F9: Governmental Accounting [PART B] Flashcards
what are the two types of accountability related to governmental reporting?
1) operational accountability
2) fiscal accountability
what is operational accountability?
- focus of government-wide financial statements
- to report government meeting operating objectives efficiently and effectively, using all resources available for that purpose
what is fiscal accountability?
- focus of FUND F/S
- demonstrate the “compliance” (think fiscal piety) with public decisions concerning the raising and spending of public funds in short term
for governmental reporting, what is included in the basic F/S?
1) government wide F/S
2) fund F/S
3) reconciliation
4) notes to F/S
what financial statements are in government wide F/S?
1) statement of net position
2) statement of activities
since FULL accrual basis of accounting
what F/S are in fund F/S?
Remember fund F/S are split among three categories:
1) governmental funds
2) proprietary funds
3) fiduciary funds
1) governmental funds: GRaSPP
- balance sheet
- statement of rev, expenditures, and changes in FUND BAL
2) proprietary funds: SE
- statement of net position
- statement of revenues, EXPENSES, and changes in fund net position
- statement of CF’s
3) fiduciary funds: PAPI
- statement of fiduciary net position
- statement of changes in fiduciary net position
what is included in the required supplementary information other than MD&A? (this comes after the basic F/S)
1) pension
- sources of changes in net pension liability (last 10 years)
- info about components of net pension liability and ratios (last 10 years)
2) budget
- budgetary comparison schedules
3) infrastructure
- information about infrastructure
- assets for entities using modified approach
what is included in the “other supplementary information” section in the governmental reporting?
(optional)
- combining statements for nonmajor funds
- variance between originally adopted and final amended budget
- variance between final amended budget and actual
what is the comprehensive annual financial report (CAPR)?
- OPTIONAL reporting by governmental reporting, it is not a GAAP requirement
- adds an intro section, a statistical section to the beginning and end of GASB 34 section
1) intro section (unaudited)
- letter of transmittal
- organizational chart
- list of principal officers
2) basic F/S and required supplementary information (audited)
- MD&A
- government wide F/S
- fund F/S
- notes to F/S
- required supplementary information
3) statistical section (unaudited)
- 10 years of selected financial data
- 10 years of economic data
- other data
what is the PRIMARY government?
- focus of government - wide F/S
- all organizations that make up the legal government entity
- examples: state gov, general purpose local gov (city, county), special purpose local gov (ex: school district, hospital authority)
what is the criteria for special purpose local governments to be a PRIMARY government?
SELF
1) has a SEPARATELY ELECTED governing body
2) LEGALLY separate
3) FISCALLY independent of other state and local governments
all these criteria need to be met
what is a component unit?
- a component unit of the primary government is an organization for which the elected officials of the PRIMARY GOV ARE FINANCIALLY ACCOUNTABLE
- nature and significance of its relationship with primary government CANNOT BE EXCLUDED from the primary government’s F/S without making the primary gov’s F/S misleading or incomplete
ex: rescue squad, board of education
what is the circumstance for blended presentation for component units?
(component units so intertwined with primary government)
only one of the following required:
1) board of component unit is substantively the SAME as primary government
OR
2) component unit serves the primary government exclusively or almost exclusively
3) component unit is NOT a separate legal entity
what does the blended presentation include?
1) combines financial information with primary government
2) financial information of component units not presented in separate columns
what is the discrete presentation for component units?
- used when blended presentation criteria not met
- most common presentation
what does discrete presentation include?
- displays component units in separate columns
- most component units should use discrete presentation
- F/S of reporting entity should provide an overview of the entity based on financial accountability
what are examples of not for profit entities as a component of primary gov?
- private foundations associated with state universities
- private foundations associated with health care facilities
for not for profit entities as a component unit, what are the criteria for discrete presentation?
(have to meet all three)
1) resources held by tax exempt organization are for the near-exclusive benefit of the primary government (benefit standard)
2) primary government has access to all majority of resources held by tax exempt organization (access standard)
3) resources held by tax exempt organization are significant to the primary government (significance standard)
for NFP entities as component unit, what is the criteria for other component unit presentation?
- legally, separate tax exempt organizations meeting the criteria of a financially integrated entity should be classified as a component unit of the primary government if their relationship to the government is so significant as to make the F/S misleading without component unit treatment
what is included in the MD&A?
required supp information
1) description of F/S
- easily readable analysis
- condensed F/S info
- analysis of overall financial position and results of operations
- analysis of balances and transactions of individual funds
- analysis of significant variations between original and final budget (NOT variance analysis, NO reconciliation)
- description of significant assumptions
2) identity of primary government and discrete component units
3) economic conditions and outlook
4) major initiatives - capital asset and LT debt
are fiduciary funds included in the government-wide F/S?
no because government wide F/S include all a&l over which the government has control over
are component units included in the government wide F/S?
yes because the gov has control or responsibility over these units
what is the format of the statement of net position?
assets
= net position
like a B/S
what are the three components of NET POSITION?
“RUN”
1) NET investment in capital assets
- all capital assets net of accumulated depreciation, reduced by outstanding balances of bonds, notes, or other borrowings that are attributable to the acquisition, construction , improvement of those assets.
- deferred outflows of resources and deferred inflows of resources that are attributable should be included
2) restricted
- restricted net position consists of restricted assets reduced by liabilities and deferred inflows of resources related to those assets
- restrictions are imposed by EXTERNAL (not internal) activity
3) unrestricted
- unrestricted net position includes net amount of assets, deferred outflows of resources and deferred inflows of resources that are not included in the determination of net capital assets in restricted component of net position
how are capital assets accounted for in the government wide F/S?
1) how are capital assets valued?
2) what is the construction period interest?
3) what is “infrastructure” assets?
1) the cost of capital assets include all ancillary charges
2) there is NO capitalization of construction period interest for capital assets used in governmental activities
3) “infrastructure” asset = streets, bridges, gutters, and other assets of government - recorded as general capital assets, and ONLY reported on the government-wide financial statements because of the incompatibility of recording these assets at the fund level with governmental fund measurement focus and difficulty to allocate to individual funds
what is the “required” approach for capital assets?
- all assets meeting capitalization requirements should be recorded and depreciated
- deprecation expense that can be specifically identified with a functional category should be included in the direct expenses of that function (ex: dep expense on police cars would be classified as public safety)
what is the “modified” approach for capital assets?
- infrastructure assets are part of a network or subsystem of a network are NOT required to be depreciated provided the two requirements are met
- the infrastructure requirements would be reported as EXPENSES unless the outlay result in additions / improvements, which would be CAPITALIZED
what are the two requirements need to be met for ‘modified” approach for infrastructure assets?
1) gov’s asset management system meets certain conditions:
- inventory of eligible infrastructure assets is up to date - summarized condition assessment of eligible infrastructure assets
- estimate is made of the amount necessary to maintain and preserve the eligible infrastructure assets at the condition level established and disclosed by government
2) gov documentation should include data on asset preservation
- complete condition assessment at LEAST EVERY THREE YEARS
- results of the three assessments support assertions that the eligible infrastructure assets are being presented at the condition level established by government
