FAR - GASB - Format & Content Flashcards
3 categories of funds
1) Gov’t: sources, uses, balances of general gov’t financial resources (taxes)
2) Proprietary: business-type activities
3) Fiduciary: resources held by gov’t in capacity as trustee/agenet for benefit of others
Gov’t Funds (5 types)
1) General: everything not required to be accounted for by a different type of fund
2) Special Revenue: specific revenues sources that are restricted/committed to expenditure for specific purposes other than debt service/capital projects
3) Capital Project: resources restricted, committed, assigned for construction or acquisition of capital facilities and other capital assets
4) Debt Service: resources restricted, committed, assigned to debt service principal and interest expenditures
5) Permanent: endowments in which its earnings are restricted to support gov’t programs that are dedicated for public purpose
Proprietary Funds (2 types)
1) Enterprise: business-type activities, public = primary user (external)
2) Internal Service: business-type activities, gov’t depts = primary users (internal)
* use accrual acct
Fiduciary Funds (4)
1) Pension Trust: provide employee retirement benefits
2) Private-Purpose Trust: created to benefit individuals
3) Investment Trust: for other participants/gov’ts
4) Agency: custodial fashion
Memory Aid for Gov’t, Proprietary Funds, Fiduciary Funds
DRIP (4) CEG PIPPA
DRIP Debt service fund = Gov't special Revenue Fund = Gov't Internal service fund = Proprietary Permanent fund = Gov't
CEG
Capital Project fund = Gov’t
Enterprise fund = Proprietary
General fund = Gov’t
PIPPA
Pension fund = Fiduciary
Investment fund = Fiduciary
Private Purpose fund = Fiduciary
Agency fund = Fiduciary
Non-fund Acct Groups
1) general long-term debt account group
2) general fixed assets
two important characteristics of a “fund”?
1) fiscal entity
2) acct entity
true/false
Governmental accounting systems are organized and operated on a fund basis.
True
Measurement Focus Basis of Acct
2 types of measurement focus
1) flow of current expendable financial resources
- similar in concept to cash flow
2) change in economic resources
- net income determination
Types of basis of acct:
1) modified accrual basis 2) accrual basis
Financial Sources (revenues)
- taxes
- licenses/fees
- grant revenues
- transfers from other funds
- bond proceeds
Financial Uses (expenses)
- salaries
- utilities
- capital expenditures
- repayments on debt
- transfers out to other funds
Flow of current financial resources measurement focus
Current Assets - Current Liab = Fund Balances
Measurement focus basis of Acct
Flow of financial resources -> Sources/uses of current financial resources -> modified accrual
Flow of economic resources -> net income -> accrual
Basis of acct type
Modified Accrual: (DR*P C*G *****) (Gov't) General Fund Special Revenue Funds Capital Project Funds Debt Service Funds Permanent Funds
Accrual: (**I* *E* PIPPA) (Proprietary & Fiduciary) Internal Service Fund Enterprise Funds Pension Trust Funds Investment Trust Funds Private-Purpose Trust Funds Agency Funds
Modified Accrual Acct: Revenues
Revenues recognized when:
1) measurable (reasonably estimable)
2) available:
- legal right to collect
- collected in current period/soon to pay liab in current period (60 days after EOY)
- classify as deferred inflows of resources in current yr if collected before legally available
3) susceptible to accrual (both measurable/available)
Modified Accrual Acct: Expenditures
Expenditures recognized when:
- incurred/due to be paid from currently available resources in gov’t fund
- term expenditures used, NOT expenses*
Modified Accrual Revenue Recognition Approaches
Taxes - Accrual
Licenses/Permits - Cash (not measurable/available)
Intergov’t grants- when provisions met (not available)
service charges - accrual
fines/forfeits - cash
Budgetary Acct
Modified Accrual Acct
Purpose: Planning/Control
Budgetary Accts:
1) Appropriations: authorized spending (planned expenditures)
2) Est. Revenues: forecast of financial resource inflows from revenues (taxes, licenses, fees)
3) Est. other financing sources/uses: interfund transfers, bond proceeds.
Closing Entries
Reverse budget/close actual
- Close budgetary accts of Appropriations and Estimates Revenues by reversing original budgetary entry, as adjusted
- close actual operating accounts (revenues & expenditures)
Financial Reporting
Reporting budgetary results required for:
- general fund
- each major annually budgeted special revenue funds
Purpose of report:
- report budget-to-actual results
- demonstrate companies w/ related laws
- assist in evaluating performance
Budgetary reporting
optional placement
optional placement:
- part of basic fund-level financial
- pat of Required Supplementary Information (RSI) after notes to financials
Budgetary Reporting
Format:
- original budget
- final budget
- actual on budgetary basis
(if non-gaap budget basis (cash basis) include reconciliation to GAAP in notes/schedule
- variance column (optional)What budgetary account represents the legally mandated spending limit?
Appropriations
credited for the amount of the authorized spending limit.
Normal balance for following accts?
1) Estimated Revenue
2) Est. Rev. Control
3) Appropriations
4) Appropriations Control
5) Estimated Other Financing Uses
6) Estimated Other Financing Sources
1) debit
2) credit
3) credit
4) debit
5) credit
6) debit
Encumbrance
(debit balance)
used only in gov’t funds, not proprietary/fiduciary
Not used in Debt service fund of gov’t funds.
control spending according to budget authorization (protect from overspending)
- record commitments in acct system until orders received
- recorded amounts may be estimates and therefore, different than actual invoice costs
- disclosed in notes to financials
Change in acct names
“new name used to be reported @ year end reporting”
“fund balance-reserved for encumbrance” -> either “Fund Balance Committed” or “Fund Balance Assigned”
*no more “reserve,” these accts show amounts dedicated to outstanding purchase orders @ EOY in financials
Items Rarely Encumbered
Regularly scheduled entries:
- payroll
- interfund
- petty cash
Year End Closing - Encumbrance
If cancelled, close out both 1) Encumbrances & 2) Budgetary Fund Balance accounts
If carried forward to next yr, close out nominal account budgetary fund balance into a real account “Fund Balance - Assigned (or Restricted or Committed if applicable)
True/False
No expenditures are recorded at the time purchase orders were issued. Encumbrances represent a commitment made to the vendor in the form of a purchase order prior to incurring actual expenditures.
True
Appropriations Remaining (Balance)
Appropriations
Less: Expenditures
Less: Outstanding Encumbrances
= Remaining Appropriations
payables don’t affect
Timing differences of Deferred Inflows/Outflows
Deferred Outflows/Inflows of resources are inflows/outflows of resources that occur in a period but are related to a FUTURE period
Use of Deferred
GASB #65, limits use of term “deferred” to items reported as deferred outflows/inflows
losses = outflow (debit balance), gains = inflows (credit balance)
When is revenue related to grants, entitlements, shared revenues, etc., that are subject to ELIGIBILITY restrictions recognized for government accounting?
Revenue is recognized when the eligibility requirements are met (until then, a liability is recognized).
When is revenue related to grants, entitlements, shared revenues, etc., that are subject to TIME restrictions recognized for government accounting?
When the stated time has arrived or the stated event has occurred (until then, deferred inflow of resources is recognized.)
*MEASURABLE & AVAILABLE
What account is credited when general fund revenues are received before they are legally due?
Deferred inflow of resources
Acct name change of “net asset”
“net asset” -> “net position”
True
Net Position Definition
Residual amount “equity” in gov’t wide financials:
- statement of net position
- statement of activities
*Residual amount in Proprietary & Fiduciary Funds
Net Position Categories
1) Net investment in capital assets
- capital assets net of Accumulated Depreciation
- Less: outstanding debt use to construct/acquire capital assets
2) Restricted:
- by external parties
- by constitutional provisions/enabling legislation
- held in trust (fiduciary funds)
3) Unrestricted:
- board designated
- no restriction
Change in Fund Balance Classifications
Reserved -> “Nonspendable, Restricted, Committed”
Designated -> “Assigned”
Unreserved -> “Unassigned”
- “equity” section for gov’t fund types - encumbrance acct
Nonspendable fund balance
- amounts cannot be spent:
- not in spendable form
- legally/contractually required to be maintained intact (perm endowment)
Restricted Fund Balance
Amounts constrained to being use for specific purpose:
- external parties/imposed by enabling legislation
Committed Fund Balance
Constraint imposed by govt’s highest level of decision-making
- constraint imposed on use of resourses is separate from authority to raise resources
- action taken to constrain resources occur prior to end of reporting period
- not legally enforceable
Assigned Fund Balance
- amounts constrained by govt’s intent to be used for specific purpose but are neither restricted or committed.
intent is expressed by:
1) governing body itself
2) body (budget committee) or official authorized by governing body to assign amounts
*assigned fund balance = residual amount in govt funds other than general fund
Unassigned fund balance
residual classification used by general fund
- amount of resources available for any purpose
- ONLY fund to report a POSITIVE unassigned fund balance (General Fund)
Negative Fund Balance Amounts
- negative residual amount should not be reported for restricted, committed, or assigned fund balances of any fund.
When negative residual balance occur:
- reduce amounts assigned to other purpose of fund to eliminate deficit
- if deficit still remains, should be classified as unassigned fund balance
Reconciliation
- net position in gov’t wide financials = net residual using full accrual acct
- fund balance in gov’t fund financials = net residual using modified accrual acct
- therefore, reconciliation is required
Common Reconciliation Items
1) capital outlays
2) disposition of capital assets
3) depreciation
4) issuance of long-term debt
5) retirement of long-term debt
6) accrued liabilities
7) interfund transfers
8) internal service funds
9) expenditures versus expenses
10) revenue not recognized in gov’t funds
stabilization “rainy day” arrangements
considered constraint for specific purpose
- amounts classified as restricted/committed if they meet criteria (unassigned in general fund if they don’t)
- usually reported in general fund
- can report in special revenue fund if resources restricted by enabling legislation or committed by governing body
CAFR Sections:
Intro, Financial, Statistical
Intro
- letter of transmittal
- organizational chart
- principal officers
Financial
- independent auditor’s report
- MD&A
- Basic financials
- Required Supplemental Info
- Combine statements & individual fund statements
Statistical
- financial trends
- revenue capacity
- debt capacity
- demographic & economic
- operating info
Minimum Financial Reporting Requirements
1) MD & A
2) Required Supplemental Info
3) Basic Financials
- Gov’t Wide Financials
- Fund Financials
- Notes
Gov’t Wide Financials
- Gov’t Fund Financials
- Proprietary Fund Financials
- Fiduciary Fund Financials
“report info about gov’t as whole & includes primary gov & component units*
2 statements:
1) statement of net position
2) statement of activities
Statement of Net Position
Gov’t Wide Balance Sheet
(Accrual)
Separate Columns:
- gov’t activities [DRIP CEG]
- business activities [DRIP CEG]
- NO Fiduciary Funds [PIPPA]
- Net Position
Statement of Activities
Gov’t Wide Statement of Operations
(Accrual)
Sections:
1) Program expenses
2) Program revenues
3) Net program (expense) revenue
4) General revenues
- separate gov’t activities from business-type activites
**NO Fiduciary Funds*
Deriving Gov’t Wide Financials
Typical adjustments:
- include general gov’t capital assets/long-term liab
- remove interfund payables/receivables
- eliminate internal service activities
- convert modified accrual to accrual
- reclassify activities between primary gov’t & component units as internal activity
Gov’t Fund Types Example Conversions
- eliminate capital outlay expenditures & establish capital assets
- record deprec. expense
- eliminate debt principal payment expenditures & establish debt principal
- convert interest expenditure to interest expense
- eliminate interfund payable/receivables & transfers
Combining Statements
Included in CAFR when primary govt has more than 1 non-major fund in any of the fund type categories
Financial Reporting Entity
2 types
(similar to consolidations or p-sub relationships)
Primary government (PG) - general purpose unit (county, state, county)
- elected governing bodies
- separate legal entity
- fiscal independence
Component Units (CU) - 1) financially dependent and/or 2) financially accountable to primary gov’t
Financial Accountability
1st criteria
Exists when primary govt:
- appoints voting majority of units governing body/created or can abolish organization AND
- Has ability to impose its will OR has potential to receive financial benefits or is subject to financial burdens because of unit
Financial Dependence
2nd criteria
Fiscally dependent if another gov’t has substantial authority to:
- establish its budget
- levy taxes or set rates/charges
- issued bonded debt
And PG has potential to receive financial benefits or is subject to financial burdens because of the unit
Presentation Approaches
Blended: similar to a fund of the primary gov’t (no distinction)
Discretely Presented: (separate column in financials of primary gov’t - GOVT WIDE FINANCIALS)
Blended Approach used
CU’s governing body AND PG’s governing body = substantially the same
CU provides services only for the PG itself (building authority)
CU benefits exclusively PG (administers PG employee healthcare plans)
CU = included b/c PG has fiduciary responsibility for it (pension plan)
When should component units be blended with primary government?
If CU is, in substance, a part of the PG (e.g., the principal beneficiary of the component units services is the primary government), it should be blended.
blended presentation of component units accomplished in the government-wide statements?
component unit’s totals are included with the primary government’s data in the Governmental Activities and Business-type activities columns, as appropriate for each component unit.
discrete presentation of component units accomplished in the government-wide statements?
column of aggregated totals for the component units is added to the right of the primary government’s data
