CRAM W3 - GOV and NPOs

Question 1

Nongovernmental NPO’s are required to report FS with what main focus?

Answer 1

An economic resources measurement focus

Question 2

How are operating expenses for a nongovernmental NPO reported?

Answer 2

FASB Statement 11: operating expenses should be reported ONLY in the Statement of Activities under Changes in Unrestricted Net Assets.

Question 3

According to SFAS 117, what type of entity is required to include a Statement of Functional Expenses in YE reports?

Answer 3

Voluntary health and welfare organizations - human service organizations that receive public funds in order to provide welfare services at little to no cost.
Other NPO orgs are encouraged to supply this statement but not required.

Question 4

How is a donation for endowment with donor stipulations on the income reported for a Health and Welfare Org?

Answer 4

The endowment is included in permanently restricted net assets, and any income (net of expenditures) is included in temporarily restricted net assets.

Question 5

How should a nongovernmental NPO classify G/L on investments purchased with permanently restricted assets?

Answer 5

Unless explicitly restricted by donor or law, (net) G/L should be reported on the Statement of Activities as increases or decreases in Unrestricted Net Assets.

Question 6

How are state appropriations to a state university (reporting as engaged only in business type activities) reported in the FS?

Answer 6

As Nonoperating Revenues in the Statement of Revenues, Expenses, and Changes in Net Position
This type of entity reports FS like an Enterprise Fund

Question 7

How are Tuition Scholarships reported for a private university?

Answer 7

Tuition Revenues are reported NET of Scholarship Allowances and Uncollectible Amounts.

Question 8

Are pledge donations for a university reported as revenue when received?

Answer 8

Yes; pledges are recognized as revenue under ‘Temporarily Restricted Assets’ until they are received.

Question 9

What are the criteria for recognition of donated services as revenue?

Answer 9

1. Specialized skills
2. Persons providing services possess those skills (1)
3. Services would have been purchased had they not been donated.

Question 10

What is the FASB requirement for NPO recognition of pledge revenues?

Answer 10

FASB Statement No. 116: Pledges must be recognized on the accrual basis net of estimated uncollectibles.

Question 11

What are the 5 elements of the Statement of Financial Position under GASB?

Answer 11

Assets, Liabilities, Deferred Inflow & Outflow of Resources (consumption and acquisition of net assets applicable to the reporting period), and Net Position

Question 12

What is GASB Statement No. 5?

Answer 12

Service Efforts and Accomplishments [SEA] Reporting (revised Statement No. 2)

Question 13

What are the elements of SEA reporting under GASB Statement No. 5?

Answer 13

Measures the following:

1. Service Efforts (inputs) - the resources applied to a service
2. Service Accomplishments (outputs) - what was achieved with resources used [[Also outcome - results of services provided]]
3. Efficiency - measures which relate 1&2
   * GASB states that 1 should really only be utilized as a component of 3 and not as a standalone.

Question 14

Define the purposes of financial reporting per GASB?

Answer 14

1. Accountability - public has a right to know
2. Interperiod Equity - related to 1; whether CY revenues are sufficient to pay for CY services or taxpayers required to assume burdens for previous services

Question 15

What is a residual equity transfer?

Answer 15

Nonrecurring transfers between governmental funds

Question 16

Per GASB Statement No. 1, what are the four implications of a legally adopted annual budget?

Answer 16

1. expression of public policy
2. expression of financial intent
3. form of control
4. potential basis for performance eval

Question 17

Which governmental fund uses accrual accounting?

Answer 17

Enterprise Fund - services are provided to the public for a charge

Question 18

What is a motor pool fund?

Answer 18

Type of internal service fund that charges other parts of government for services provided on a reimbursement basis.

Question 19

If a city integrates budgetary accounts into its general fund, when are capital and operating grants recognized?

Answer 19

Grants should be recognized as revenue as soon as they are susceptible to accrual. Expenditure of resources is a prime factor in determining accrual eligibility.

Question 20

What are the 3 governmental fund categories? What is the accounting basis for each?

Answer 20

1. Governmental Funds - Modified accrual
2. Proprietary Fund - Accrual
3. Fiduciary Fund - Accrual

Question 21

What are the fund TYPES within each fund category?

Answer 21

GOV: General, Special Revenue, Debt Service, Capital Projects, Permanent
PROPRIETARY: Enterprise, Internal Service
FIDUCIARY: Trust, Agency Trust

Question 22

What are the budgetary accounts and their purposes?

Answer 22

Appropriations - estimated expenditures (authorized spending)
Estimated Revenues - forecasted inflows
Estimated Other Financing Sources/Uses - interfund transfers or bonds
*Note that the normal balances for budgetary accounts are opposite of accrual counterparts

Question 23

What are the reporting requirements for budgetary accounting? What if the budget is not GAAP?

Answer 23

The budget must be included in the CAFR either as a part of the FS presentation or as portion of RSI. Format: original, final, and actual on budgetary basis (recon to GAAP)

Question 24

Are adjustments made to the initial budget throughout the fiscal period?

Answer 24

No! Any entries associated with purchases or inflows are entered in the encumbrance, expenditures, vouchers payable, and revenue accounts. The budget accounts only serve to show the initially budgeted amounts, and they are closed out in entirety at the end of the period.

Question 25

What happens with any Encumbrances that are OS at YE?

Answer 25

These represent OS PO’s or unfilled contracts. The required Fund Balance classification is restricted, committed, or assigned depending upon the authority behind the amount.

Question 26

If a budget calls for an anticipated transfer to another fund during the year, is this amount accounted for in the budgetary entries at beginning of the period?

Answer 26

Yes. IE, if an anticipated transfer of $900k to Debt Service Fund is approved at the initial budget creation, the entries would include this amount of transfer: the credit to Budgetary Fund Balance would be less this $900k.

Question 27

When is revenue recorded in the fund financial statements under GASB? In Government-Wide FS?

Answer 27

When it is measurable and available - NOT when earned like GAAP. GW - when there is an enforceable claim (tax levy), net of estimated uncollectibles.

Question 28

In the event that the appropriations in a given period are not fully expended, where is the balance reported in the Government-Wide FS?

Answer 28

Fund Balance Assigned - funds in this category are n/a for appropriation in the next year.

Question 29

What is GASB Statement No. 54?

Answer 29

Requires that amounts which can only be used for a specific purpose, because of constraints by formal action of the government’s highest level of decision making authority, should be reported as Committed Fund Balance.

Question 30

In the event that there are outstanding encumbrances at YE and all resources are considered to be committed, how are those encumbrances reported in the YE external FS?

Answer 30

Per GASB Statement No. 54, significant encumbrances should be disclosed in the notes to the FS.

Question 31

Which activities should be excluded from a government’s fund financial statements when they are converted to Government-Wide Statements?

Answer 31

Fiduciary activities are always excluded because the government doesn’t have ownership or stake in those activities for which it acts as trustee.

Question 32

What is the minimum reporting requirement for a government?

Answer 32

General Purpose Financial Statement is the minimum requirement for governmental reporting, NOT CAFR. This includes MD+A, Basic FS, and RSI.

Question 33

Where is the independent auditor’s opinion included in the CAFR?

Answer 33

Financial Section

Question 34

The CAFR of a state or local governmental unit includes fund-level statements for which funds?

Answer 34

All three: Governmental, Proprietary, Fiduciary

Question 35

Which funds are reported in the government-wide FS?

Answer 35

All governmental funds are reported in the GW FS, but proprietary and fiduciary funds are only reported at the fund-level.

Question 36

What method is required by GASB for reporting the Statement of Cash Flows?

Answer 36

Direct Method - reconciliation to operating income is also required in an accompanying schedule

Question 37

How may a church pool its investments?

Answer 37

All investments may be pooled (whether from restricted or unrestricted funds), and G/L must be equitably allocated among participating funds.

Question 38

Within a Statement of Changes in Fiduciary Net Position, what do the titles for ‘additions’ and ‘deductions’ describe?

Answer 38

These are inflows and outflows of resources, not titled as revenues and expenses because those descriptors are not relevant to the activities of a Fiduciary Fund.

Question 39

Which fund would be used to account for a capital grant required to be equally distributed among municipalities in a governmental unit?

Answer 39

Agency Fund

Question 40

What FS are required for Fiduciary Funds?

Answer 40

Statement of Net Position and Statement of Changes in Net Position - Assets offset Liabilities, and Net Position always = 0.

Question 41

What is a Private Purpose Trust Funds, as opposed to a Permanent Fund?

Answer 41

PPTF - associated with a non-governmental purpose.

Perm Funds are associated government related purposes.

Question 42

What is the funded ratio of a pension plan?

Answer 42

Compares the actuarial value of plan assets to actuarial accrued pension liability.

Question 43

How does the General Fund report a contribution to the Debt Service Fund for a general obligation bond?

Answer 43

Operating Transfer - GF transfers to the Debt Service Fund are examples of routine transfers of resources between funds to subsidize current activities.

Question 44

How are Enterprise Funds reported in the GW FS?

Answer 44

Under the business-type activity section of the GW FS.