F9 Flashcards
Operational Accountability Goal vs Fiscal Accountability Goal
Operational = efficiency and effectiveness Fiscal = compliance
Two Types of Reporting
Normal:
- MD&A
- Government-Wide Financial Statements
- Fund Statements
- Notes to Financial Statements
- Required Supplementary Information
- Other Supplementary Information
Comprehensive Annual Financial Report (CAFR)
- Introductory
- Basic Financial Statements and Required Supplementary Information
- Statistical Section
Primary Government Requirements
- Separately elected governing body
- Separate entity
- fiscally independent
Blended Presentation Requirements
- board is substantively the same
- component unit serves the primary government exclusively or almost exclusively
- component unit is not a separate legal entity
Reporting NFP Entities as a Component Unit Criteria
- resources are for the near-exclusive benefit of the primary government
- government has access to a majority of the resources
- resources held by the NFP are significant to the primary government
Are fiduciary funds reported on the government-wide financial statements?
No
Where is the analysis of significant variations in the original and final budget found?
MD&A
*does not include a variance analysis or a reconciliation of fund statements to government-wide statements
Must construction period interest be capitalized on the government-wide financial statements?
*it is not required for governmental activities
Modified Approach for reporting Capital Assets
Requirement 1: have an inventory and a summarized condition of assets
Requirement 2: a complete condition assessment at least every three years
Artwork & Historical Treasures Rules
- can elect not to capitalize if:
1. held for public exhibition
2. collection is protected and cared for
3. proceeds from sales of collection items be used to acquire other items for collections
Examples of component units
Rescue Squad & Board of Education
3 Categories for Government-Wide Revenues
- S ervice Charges
- O perating grants/contributions
- C apital grants and contributions
Major Fund Rules
- Larger than 10% of all revenues/expenses, asset, etc. of governmental funds or larger than 10% of all enterprise funds
and - larger than 5% of revenues, expenditures, etc. of all governmental and enterprise funds combined
- general fund is always a major fund
- internal service funds are not used in the calculation of these amounts
Reconciliation of Fund to Government-Wide
1. Balance Sheet G RaSPP Fund Balance \+ Assets (non-current) (NET OF DEPRECIATION) - Liabilities (non-current) \+ Service fund net position B asis of accounting A ccrued R evenues and E xpenses
2. Statement of Revenues, Expenditures, and Change in Fund Balance G RaSPP Net change - Other financing sources \+ Expenditure - capital outlay (NET OF DEPRECIATION) \+ Service fund net income B A S E
For Fund Financial Statements, where is the statement of cash flows required?
*for proprietary funds
Classifications of Proprietary Fund Cash Flow Statement
- Operating
- Noncapital Financing
- Capital Financing
- Investing
What items are included in Noncapital Financing Cash Flows?
- property taxes (not restricted for capital use)
- operating transfers in/out
- operating grants or subsidies
Which cash flow method must be used by proprietary funds?
- direct method
* also includes a reconciliation at the end
General Governmental Disclosures
- description of government-wide activities
- policies relating to elimination of internal activity
- description of the modified approach if used
- segment information
- measurement standard for measurable and available
Required Supplementary Information
Budgetary comparison schedules showing the original budget, final budget, and actual amounts
*variance computation between budgets and between actual and budget are both optional
- infrastructure and assessed condition and cost to maintain for past 5 years
- pension information for the 10 most recent fiscal years
Reciprocal vs Non-reciprocal Interfund Activity
Reciprocal
- interfund loans
- interfund services provided and used (sales/expenses)
Non-Reciprocal
- Interfund transfers
- Interfund reimbursements
- eliminated on the GOVERNMENT-WIDE FINANCIAL STATEMENTS
- shown as transfers, due to/from on the fund financials
How should transactions between the primary government and its fiduciary funds be reported?
*expensed, as if it was between external parties
Interfund receivables and payable are titled
Due to/due from
Which method of accounting do NFPs use?
full accrual accounting
Required Financial Statements for NFPs
- Statement of Financial Position
- Statement of Activities
- Statement of Cash Flows
(4. ) Statement of Functional Expenses (voluntary health and welfare organizations are REQUIRED)
Components of Financial Position
Assets - Liabilities = Net Assets
Are internally restricted funds listed as restricted?
NO
Net Asset Classifications for NFP
Unrestricted
Temporarily Restricted
Permanently Restricted
How are over-expenditures in temporarily restricted assets handled?
*they are treated as a decrease in unrestricted net assets
Expenses decrease which net asset classification?
*expenses always decrease unrestricted net assets
Which method of cash flow may be used for NFPs?
*direct or indirect method
Restricted donor contributions are what type of cash flow?
Financing
If a marketable security meets the definition of a cash equivalent but is restricted by a donor, how is it classified?
*not included as a cash equivalent
Example of fundraising expenses
*unsolicited merchandise sent out
Functional Classification of Expenses
- Program Support Expenses
- Fund-raising expenses
- Management and general costs
- Multiple cost items
Revenue Recognition for:
- Cash Contributions
- Unconditional Promises
- Conditional Promises
Cash Contribution = revenue when received
Unconditional Promises = revenue when received
Conditional Promises = revenue when the condition is met
*payment ahead of time is credited to REFUNDABLE ADVANCE
Donated Services Requirements
- enhance or create a non-financial asset
or - require specialized skills that the provider possesses and would otherwise have been purchased by the organization
DR: Expense
CR: Contributions–non-operating revenue
Donated Materials Recording
DR: Asset
CR: Contribution: Support
Pass Through Organization
DR: Expense
CR: Unrestricted contributions-supplies
Account to use when restrictions are removed
DR: Satisfaction of time restriction
CR: Satisfaction of time restriction
*revenue can be temporarily restricted and an allowance for doubtful accounts can be set up as well
Restricted Contributions Accounting Entries
*will usually include a DR: to expense and CR: to cash in the unrestricted fund as the assets are released from the restriction
Exchange Transactions for Members
Amount Transferred
=Contribution Revenue
Recipient Accounting: Holding Resources for Others
Without Variance Power
DR: Asset
CR: Refundable advance
Granted Variance Power
DR: Asset
CR: Contribution revenue
Financially Interrelated (manages on behalf of beneficiary)
DR: Asset
CR: Contribution revenue
Beneficiary Accounting: Holding Resources for Others
*recognized unless the recipient is explicitly granted variance power
Financially Interrelated = Equity
DR: Asset
CR: Equity transaction
Pools of Assets - Beneficial Asset = Revenue
DR: Beneficial Interest
CR: Contribution Revenue
Recognized Receivable and Contribution Revenue
DR: Receivable
CR: Contribution revenue
Gain/Loss Treatment for NFP
increase/decrease to UNRESTRICTED assets UNLESS it is restricted, at which point it increases/decreases temporarily or permanently restricted assets
*may be recorded in unrestricted if the stipulations are met in the same reporting period as the gains/losses
Endowment Fund Types - NFP
- Permanent Endowment
- Term Endowment
- Quasi-endowment (governing body; unrestricted net asset)
Gross Revenue from Tuition and Fees Calculation
Assessed Student Tuition and Fees
=Gross Revenue from Tuition and Fees
Patient Service Revenue vs. Net Patient Service Revenue
Gross Patient Service Revenue
=Net Patient Service Revenue
Other Operating Revenue
Non-Operating Revenue = unrestricted
Donated Services are what type of revenue for NFPs?
non-operating
How should income be reported for voluntary health and welfare organizations?
*break out each revenue type by source and whether it is restricted or unrestricted
Purpose of Statement of Functional Expenses
*assess an organization’s service efforts including the cost of services and how resources are utilized
- program support services
- fund-raising
- management and general
