Exam 1 Flashcards
government officials need to exercise a healthy does of __________
professional skepticism
what is professional skepticism
is an attitude that includes a questioning mind and a critical assessment
mission of the government
provide services for the betterment of society
what is the governing force of a government entity
budget
Nonprofits and charities may have to file an IRS Form _____
990
What is the board that dictates Generally Accepted Accounting Principles for businesses and nonprofits?
Financial Accounting Standard Board (FASB)
What is the board that dictates GAAP for state and local governments?
Governmental Accounting Standards Board (GASB)
What is the board that dictates GAAP for federal government?
Federal Accounting Standards Advisory Board (FASAB)
Sarbanes-Oxley made it to where FASB and GASB are funded by ______________________
independent sources
What was the latest GASB was number _______
103
What is GASB 103?
Improvements to financial reporting model
What does the Chief Financials Officers Act of 1990 do?
improve the financial management and accountability of the United States government
Governmental activities are funded primarily by ________ & ___________
Primary taxes and grants
Business activities are funded by _____________ / _______________
user feeds/ revenues
Governmental activities focus: ___________________________
available current financial resources
Business activities focus:
___________________________
all economic resources
Governmental activities accounting method: _________________________
Modified accrual basis of accounting
Business activities accounting method: _______________________
accrual (activity and cash don’t happen at the same time)
Governmental activities type of funds: ________________________
governmental funds
Business activities type of funds: _______________________________
proprietary funds
How many governmental funds are there?
5
What are the 5 governmental funds
- general fund
- special revenue
- debt service
- capital projects
- permanent
How many propriety funds are there?
2
What are the 2 propriety funds?
- enterprise
- internal service
What is an enterprise fund?
Provides business services to external customers (ex: water company)
What is an internal service fund?
Provide business services to internal customers (ex: state of LA has vehicles so of auditor needs to go on trip they rent vehicle and the department pays)
Which fund is the most significant of all the governmental funds?
General fund
What are some characteristics of a general fund
largest number of transactions; everything not legally or contractually set aside for a specific purpose
Every government must have one and only one of which governmental fund?
General fund
What is a special revenue fund?
The tax or the source is “special” and comes with constraints
What are two ways that constraints could be placed on a special revenue fund
- Government that grants it
- or restricted by voters
Does debt appear in the debt service fund? Yes or No
No
What does a debt service fund do?
Accumulate resources to repay long term debt; sets aside money to pay debt when debt comes due
What fund has money that officials agree they HAVE to put aside?
Debt service fund
What two funds are often times related?
Capital projects fund and debt service fund
What is a capital projects fund?
Account for resources committed/ restricted to a capital project
Do capital projects/ assets appear in the capital projects fund? Yes or No
No
What in a permanent fund can be spent?
the interest made from the fund but not the principal
The principal can NEVER be spent in which fund
the permanent fund
The permanent fund must do what?
Must benefit the government or its citizens
(formula ) Fund balance =
assets (+ deferred outflows) - liabilities (+ deferred inflows)
What are the five categories of fund balances
- non-spendable
- restricted
- committed
- assigned
- unassigned
What is a non-spendable fund balance
only can spend the interest/ earnings
What is a restricted fund balance
constrained by a 3rd party
What is a committed fund balance
constrained internally by highest authority or elected body
What is an assigned fund balance
expressed explicit intent, lower authority
What is an unassigned fund balance
general government services
What are a required sections of the Annual Comprehensive Financial Report
MD&A and statistical section
what kind of funds are in fund financial statements
governmental and proprietary
information about the fund balance sheet
lists funds individually; major funds individual; non-major funds combine
what accrual do governmental funds use in the fund balance sheet
modified accrual
what accrual do proprietary funds use in the fund balance sheet
full accrual
Governmental wide statement of net post categorizes as either: _________________ or ______________
governmental activities or business type activities
What basis do statement of net post use
full access basis
How many funds are there for non profits?
2
What are the 2 types of non profit funds
restricted/ nonrestricted
What does the governmental wide financial statement do?
Provide a full view of the financial situation of a governmental entity
What are some example of who may want to use a governmental wide financial statement?
lenders, bondholders, and bankers
Can a government have multiple capital project and debt service funds? Yes or no and why
Yes if they have multiple capital projects and debt issuances
Not-for-profit entities typically use which type of accounting?
Fund accounting
What do not-for profit entities typically fall under: FASB or GASB?
FASB
Are not-for-profits required to use fund accounting?
No
Do not-for-profit entities have to distinguish between restricted and unrestricted resources?
Yes
What type of balance does a general fund have?
Unassigned balance
What is the only fund with an unassigned balance?
general fund
what is a government bond?
a bond issued by government and backed by full faith and credit of issuing government
what is a revenue bond?
a bond only backed by the revenues it is financing
which bond (revenue or government) has interest rates that are a little higher and riskier?
revenue
What is this an example of: developer come to baton rouge and says they are going to put in a mall but need a road widened so the government will out taxes for this
tax increment financing
What type of funds have a statement of cash flows?
proprietary funds
What type of funds don’t have statement of cash flows
governmental funds
fund balance + estimated revenues=
available resources for the year
Available resourced for the year should ______________________
meet or exceed expenses
who executes the budget
organization’s executive branch
Governments integrate their _______________ into their accounting systems
budgets
On what basis are budgets prepared
GASB has no control over the budget
what basis does GASB recommend that the budget is prepared on
modified accrual basis
governments and some not-for-profits record _____________ to help prevent overspending the budget
encumbrances
the entry to record an encumbrance is usually prepared when a purchase order is .. (3 answers)
issued, contract signed or commitment made
How are encumbrances recorded
with a journal entry
What do encumbrances do
put a restraint on a fund balance
a pension is what kind of a fund?
fiduciary
what is a fiduciary fund?
a fund of trust (holding on behalf of someone else)
Do fiduciary funds show up on the face of the financial statement?
No
Why do fiduciary funds not show up on the face of the financial statement?
it is not the state’s money (instead disclosed in the footnotes)
what are the two types of retirement plans?
1.defined contribution
2. defined benefit
what is a defined contribution?
benefit in future is not defined
what is a defined benefit?
know exactly what the monetary benefit will be
defined contribution is usually called what:
a 401K
What is GASB Stmt 68
participant from a multi employer plan must report their prorita pension obligation on their financial statements
What are some key uncertainties that come with a pension
employee life expectancies; employee turnover rates; future wages & salaries rates; the investment
Do pension plans get get audited?
Yes
What are the four types of fiduciary funds
- pension and other employee benefit trust funds
- investment
- private purpose trust
- custodial
What does OPEB stand for
other employee benefits
examples of OPEB
health insurance, paid time off, life insurance
