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FAR - Fact Nuggets > Governmental Accounting > Flashcards

Governmental Accounting Flashcards

1
Q

What are the three major governmental fund types?

A
  1. Governmental - general programs and services , funded through taxes
  2. Proprietary - business type activities, funded through fees
  3. Fiduciary - resources held for third parties (i.e. pension funds)
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2
Q

What gov’t fund types use modified accrual basis?

A

Governmental funds - general fund, special revenue fund, and capital projects fund

Modified accrual has a *current financial resources focus*.

Revenues are recognized when *available and measurable*

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3
Q

What are the primary objectives of Governmental Accounting ?

A

1) Operational Efficiency - has the gov’t been efficient in it’s operations? - Measured by Gov’t Wide F/S
2) Fiscal Accountability - has gov’t been complying with Budget? - Measured by Fund Financial Statements

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4
Q

What are Special Revenue Funds ?

A

Used to account for and report the proceeds of specific revenue sources that are restricted or committed to expenditure for specific purposes other than debt service, or capital projects. i.e. Motor fuel tax for road maintenance.

**If the intent is to recover less than 50% of expenses from user fees, then the activity is handled in special revenue fund Rev. sources include fees, grants, specific taxes

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5
Q

What are Capital Project Funds?

A

Capital Project funds are used to account for the acquisition and use of financial resources to construct or acquire major long-lived general govt capital assets.

ex. Construction of town hall, park, or courthouse *modified accrual*

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6
Q

What are Debt Service Funds?

A

Account for accumulation of resources for the payment of general long term debt principal and interest. Most bond indentures will require separate funds for debt service reserves. *modified accrual*

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7
Q

What are Permanent Funds?

A

Endowments received by gov’t where gov’t is not allowed to spend principal. Only earnings may be used for purposes that support. *modified accrual*

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8
Q

What are General Funds?

A

General funds are all funds not included in other funds. *modified accrual*. Only 1 General Fund. -General fund revenues primarily consist of taxes, licenses, fines, & interest

Ex: General Svcs such as public safety, recreation, transportation.

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9
Q

What type of funds are Proprietary Funds?

A

Activities where gov’t provides goods/services for a charge (like a commercial business)

1) Internal Service Funds - Goods/Svcs provided to other funds/departments/agencies
2) Enterprise Funds - Goods/services provided to external customers / general public

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10
Q

What are the criteria to be classified as enterprise funds?

A
  • Activity is financed with debt secured by pledge of *net revenues*
  • Law requires activities cost of providing services is recovered with fees & charges, not taxes
  • Pricing policies of the Activity establish fees & charges designed to recover its costs
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11
Q

What are Fiduciary Funds?

A

Used to report assets held in a trustee or agency capacity for others and, therefore, cannot be used to support the gov’t own programs.

  • Custodial Funds (agency funds)
  • Pension Trust Fund
  • Investment Trust Fund
  • Private Purpose Trust Fund

C-PIPP

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12
Q

What are Component Units?

A

Autonomous legally separate unit satisfies either criteria:

1) Primary Govt is financially accountable for the unit i.e. Library Society that rises money which is for the benefit for the Govt
2) Close financial relationship with Primary Govt such that exclusion would cause Primary Govt F/S to be misleading

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13
Q

Why Modified Accrual Accounting for Gov’t Funds?

A

1) To meet gov’t accounting objective of budget compliance.
2) matching principal not applicable - taxes are imposed, not earned - there is no earned revenue here, all spending is expenditure

Modified Accrual Accounting ignores all future periods and considers only current period. Revenue is not *earned* , therefore revenue is recognized when measurable and available to be spent

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14
Q

What are Gov’t Fund Financial Statements ?

A

-Balance Sheet to present financial position -Statement of revenues, Expenditures, and Changes in Fund Balance *Modified Accrual Basis* NO CASH FLOW

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15
Q

What are included in Basic Govt Financial Statements?

A
  • Gov’t Wide F/S
  • Fund Statements
  • Notes to Financials
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16
Q

What are Gov’t Financial Statements required by GASB?

A

Basic Financial Statements (Gov’t Wide F/S , Fund Statements, Notes to Financials)

+ Management Discussion & Analysis

+ Required Supplementary Info other than MD&A

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17
Q

What F/S are included in CAFR ? (Comprehensive Annual Financial Report)

A

Basic Financial Statements (Gov’t Wide F/S , Fund Statements, Notes to Financials)

+ Management Discussion & Analysis, Required Supplementary Info other than MD&A (GASB required)

+ Introductory Section + Statistical Section

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18
Q

What is the current financial resources approach?

A
  • Gov’t funds using modified accrual accounting ignore all future periods and only consider current period.
  • Expenses of current period should be covered by revenues and taxes of current period.
  • This tries to ensure that current period expenditure are not paid by future tax payers
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19
Q

Which of the following describes GASB’s role for improving communications (as described in Concept Statement No. 3) in governmental external financial reporting?

A

The Board’s independence supports governments’ credibility and comparability among governments’ financial statements.

Concepts Statement No. 3 describes the importance of the GASB’s independence for establishing communication principles in the reporting standards to support governments’ credibility and enhance comparability among external financial statements.

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20
Q

What is the formula for the Government Wide Statement of Net Position?

A
  • +Assets
  • +Deferred Outflows of Resources
  • -Liabilities
  • -Deferred Inflows of Resources
  • =Net Position
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21
Q

Who are the primary users for Governmental Financial Statements ?

A
  1. Citizenry (citizens, media, advocate groups)
  2. Legislative and oversight bodies
  3. Investors and creditors

NOT internal managers !!

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22
Q

What are the four financial reporting implications associated with the legally adopted annual budget?

A

(1) expression of public policy,
(2) expression of financial intent,
(3) form of control, and
(4) it may provide a basis for evaluating performance (if the government established service efforts and accomplishment goals as part of its budget process).

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23
Q

According to GASB 34, Basic Financial Statements-and Management’s Discussion and Analysis-for State and Local Governments, certain budgetary schedules require supplementary information.

What is the minimum budgetary information required to be reported in those schedules?

A

A schedule showing the original budget, the final appropriations budget, and actual inflows, outflows, and balances on a budgetary basis.

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24
Q

What liability is presented on governmental wide financial statement for pension liability?

A

Net pension liability - which is equal to the portion of the actuarial present value of projected benefit payments attributable to past periods of employee service minus the pension plan’s fiduciary net position.

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25
Q

A major governmental fund is one that has one or more elements (e.g., assets, liabilities, revenues, or expenditures) that is at least:

A

10% of the corresponding element(s) of total governmental funds and 5% of the corresponding element(s) of total governmental and enterprise funds combined.

26
Q

What are five constraints on fund balances ?

A
  • Non spendable - Inventory, Prepaid Expenditures, Legally or Contractually required to remain intact (permanent funds)
  • Restricted - Limited by EXTERNAL sources- creditors, contributors, other governments, Laws, constitutional provisions, enabling legislation, bond covenant
  • Committed - Limited by INTERNAL sources- specified purposes, Government’s highest level of authority
  • Assigned -Constrained by govt’s INTENT to be used for a SPECIFIC PURPOSE (assigned purpose)
  • Unassigned -Anything that does not fit in any of the above constraints. Catch all for General Fund. ONLY fund that can have a POSITIVE fund balance.
27
Q

What are the journal entries to record an encumbrance?

At time of PO, when goods received, at year end

A
  • PO issuance
    • DR: Encumberance (increase)
      • CR: Budgetary Control
  • Goods Received
    • DR: Budgetary Control
      • CR: Encumberances - (decrease for same price as PO!!)
    • DR: Expenditure - actual invoice price
      • CR: Voucher Payable
  • Year End: Assuming unused balance to be carried over to next year
    • DR Budgetary Control
      • CR: Encumberances
    • DR: Fund balance- unassigned
      • CR: Fund balance - assigned
    • Don’t use account title “Reserve for Encumberance” that is old GASB
    • Encumbrances are disclosed at the end of the year
28
Q

What is SEA and what does it disclose?

A

Service Efforts and Accomplishments is a voluntary reporting as supplemental info to Government Reporting.

  • Measures service efforts (inputs)- amount of resources applied to a service
    • dollars spent on roads, or employee hours spent on roads
  • Measures service accomplishments (outputs and outcomes) - report what was acheived
    • Output measures - quantity of service provided (miles of roads repaired)
    • Outcome measures - results that occur because of service provided (resident’s rating of neighborhood safety)
  • Measures of service accomplishment (efficiency) - cost per lane mile to resurface roads.
29
Q

What are the obejectives and characteristics of gov’t financial reporting ?

A
  • Objectives : Accountability and Interperiod Equity
  • Characteristics (TRUCCR)
    • Timeliness
    • Relevance
    • Understandability
    • Comparability
    • Consistency
    • Reliability
30
Q

When should a “special item” be reported for governmental accounting?

A

Special = Either unusual or infrequest and are within the control of the government

Extraordinary - unusual and infrequent

31
Q

What are the requirements of budgetary reporting for Govt financials?

A

REQUIRED on general fund and any major special revenue funds for which a budget is legally adopted

Required: Original buget, final, and actual results on budgetary basis

Optional: Variance with final budget

32
Q

What is the normal balance for budgetary accounts ?

A

OPPOSITE normal accounts

33
Q

What are the reconcilation items for Reconciliation Govt Fund Statement of Revenue, Expenditures and Change in Fund Balance? CPAs RIDeS

A
34
Q

Which fund classification is typically negative?

A

Unassigned - except in the general fund.

When other classes are negative, re-allocate the amounts assigned to other classification until the deficit is corrected, whatever deficit remains goes to the unassigned classification.

In the general fund, the unassigned classification is positive.

35
Q

What is the reconcilation to Gov’t wide fund Statement of Revenue, Expenditures and Change in Fund Balance? (income Statement)

CPAS Ride SIT

A

Adjustment for Measurement Focus

+ CCapital Outlay Expenditures- ADD

+ PPrincipal payment on debt- ADD

- (A)NBV Capital Assets Disposed of during period- SUBTRACT

- (S)Debt Proceeds shown as other financing Sources- SUBTRACT

Adjustment for Difference in Basis of Accounting

+ R Recognized Revenue Measurable but unavailable- ADD

I Interest Expense- ACCRUE

DE Depreciation Expense- RECORD

Consolidation Entries

+ S Internal Service Fund Profit- ADD

I Interfund

T Transfers

36
Q

What are the two Governmental Wide Financial Statments, and what is the purpose of each?

A
  • Statement of Net Position
    • Are we financially sound?
    • Like a balance sheet
  • Statement of Activities
    • Have we been operating efficiently?
    • Like an Income Statement
37
Q

What revenue category are taxes reported?

A

General revenue

NOT program revenue

GASB 34 switched away from matching program revenue and expenses, so you might see large deficits in net expense column.

38
Q

Providing a framework to educate users and support public policies, invest-ments, and management by those users

A

Part of GASB’s misson

39
Q

How are bond and bond issuance costs treated in Fund accounting?

A
  • Proceeds from the bond (including premium) are recpded om gov’t funds as other financing sources
  • Bond issuance costs are treated as an expenditure
40
Q

When is revenue recognized for the modified accrual basis (current financial resource focus) and the full accrual basis (economic resource basis)

A

Modified - available and measurable

Full - earned and measurable

41
Q

What is the funded ratio of a pension plan (Gov’t fund)?

A

The plan’s fiduciary net position as a percentage of the actuarially determined total pension liability.

This is required supplemental information.

42
Q

What is the difference between Custodial Funds and Private Purpose trust funds ?

A
  • Custodial funds - held to be disbursed to other gov’t agencies
    • EX: State government collecting sales tax to be disbursed to city and county
  • Private purpose - held to be disbursed for non-governmental purpose
    • EX: Endowment for Rotary Fund scholarship
43
Q

What are the major sections of the CAFR?

Comprehensive Annual Financial Report

A
  • Introductory Section
    • Table of contents, letter of transmittal
  • Basic Financial Statements
    • Management’s Discussion and Analysis
    • Gov’t Wide Financials
    • Fund Financial Statements
    • Notes to the Financial Statements
    • Required Supplementary Information
  • Statistical Section
    • Trend data and non financial info
44
Q

How are Fiduciary Funds treated in the CAFR?

A

Excluded in Gov’t wide financials

Shown in the Fund level statements

45
Q

What is the accounting treatment for internally generated computer software in Gov’t wide financial statements?

A
  • Preliminary project stage and post implementation stage are expensed as incurred
  • Application development stage is capitalized, including internal payroll costs
46
Q

Shared revenues received by an Enterprise Fund of a local government for operating purposes should be recorded as:

A

Non Operating Revenues

Shared revenues are received by one branch of the gov’t and distributed to others (From the state, distributed to counties and cities), since it is not direcly from charging user fees for services, it is not operating revenue to the Enterprise Fund.

47
Q

The orientation of accounting and reporting for all proprietary funds of governmental units is:

A

Income determination

Accrual based fiancials accounted for essentially as if they were business enterprises.

48
Q

Where is the reconcilation between funds and Gov’t wide statements included?

A

In the Gov’t fund statements

49
Q

What are reciprocal interfund activities?

A

Payments between funds for good or services being provided. Like payment for billing of an internal service fund.

Routine transfers and seed funding are NON-reciprocal transfer. General fund is getting nothing in return.

50
Q

What should government record as basis for fixed assets acquired through reposession due to people defaulting on taxes?

A

lower of (1) the amount due for taxes, special assessments, penalties and interest, plus foreclosure costs or (2) appraised fair market value.

For example, parking lot has fair value of $60K, and amount of taxes not paid were $20k. Book value is $20K.

51
Q

When should component units be presented discretely?

A
  • Legally separate, tax-exempt entities that meet all three criteria must be presented discretely as component units:
  • (1) economic resources received or held by the separate entity are totally (or nearly totally) for the direct benefit of the primary government, its component units, or its constituents;
  • (2) the primary government, or its component units, is entitled to a majority of the economic resources received or held by the separate entity; and
  • (3) the economic resources received or held by an individual entity that the specific primary government, or its component units, is entitled to, or has the ability to otherwise access, are significant to that primary government.
52
Q

What are some important GASB pronouncements ?

A

Stmt 1 - establishment of external financial reporting

Stmt 75 - post employment benefits other than pensions

Stmt 34 - government wide financials prepared using accrual

53
Q

When a governmental unit acquires a general fixed asset through a lease, how should it be recorded ?

A

Both an expenditure and an other financing source.

This should be considered “Contract that transfers ownership”

54
Q

What method of cash flow is reported for Enterprise Funds?

A

Direct Method

  • Operating
  • Capital and related financing
  • Non-Capital financing
  • Investing Activities
    • Interest expense or income - whatever section underlying interest is from is where it goes. So interest income on investments goes to investing. Interest expense on capital goes to capital financing.
  • Capital assets purchased are financing
55
Q

What is reported in the Proprietary Fund changes in Revenues, Expenses and Change in Fund Net Position?

A
  • Operating Revenues
  • -Operating Expenses
  • +NonOperating Revenue (and expenses)
  • +Capital Contributions
  • -Transfers out
  • = change in net position
56
Q

What are the three types of leases recognized by GASB?

A

Short term lease (s/t short term)

Contracts that transfer ownership (s/t sales type)

Other leases (s/t direct financing)

57
Q

What are the lessors journal entries for a “contract that transfers ownership” lease for a governmental fund?

Initial entry and subsequent measurement

A
  • Lessee’s perspective Inital recognition:
  • DR Expenditure - Capital Outlay
    • CR Other Finacing Source
  • Subsequent Measurement :
  • DR Expenditure - Principal
  • DR Expenditure - Interest
    • CR Cash
  • Lessor initially recognizes Lease Receivable, Revenue, and deferred inflow of resources
58
Q

What are the four columns in Government Wide Statements?

A

governmental and business type activity

total

+ discretely stated component unit

59
Q

What information is included in the Required Supplemental Information?

A
  • MD&A - current year, primary govt. Not forward looking.
  • Beudgetary Comparison Schedule (original budget, final budget, actual results, and variances)
  • Infrastructure Schedules
  • Pension and OPEB schedules
  • Claims and Judgements
  • NOTE: Not the notes to F/S, those are part of the BASIC financial statements
60
Q

What determines if a fund is considered major fund?

A

Total assets/outflow, liabilities/inflows, revenue, or expenditures of individual fund meet both:

  • 10% of total for all funds of that type
  • 5% of total for all government and enterprise funds combined
61
Q

When are component units reported on gov’t financial statements?

A

SELF - If it meets this test, self reporting, otherwise, component unit

SE - Separately Elected Board

L - Legally separate entity

F - Financially independent

Blended - so intertwined, you cannot tell the difference between primary and component. Substantially the same, or serves the primary gov’t exclusively.

Discrete - default presentation.

62
Q

Gov’t wide reconciliation - what are the major categories and effect on net position?

A
  • Internal service fund
    • add dollar for dollar
  • Capital assets -increases net position
    • I/S: add back capital expenditures, subtract depreciation(increase net position)
  • Long term liabilities - decreases net position
    • I/S: subtract long term debt issued, add principal payments on debt
  • Revenue recognition - additional income increases net postions
    • I/S: Add revenue not recognized in funds, should be recognized govt wide
  • Accrued interest - additonal expense, decreases net position
    • I/S: subtract increase in accrued interest, add decrease in accrued interest
  • THINK - Accounting equation if you get stuck A= L + E. Increase in A also increases E (net position is akin to equity)

FAR - Fact Nuggets (17 decks)

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