in fund balance
Included in Program Revenues* on Statement of Activities (GW)

*since purpose is specified

63
Q

Record Budget Adopted

A

Estimated Revenues DR
Appropriations CR
Budgetary Fund CR/DR (plug)
(Estimated Transfers CR)

64
Q

For Budgetary Control

A

Unencumbered Appropriations = Appropriations - Expenditures - Encumbrances

65
Q

5 Fund Balance Classifications

Note not encumbrances

A

Nonspendable - nonmonetary (prepaids, inventory)
Restricted - externally designated
Committed - designated by highest authority (legislature)
Assigned - designated by management
Unassigned - undesignated (only used in General Fund)

66
Q

Account for an advance for a grant that is expenditure driven.

A

Deferred revenue upon receipt of actual cash advances if receipt is in a prior period (prior to expenditures).

Move to revenue as expenditures are made in the applicable period.

If expenditures exceed advances in the applicable period, no deferred revenue remains even if more has been promised and will be transferred.

67
Q

Classification of expenditures

A

Hierarchical:

  1. by fund
  2. by program
  3. by organizational unit
  4. by activity
  5. by character
  6. by object (what is ultimately acquired e.g. Salaries & Wages)
68
Q

Reconciliations to GWFS

A

Required on the face or as a separate schedule for governmental funds (BS and SRE&CFB) and proprietary funds statements (SNP and SRE&CFNP)

69
Q

A primary government entity

A

ALL 3 criteria:

  1. Separately elected governing body
  2. Legally separate
  3. Fiscally independent (other state/local govt’s)
70
Q

Define “fund”

GOV

A 
fiscal and accounting ENTITY
w/a self-balancing set of ACCOUNTS
RECORDING cash and other financial RESOURCES
which are SEGREGATED
for the PURPOSE
of carrying on specific ACTIVITIES
or attaining certain OBJECTIVES
71
Q

Recognizing Revenue

GOV Funds vs GW

A

GW - Timing and collection does not affect GW. Recognized net of estimated UC (NRV current year)

Funds - must also be “available”

72
Q

Defined contribution plan disclosure

A

types of employees covered

employee/employer obligations to contribute

73
Q

If appropriations exceed actual expenditures

GOV

A

then the unassigned fund balance increases at year end (where budgeted decreases/increases are debited/credited direct to unassigned fund balance)*

*alternatively the budgetary fund balance account is used and unassigned fund balance is unaffected

74
Q

Special Revenue (Governmental) Funds

A

Used to account for resources that are either restricted or committed for specific purpose (other than Capital outlay or Debt Service)

Examples: gas tax to finance street mtnce, hotel tax for development, expendable trust gift to fund a program

75
Q

Encumbrances and Liabilities

A

Encumbrances are executory (unperformed) contracts for goods or services (from issue of PO or approval of K’s) and are not liabilities because goods/services not received. It is an ESTIMATE of EXPENDITURE that will result.

Categorize Encumbrances as:
Committed/Assigned Fund Balance (unless already restricted)

Unencumbered Appropriations = Appropriations - Expenditure - Encumbrances

76
Q

3 criteria in order to record an art work or historical treasure as either an asset or expense (otherwise asset).

A
  1. item has to be held for public exhibition, education, or research as a public service
  2. it is protected, cared for, and preserved
  3. a policy has to be in place requiring the proceeds from any future sale to be used to acquire other items for the government’s collection

If any of the criteria is not met, the cost (or fair value if received by donation) must be recorded as an asset.

77
Q

GWFS Statement of Activities

A
  1. Show net financial burden or benefit per each separate function of government (education, public safety) which produces a net financial burden.
  2. Show general revenues (property, sales, income taxes) to show major funding to offset net financial burden.
78
Q

Public vs Private Educational Institutions and Financial Reporting

A

Similar:
Private (NFP) follow FASB, therefore accrual
Public (GOV) follow GASB, but for simplicity report as a single enterprise fund (Proprietary) so also accrual.

Different:
Private NFP must report on Unrestricted, Temporarily Restricted and Permanent while Public GOV do not.

79
Q

The term “interperiod equity”

GOV

A

Refers to whether revenues and spending align each period.

If revenues are higher (a surplus), then money is carried forward to be used in future years. If spending is higher, then a deficit occurs that must be paid for in the future.

Budget entry shows whether the budget is balanced or whether a surplus or deficit is projected.

FAR (9 decks)

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