FAR 9 Flashcards
Primary government entities
- State governments
- General purpose local governments )county or city)
- Special purpose local governments
Special purpose local government (SELF)
‘Primary Government’
Is primary government if all criteria are met
- separately-elected governing body
- Legally separate
- Finincially independent of other state or local government
If does not meet above criteria, then it is COMPONENT UNIT (either use discrete or blended)
Component Unit
An elected officials of the primary government are financially accountable
May be an organization that cannot be excluded from governmental-wide F/S
Not-for-profit organizations that provide ongoing support to primary govt or component unit of primary govt (e.g. private foundations associate with state universities or public health care facilities)
Component Unit
‘Blended Presentation’
Only one is required:
- Board of component unit is substantively the same as primary government
- Component unit serves the primary government exclusively
- Component unit is not a separate legal entity
- Not financially independent since its budget is approved by government official
Does not meet the SELF requirement
Discrete Presentation (or separate presentation) of component unit
- Separately elected governance board
Default method when the criteria for blended presentation have not met
Legally separate, tax-exempt organizations should be reported as discrete (separate column) component unit if it meets
- Resources held are used for near-exclusive benefit of primary government
- Primary governemnt has access to majority resources
- Resources held are significant government
Reporting for general purpose governmental units
REQUIRED
- Required supplementary info before basic F/S
Management’s discussion and analysis (MD&A) -
- Basic F/S
- Government wide F/S
- Fund F/S
- Notes to F/S
- Required supplementary info after basic F/S
- Combine statements for non major funds
- Budget vs. actual for general fund
- adopted vs. final amended budget
Statistical section of optional reporting for general purpose governmental units is not
Part of basic financial statements
Management’s Discussion and analysis
- 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 signification variations (NO VARIANCE ANALYSIS & RECONCILIATION OF FUND F/S
- description of the signification assumptions
Government wide F/S - statement of net position (‘consolidated statement’)
Does not include fiduciary funds
Include component unit
Asset - Liabilities = Net position (RUN)
Construction Period Asset for Capital Assets
Is NOT REQUIRED
Capital assets include…
Infrastructure assets - streets, bridges, gutters, other asset of govt.
Reported as general capital assets
Capital Asset - Required Approach
All assets meeting capitalization requirements should be recorded and depreciated
Depreciation exp that can be identified with function category should bbe included in direct expense of that function
Capital Asset - Modified Approach
Infrastructure assets that are part of network or subsystem of network are NOT REQUIRED to be depreciated
Ongoing infrastructure expenditures are typicallly reported as expense
Outlays in additions or improvements should be capitalized
Capital asset -Modified approach requirement
- Govt’s asset management system meets certain conditions:
- inventory eligible is up to date
- summarized condition assessment of eligible infrastructure assets
- estimate is made of the amount necessary to main or preserve the eligible infrastructure asset every year - Govt documentaton should include data on asset preservation
- complete condition assessment at leaset every THREE years
- support assertions of the eligible infrastructure assets meeting the conditions
Changes from modified to required
Changes from required to modified
Treat as change in estimate
Treatment of artwork and historical treasures
Capitalize at historical cost or fair value at data of donation
Govt elect not to capitalize artwork and historical treasures
- Collection is held for public exhibition
- Collection is protected
- Collection is subject to an organizational policy that requires proceeds from sales to be used/acquired other items for collections
Treatment of Inter-fund receivables and payables
Eliminate all interfund activities
Program Revenue Category Types - SOC
- CHARGES FOR SERVICES to customers, to government, fines & forfeitures (exchange for exchange-like transactions)
OPERATING GRANTS & CONTRIBUTIONS - restricted use for particular program
CAPITAL GAINS & CONTRIBUTIONS - mandatory and voluntary non-exchange transactions
Government-wide statement of activities presentation
Horizontal: expenses, indirect expense allocation, program revenues (SOC), net(expenses) revenues and changes in net position (primary govt)
Vertical - Function/programs (- Primary govt (governemnt activities, business-ike type), component unit
Fund F/S requirement of Major fund
Both criteria must be MET:
- > 10% of the corresponding total revenues, expenditures/expense, assets and deferred outflows of resources, or liabilities and deferred inflows of sources of:
ALL GOVERNMENTAL FUNDS
OR
ALL ENTERPRISE FUNDS (separate columns) - > 5% of the corresponding total revenues, expenditures/expense, assets and deferred outflows of resources, or liabilities and deferred inflows of sources of:
ALL GOVERNMENTAL FUNDS AND ALL ENTERPRISE FUNDS (total column)
Use the statistic of
Aggregate revenues or expenditures/expenses and aggregate assets & liabilities
In determing major fund, general Fund is always
A major fund
In determing major fund, Internal services fund will not be considered
in the evaluation of major and non-maor fund
Reconciliation for B/S
‘
Governmental fund balances
ADD: non-current assets
SUBTRACT: non-current liabilities
ADD net position of governmental acivities
Reconciliation of I/S
‘Change in net position’
Net change in governmental Fund balances
SUBTRACT: other financing sources
ADD: expenditures - capital outlay (net of depreciation)
ADD: service (internal) fund net income
Governmental Fund F/S
Assets Deferred outflow of resources Liabilities Deferred inflow of resources Fund Balances (Non-spendable inventories restricted for committed to assigned unassigned)
Governmental Funds - Statement of Revenue, Expenditures & changes in Fund Balance (Income Statement)
- Revenues
- Expenditures
- Other financing sources(uses)
- Special Item
Minimum budgetary information required as supplementary information are
Schedule showing
- original budget
- final appropriations budget
- actual inflows, outflows, and balances on a budgetary basis
Variances of budgets are…
Optional other supplementary information (optional)
Government-wide components of statement of cash flow
‘the difference between commercial statement of cash flow’
- Direct method is required (indirect method is prohibited)
- reconciliation of operating income (not NI) to net cash provided by operations is required
- Four categories: operating, capital financing, non-capital financing, investing
- Order of financing and investing activities are reversed
- Interest income/cash receipts reported as ‘investing activities’ (not operating activities)
- interest expense/cash payments are in financing
- capital asset purchases are reported as ‘financing activities (not investing activities)
Government-wide F/S focus the reader on accountability in which way
Operational accountability - takes economic view that reportes L/T efficient and effective use of resources
Fund Financial statements focus the reader on accountability in which way
Fiscal accountability - takes S/T view that focus reader on compliance and current year performance
Integrated approach is a…
Joint presentation of government-wide and fund financial statements and appropriate reconciliation
Combining financial statement of non-major fund types is reported in
Other supplementary Info (optional)
Comprehensive Annual Financial Report (CAFR)
‘Optional Reporting’
- Introductory section
- basic F/S and Required supplementary info (include MD&A)
- Satistical Section
Required Financial Reports
- Management’s Discussion & Analysis *MD&A) - required supplemental info
- Basic F/S - all 2 fund statements and notes to F/S
- Required supplementary info
- other supplementary info
Modified Approach report infrastructure expenditures as
Expenses except for outlays that result in additions or improvements, which would be capitalized
In preparing government-wide F/S for governmental entity, interfund receivables & payables between governmental and enterprise fund should be
Reported as internal balances
Quasi-external transactions
One in which governmental fund acquires a good or service that could have been purchased from unrelated business Enterprise
An exception gives rise to operating expenditures and revenues for TRANSFERS BETWEEN FUND
Special assessment debt that is to be repaid from general resources of the government is reported…
In government-wide statement of net position
Revenue recognition of modified accrual basis
Measurable and available
Revenue recognize = current year collection + collection within 60 days of next year
Unassigned fund balance of general fund represents…
The amount of current resources carried forward into the following year that will be available for appropriations.
Unassigned fund is likely to increase when appropriations > expenditures
Non-capital financing activities of cash flow include
- Proceeds/payments related to borrowing not attributable to acquisition, construction or improvement of capital assets
- capital receipts or payments related to grants/subsidies not attributable to capital purposes
- property taxes not designed for capital purposes
- cash paid to other funds (other than for inter fund services)
Operating transfer out
Operating section of Cash flow includes
- Receipts & disbursements related to sales of goods & services
- Interfund reimbursement
Valuable donations that is used for lecction & display in protected exhibition area and if sold, use the proceed to buy another collection, the government may elect
to capitalize and depreciation; however, it is not require.
Reciprocal inter fund activity includes
- Inter-fund loans
2. inter-fund services provided and used
Non-reciprocal transfers include
- Interfund transfers
2. Inter-fund reimbursement
Introductory section of comprehensive annual financial report includes
- letter of transmittal
- organizational chart
- list of principal officers
Not-for-profit required financial statements
- Statement of Financial Position
- Statement of Activities
- Statement of Cashflows
- Statement of functional expenses - required for voluntary health and welfare organizations
Statement of Financial Position
Asset
Liabilities
Net assets (equity) - permanent restricted, temporarily restricted, unrestricted
Current = to be spent soon Non-current = to b permanently held
Net Assets of not-for-profit
‘Unrestricted’
(Equity)
Available to finance general operations
- May be expended at discretion of the governing board
- Internal board-designed fund are considered unrestricted
- contributed services
Temporarily restricted net assets
Not for profit
(Equity)
Donor-imposed stipulations either
- expire by passage of time
- removed by actions of the organization
Temporarily restricted net assets should not be displayed as DEFICIT,
Over spending should be classified as REDUCTION OF UNRESTRICTED NET ASSET
Permanently restricted net assets
Not for profit
(Equity)
- Contributions whose use is LIMITED by donor-imposed stipulations that neither expire by passage of time nor can be fulfilled or otherwise removed by actions of the organization
Statement of Activities
(Income Statement
- Changes in total assets
- changes in net assets
- permanently restricted
- temporarily restricted
- unrestricted
When a donor restriction is satisfied
A reclassification is reported on statement of activities
Support in permanently restricted/unrestricted net assets is ordinarily
Not reclassified
Classifications of functional expense categories in
- Program services - universities, hospitals, union, day care
- Support services - fundraising, administration, management and general, membership development
- combined cost - Fundraising efforts with eductional (program) services
Allocate between the 2 costs
Not-for-profit CF
‘Financing Activiites”
- Borrowing
- Certain restricted contributions (donor-imposed restrictions limiting its use to L/T purposes like increase in endowment, puchases of assets, or annuity agreements)
Not-for-profit CF
‘Investing Activities”
- Equipment investment
- proceeds from sale/purchase of works art
- proceeds from sale of assets where restricted to inestment in equipment
Cash and cash equivalent of not-for-profit restrict
restricted securities that meet the requirement
Statement of functional expenses is required for
Voluntarily health and welfare
Statement of function expenses categories
- Program support expenses
- Fundraising expenses - unsolicited merchandise sent out
- Management and general costs
- Multiple cost tiems
Not-for-profit
Contributions & Recognition
- Unconditional transfer of cash or assets to new owner is voluntarily
Recognition
1. Cash = received, FV date of gift
- Unconditional promises - record at FV when promise is made (may be written or verbal)
- Conditional promises - record when conditions are substantially met or chances of not meeting is remote (earned)
transaction depends on occurrence of future and uncertain event
Multi-year pledge is recorded
Now = revenue Future = Temp. restricted revenue (recorded at PV)
Split-Interest contributions
- Measured at FV of date of acquisition
2. displayed as temporarily restricted (unless there is a permanent restriction establish by donor
Donated Services reported as
Fair value and support
Donated services are recorded as contribution revenue & expense at FV if services meet these criteria (SOME)
- Specialized skills are required/possed by donor
- Otherwise needed by the organization to hire personnel
- Measureable
- Easily (at fair value)
DR Expense/Asset
CR Contributions - nonoperating revenue
Expenses associated with solicitations of contributions of volunteer assistance classified as
Fundraising expense
Donated Materials JEs
Reported at FV
Significant donated material
DR Asset
CR Contribution -Support
Donate materials that merely pass through
DR Expense
CR Unrestricted contributions - supplies
Restricted Contributions JEs
Restricted net asset
DR pledge receivable - temporarily restricted
CR Allowance for doubtful accounts
CR restricted revenue - temporarily restricted net assets
When receivable is collected
restricted net assets
DR reclassification - satisfaction of restriction
CR Cash/Restricted net aassets
Unrestricted net assets DR Cash/unrestricted net assets CR reclassification - satisfaction of restriction DR Operating expense CR cash/unrestricted net assts
Gift-in kind
noncash contributions to a not for-profit
measured at FV
Exchange transactions ‘Buyer&Seller’
contribution revenue = amount transferred - FV dues/purchases
Recipient Accounting
‘Without variance power”
Not for profit act as agent/ no benefit/power
Asset value at FV
DR Asset
CR Redundable advance (liability)
Recipient Accounting
‘Granted variance power”
Financially-Interrelated - Granted variance power
Not for profit acts as agent/has power
Asset value at FV
Recorded as contribution revenue when received & expensed when distributed to the beneficiary
DR Asset
CR Contribution revenue
Beneficiary accounting
‘Recognize interest - financially interelated’ JE
Recognize interest in net assets of recipient when organizations are financially inter-related
Equity transaction
DR Asset
CR Equity Transaction
Beneficiary Accounting
‘Recognize Beneficial interset - Pool of assets’ JEs
Beneficiaries recognize beneficial interest in unconditional right to receive specified CF from pools of assets as CONTRIBUTION REVENUE
Allocate realized and unrealized gains/losses among net asset classification
PV at fair value
DR Beneficial Interest
CR Contribution Revenue
Recognize Receivable and contribution revenue
Cases that do not involve in net assets or beneficial interest
DR Receivable
CR Contribution revenue
Similar to all other unconditional promises
Gain/loss in investment in securities recorded as
Reported on statement of activities as increases/decreases in unrestricted net asset, unless the investment is restricted
Recognition of contribution revenue of unconditional promise
Net realizable value - amount to be collected
DR Cash
CR Allowance for Doubtful Account
CR Contribution Revenue
In order for not-for-profit organizations to be financially interrelated, it must satisfy these characteristics
- able to influence the operating and financial decision of the other
AND - has an ongoing economic interest in the net assets of the
Contribution revenue include
Transactions that are
- unconditional
- non-reciprocal
- voluntary
- not an ownership investment
Exchange transaction
contribution rev = amount transferred - FMV
Unrestricted, temporarily restricted and permanently restricted category in statement of cash flow
- Operating activities - unrestricted & temporarily restricted
- Financing activities - permanently restricted
Health care organization revenue classification
- patient service revenues - accounted for at gross, but deductions are made for CHARITY CARE
- non-operating revenues - incidental earnings not related to ongoing and central operations of the ospital unrestricted gifts
- other operating revenues - those generated by operations other than patient services
Gross patient service revenue
= Patient service revenue
Quasi-endowment fund is
fund account for assets that have been internally designated by the institution for a specific purpose
Endowment Fund
Outside donor stipulated that principal be maintained intact with perpetuity
Restricted current fund
OUtside donor restricted for specified purpose
Donated services that are recorded as contribution revenue and expense must meet the following criteria
- Create or enhance a non-financial asset
2. Require specialized skills that the provider possesses and would otherwise have been purposed by the organization
Pledge receivables reported at
PV
Operating expenses are reported in
Changes in unrestricted net asset as temporarily expenses are being reclassified
Donor imposed restrictions that are met in the same period they are received may be recorded as
unrestricted support (contribution revenue)
Gain/Loss on disposals of governemntal operations are displayed as
Special item
Student tuition and fees reported at
Gross amount
Assessed student tuition and fees
= gross revenue from tuition and fees
Derived tax revenue
Result from taxes assed by government in exchange transactions
Imposed nonexchange transactioins
taxes and other assessments by government property taxes, special assessments, fines,
