F8: Governmental Accounting Overview

Question 1

What are restricted fund balances?

Answer 1

Resources whose use has been limited by external sources as creditors (ex: debt convenants), contributors, other governments, laws, constitutional provisions or enabling legislation

EXTERNAL AUTHORITIES

Question 2

What are non-spendable fund balances?

Answer 2

Non-spendable fund balances represent resources in a form that cannot be spent (ex: inventories or prepaid expenditures) or are legally or contractually required to remain whole (ex: perm fund principal)

PREPAID EXPENSES, INVENTORIES

Question 3

What are committed fund balances?

Answer 3

Committed fund balances represent resources that only can be used for specific purposes pursuant to constraints imposed by formal action of the government’s highest level of decision-making authority

RESOLUTIONS, ENCUMBERED APPROPRIATIONS

Question 4

What are assigned fund balances?

Answer 4

Assigned fund balances are constrained by the government’s intent to be used for specific purposes but are neither restricted nor committed.

GOVERNMENT INTENDS TO OBLIGATE (DESIGNATE)

Question 5

What fund would show a positive amount in the unassigned fund balance?

Answer 5

The general fund.

Question 6

What are unassigned fund balance?

Answer 6

Unassigned fund balance is the residual classification for the general fund. This classification represents fund balance that has not been assigned to other funds and has not been restricted, committed, or assigned to specific purposes within the general fund.

ONLY GENERAL FUND SHOULD HAVE POSITIVE UNASSIGNED FUND BALANCE

Question 7

Why would there be a negative unassigned fund balance?

Answer 7

Over expenditure of resources in other funds (special revenue, debt service, capital projects, perm)

Question 8

What is GRaSPP?

Answer 8

These are government funds. Modified accrual basis of accounting. Current economic resources focus. Consists of: General fund, Special Revenue, Debt Service, Capital Projects, Permanent

Question 9

What are the proprietary funds?

Answer 9

SE: Internal Service, Enterprise

Question 10

What are the fiduciary funds?

Answer 10

PAPI: Pension, Agency, Private Purpose, Investment Trust Funds

Question 11

What is a fund?

Answer 11

A fund is a fiscal & accounting entity with a self balancing set of accounts recording cash and other financial resources, together with all related liabilities and residual equities or balances, and changes therein. Fund resources are segregated for the purpose of carrying out specific activities or attaining certain objectives.

Question 12

What is the order of restrictive classification of governmental fund balances?

Answer 12

From most to lease restrictive:

1) Non-spendable
2) Restricted
3) Committed
4) Assigned/Unassigned

Question 13

What are permanent funds?

Answer 13

Perm funds are used to report resources that are legally restricted to the extent income, and not principal, will be used for purposes supporting by a gift endowment and the library is intended to support the needs of the general community, not a specifically identified individual.

Question 14

What are private purpose trust funds?

Answer 14

These are fiduciary relationships that do not meet the definition of a pension, agency , or investment trust fund and are intended for the benefit of SPECIFIC individuals, private organizations, or other governments.

Question 15

What are investment trust funds?

Answer 15

Investment trust funds are used to account for external investment pools.

Question 16

What are special revenue funds?

Answer 16

Special revenue funds account for revenues from specific taxes or other earmarked sources that (by law) are restricted or committed to finance particular activities of a government.

Question 17

What is the paramount objective of financial reporting for state and local governments?

Answer 17

ACCOUNTABILITY. Government (and NFP) organization reporting is designed to demonstrate the accountability of each organization for the stewardship of the resources in their care. Governments do NOT measure net income or increase in wealth as businesses do but are focused on providing efficient and effective DELIVERY of services with public resources. BOTH operational and fiscal accountability are important.

Question 18

What are secondary objectives of financial reporting for governments?

Answer 18

Comparability, reliability, timeliness, and consistency.

Question 19

What is the measurement focus and basis of accounting for government-wide F/S?

Answer 19

Gov-wide F/S are presented using the economic resources measurement focus using the accrual basis of accounting, similar to commercial enterprises.

Question 20

What is the measurement focus of governmental fund accounting?

Answer 20

Current financial resources. (GRaSPP)

Question 21

What is the hierarchy of GAAP as it relates to GOVERNMENTS (GASB) ?

Answer 21

1) GASB statements and interpretations
2) GASB technical bulletins, AICPA industry audit guides, and AICPA statements of position
3) AICPA practice bulletins
4) GASB implementation guides

Question 22

What is categorized under the accounting principles and standards for not for profit organizations:?:

Answer 22

1) financial accounting standards board (FASB)
2) audit and accounting guides
3) industry-specific literature

Question 23

what is government accountability office (GAO)?

Answer 23

the GAO prescribes “government auditing standards” - Yellow Book standards for audits of governmental organizations and federal assistance programs, activities, and functions.

SINGLE AUDIT ACT - an audit based on federal financial assistance awarded to governments and NFP organizations - requires compliance with government auditing standards as well as specific single audit rules

Question 24

governmental accounting generally tested in the following three items:

1) fund structure
2) fund accounting
3) external reporting

what is related to these three items?

Answer 24

1) fund structure
- eleven fund types in three categories: governmental funds, proprietary funds, fiduciary funds
- fund F/S should be separately presented for governmental, proprietary, and fiduciary funds to report additional and detailed information about the primary government
2) fund accounting - (modified accrual / full accrual), measurement focus
3) external reporting
- reporting requirements include fund-based and government wide presentations supported by notes by the F/S and a variety of required supplementary information
- presentation of a recon of fund F/S to government-wide F/S to fully integrate reporting objectives required

Question 25

what are the government-wide presentations?

Answer 25

• consolidated F/S
• full accrual accounting
• economic resources measurement focus
• convert disaggregated fund- based F/S using multiple measurement focuses and basis of accounting –> single consolidated set of F/S which uses FULL accrual basis of accounting.
• financial activity of primary government classified in the following two ways:
  1) governmental activities
  2) business type activities

Question 26

what is major fund F/S?

Answer 26

• major funds presented using basis of accounting and measurement focus unique to each category of fund
• only major funds are presented, non major funds are displayed in the aggregate

Question 27

where is the

1) enterprise funds
2) internal service funds
3) fiduciary funds

located in the government wide F/S?

Answer 27

1) enterprise funds are in the business type activities section, with no reconciling items
2) internal service funds - merged with governmental funds activities in the government wide financials
3) fiduciary funds - presented individually as fund F/S but are EXCLUDED from government wide F/S position

Question 28

what is internal service fund?

Answer 28

IS funds are set up to account for g&s provided by designed departments on a cost reimbursement fee basis to other departments and agencies within a single governmental unit or to other governmental units

customers or the internal service fund are primarily INTERNAL

Question 29

what is enterprise fund?

Answer 29

to account for acquisition and operation of governmental facilities and services that are intended to be primarily (over 50%) self supported by user charges.

customer of the enterprise funds are primarily EXTERNAL

Question 30

what are examples of enterprise fund?

Answer 30

utilities (water, sewer), airports, transit systems

Question 31

what are the criteria that requires an enterprise fund?

Answer 31

1) activity of the fund is financed by debt secured by a pledge of fee revenue
2) laws require collection fees adequate to recover costs
3) pricing policies established to produce fees to recover costs