Governmental Accounting

Question 1

What are the three major types of funds in governmental accounting?

Answer 1

Governmental, Proprietary, Fiduciary

Question 2

Which two accounting bases are used in governmental accounting?

Answer 2

Accrual basis - current economic resources focus (revenues recognized when earned)

Modified accrual basis - current financial resources focus (revenues recognized when available and measurable)

Question 3

What is a budget appropriation?

Answer 3

The highest amount allowed for a particular expenditure under a budget.

Question 4

What is an encumbrance?

Answer 4

Records purchase and reserves it for the encumbrance.
Record when purchase order is approved

Encumbrances
Reserved for Encumbrance

Question 5

What is the opening budgetary entry?

Answer 5

Dr Estimated Revenues Control
Cr Appropriations Control
Dr/Cr Budgetary Fund Balance (plug)

Question 6

What is the closing budgetary entry?

Answer 6

Dr Appropriations Control
Dr/Cr Budgetary Fund Balance (plug)
Cr Estimated Revenues Control

Question 7

What are the types of governmental funds?

Answer 7

General Fund - unassigned
Special Revenue Fund-restricted/committed
Permanent Fund -restricted, non expendable

Capital Projects Fund
Debt Service Fund
= both restricted, committed, assigned

Question 8

What is a General Fund?

Answer 8

The operating fund of the governmental unit

Records Significant Revenues: Taxes; Tickets; Fines; Licenses

Records Significant Expenditures: Police; Education; Fire Dept

Question 9

What is a Special Revenue Fund?

Answer 9

Restricted for a specific purpose such as street repair.

Question 10

What is a Permanent Fund?

Answer 10

Legally restricted fund; where only earnings can be used to fund programs.

Principal remains intact.

Question 11

What is a Capital Projects Fund?

Answer 11

Used to acquire and build facilities.

Question 12

What is a Debt Service Fund?

Answer 12

Handles repayment of long-term debt and related interest.

Question 13

Which fund statements are issued in Governmental Accounting?

Answer 13

Balance Sheet

Statement of Revenues; Expenditures; and Changes in Fund Balance

Question 14

When is Revenue recorded in Governmental Accounting?

Answer 14

When it is BOTH available and measurable; regardless of when it is spent.

Question 15

What is Derived Tax Revenue?

Answer 15

Money collected from people doing things:

Sales tax (buying cars) or income tax (people working)

Question 16

What is Imposed Tax Revenue?

Answer 16

Tax assessed just because things exist

Example: property tax on a car (even if it’s never driven); real estate tax

Recorded as a revenue when BUDGETED.

Estimated uncollectible property tax revenues don’t offset revenues; so don’t net them.

Question 17

What are the types of Proprietary Funds?

Answer 17

Internal Service Funds - to serve the needs of other governmental units (i.e. motor pool)

Enterprise Funds - provide goods or services to external users (i.e. post office)

Question 18

What are the Fund Balance Types?

Answer 18

Restricted - Restricted by Contributor 
 Committed - Restricted by Government
 Assigned - Intended for a purpose
 Unassigned - Available to be spent
 Non-spendable - Not in a spendable state

Question 19

What are the types of Fiduciary Funds?

Answer 19

Agency Fund - government acts as an agent or custodian

Pension Trust Fund - Government is a trustee for a pension plan

Investment Trust Fund - Government is a trustee over a series of investments

Private Purpose Trust - Trust that benefits various individuals and entities

Question 20

How are Assets & Liabilities presented on the Statement of Net Position?

Answer 20

Assets (Current & Non-Current)
Deferred Outflows of Resources
Liabilities (Current & Non-Current)
Deferred Inflows of Resources

Question 21

How are Capital Assets shown on a governmental Statement of Net Assets?

Answer 21

They are shown net of debt

Asset Cost - Accumulated Depreciation - Asset Liabilities : Net Assets

Question 22

How is infrastructure reported on a governmental Statement of Net Assets?

Answer 22

Modified approach:

Reported at cost; no accumulated depreciation

Question 23

How is a Statement of Net Assets divided?

Answer 23

Into Governmental Activities and Business Activities

Question 24

How are activities presented in a Statement of Activities?

Answer 24

They are divided by function

If the activities of a component are distinguishable from the rest of the governmental entity; then discreet presentation is required

If the activities of the component cannot be identified and separated from the rest of the governmental activities; then blended presentation is warranted.

Component units are reported in the Entity-Wide Financial Statements and not the Fund Financial Statements.

Question 25

What is the primary objective of governmental accounting?

Answer 25

To provide information that is useful and benefits a wide range of users including: Costs of services provided Sufficiency of revenues to cover costs Financial position of entity

Question 26

Government wide financial statements demonstrates

Answer 26

operational accountability | -how effective the organization was in using resources

Question 27

Fund financial statements demonstrates

Answer 27

fiscal accountability | organization's compliance with rules and regulations on spending activities

Question 28

Government Reporting Model

Answer 28

focuses on fiscal and operational accountability fiscal - fund FS operational - government wide FS

Question 29

Basic governmental FS

Answer 29

1. MD & A 2. GOVERNMENT WIDE FS Statement of Net Position Statement of Activities 3. FUND FINANCIAL STATEMENTS: 1. Governmental(modified accrual) Balance Sheet Statement of Revenues, Expenditures and Changes in Fund Balances 2. Proprietary (accrual) Statement of Net Position Statement of Revenues, Expenses and Changes in Fund Net Position 3. Fiduciary Funds Statement of Fiduciary Net Position Statement of Changes in Fid. Net Position 4. NOTES TO FINANCIAL STATEMENTS 5. REQUIRED SUPPLEMENTARY INFORMATION other than Management's Discussion and Analysis

Question 30

Required Supplementary Information

Answer 30

1. Ten year schedule of selected information - for entities that provide pensions through pension funds administered thru trust funds 2. Budgetary Comparison Schdule 3. Information about Infrastructure assets 4. Claims Development Information when the government sponsors a public entity risk pool Other supplementary schedules (not mandatory) CAFR

Question 31

CAFR - comprehensive annual financial report

Answer 31

Major sections are introductory, statistical and financial. Introductory - transmittal, organization chart, list of principal officials (unaudited) Financial section - includes auditor's report Statistical - various schedules: - net position by component - demographics - debt capacity - revenue capacity etc

Question 32

Special purpose governments- what FS are required?

Answer 32

Example: park districts, tollway authorities, school districts, sanitation districts Engaged in: governmental activities business type fiduciary or both governmental and business type Guide: Criteria #1 If engaged in governmental activities and have one more than one program OR If engaged in both governmental and business type activities = BOTH GOVERNMENT WIDE FS AND FUND FINANCIAL STATEMENTS REQUIRED Criteria #2 If engaged in only ONE GOVERNMENTAL ACTIVITY = combine Government Wide and Fund Financial Statements Criteria #3 If engaged in only: Business type activities or Fiduciary activities = Fiduciary or Proprietary Fund FS only

Question 33

Primary government

Answer 33

1. state government 2. general purpose local government 3. special purpose local government - has a separately elected governing body - legally separate - fiscally independent of other state or local government

Question 34

Component is

Answer 34

- legally separate organization for which the elected officials of a primary government are financially accountable. Assumption of financial accountability: 1. When the primary government appoints a voting majority of the organization's governing board 2. it is able to impose its will on that organization 3. there is a potential for the organization to provide specific financial benefits to or impose specific financial burdens on the primary government 4. the organization is fiscally dependent on and there is a potential for the organization to provide specific financial benefits to, or burdens on, the primary government - regardless of the primary government's influence of the governing board Omission of the component in the primary government's FS would cause it to be misleading IS DISCRETELY PRESENTED IN THE GOVERNMENT WIDE FINANCIAL STATEMENTS CAN BE BLENDED IF CRITERIA ARE MET.

Question 35

Criteria for a component unit to be blended in the FS

Answer 35

1. governing body of the component unit is substantially the same as that of the primary government 2. there is a financial benefit or burden relationship between the primary government and the component unit 3. management of the primary government has operational responsibility for the component unit 4. the component unit provides services ENTIRELY or ALMOST ENTIRELY for the primary government or for the benefit of the primary government 5. the component unit's TOTAL debt outstanding, including leases, is expected to be repaid entirely or almost entirely by the primary government

Question 36

Management's Discussion and Analysis

Answer 36

- overview of the government's financial activities - provides comparison of the current year results with prior year, with emphasis on the prior year INCLUDES: 1. brief discussion of the financial statements 2. condensed financial information from the government wide FS and individual fund FS 3. analysis of significant variations between the original budget, final budget and current year results 4. description of significant capital asset and long term debt activity for the year 5. a discussion by those governments using the modified accrual approach - about infrastructure assets regarding the condition of these capital assets and changes from the prior year 6. any know facts, conditions, decisions that have significant effect on the governments financial position and results of operations

Question 37

Government wide FS format

Answer 37

Statement of Net Position ``` Assets + Deferred Outflows - Liabilities - Deferred Inflows = Net Assets ```

Question 38

Deferred Outflow cash payments

Answer 38

- asset - consumption of net assets that is applicable to a FUTURE PERIOD Example: 1. grant expenditure paid in advance 2. deferred amounts from refunding of debt (debit) - advance cash payment 3. cost to acquire rights to FUTURE revenues 4. deferred loss from sale and leaseback 5. negative fair value of government hedge of a FUTURE transaction

Question 39

Deferred inflows cash received

Answer 39

- liabilities - acquisition of net assets applicable to a FUTURE reporting period Example: 1. grants received in advance 2. deferred amounts from refunding of debt (credit) 3. proceeds from sale of future revenues 4. deferred gain from sale and leaseback positive fair value on govt hedge of a future transaction 5. advanced revenue from imposed nonexchange transactions

Question 40

Government Wide FS - Statement of Net Position Format

Answer 40

``` GA BTA Total CU Assets Deferred Outflows Liabilities Deferred Inflows Net Assets Net Investment in Capital Assets Restrited Unrestricted ``` GA - governmental activities - all govt funds + internal service BTA - business type activities - enterprise fund only FIDUCIARY FUNDS NOT INCLUDED HERE Assets include: Capital assets - net of depn Internal balances (transfers) - not eliminated - GTA to GA transfers (vice versa)

Question 41

Government Wide FS - Statement of Activities Format Additional disclosures are in this statement not in the financial position

Answer 41

Column Headings: FUNCTIONS/PROGRAMS: EXPENSES - program expenses by function - NO DEPRECIATION here - includes interest on long term debt PROGRAM REVENUES: Charges for services Operating grants and contributions Capital grants and contributions GOVERNMENTAL ACTIVITIES BUSINESS TYPE ACTIVITIES TOTAL COMPONENT UNITS ROW Headings; Functions/Programs: ``` Primary Government Governmental activities - expenses by function/program Business Type activities Total primary activities ``` Component Units Total component units Below the totals: GENERAL REVENUES: Taxes Transfers Total general revenues, taxes and transfers Change in Net position Add: Net position beginning Net position end Taxes include: ``` property taxes levied for general purposes property taxes levied for debt service franchise taxes public service taxes payment from City grants and contributions not restricted to specific programs investment earnings miscellaneous special items - gain on sale of land ``` Transfers: debit (credit) amounts in the governmental activities and business type activities columns

Question 42

Funds Statement - Governmental Funds Balance Sheet Additional disclosures are in here not in the Statement of activities

Answer 42

Column headings: By Fund type: ``` Major Funds: General HUD programs Community development Route 7 construction ``` Other governmental funds TOTAL GOVERNMENTAL FUNDS ROW Headings: ``` Assets - includes Due from other funds - no capital assets here Deferred Outflow Liabilities - includes Due to other funds Deferred Inflow Fund Balances: Nonspendable Restricted Committed Assigned Unassigned TOTAL FUND BALANCES (final total) ``` ADDITIONAL DISCLOSURES AT THE BOTTOM: Reconciliation and discussion of total fund balances to fund balances in the Statement of Net Position in government wide FS: Amounts reported for governmental activities in the statement of net assets are different because: ``` ADD THESE AT THE BOTTOM OF THE TOTAL FUND BALANCES FROM ABOVE (LAST COLUMN) Capital assets Other long term assets Internal Service Fund Long term liabilities ``` NET POSITION OF GOVERNMENTAL ACTIVITIES - FINAL TOTAL - DOUBLE RULE IN THE COLUMN OF TOTAL GOVT FUNDS ONLY

Question 43

Fund Statements Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances

Answer 43

COLUMN HEADING: By major fund type (same as in the BS) ``` General HUD programs Community development Route 7 construction Other governmental funds Total governmental funds ``` ROW HEADINGS: ``` Revenues - by source i.e taxes, fees, fines - Expenditures - by character Current Debt service Capital outlay Total expenditures = Excess (Deficiency) of total revenues over expenses ``` ``` Other financing sources (uses) Proceeds of refunding bonds Payment to bond refunding Proceeds of long term debt Transfer in Transfer out Total ``` Special Items: Proceeds from sale of land NET CHANGE IN FUND Add: Beginning FUND BALANCE END