Governmental Accounting Overview Flashcards
What are the objectives of governmental reporting?
it is designed to demonstrate the accountability of each organization for the stewardship of the resources in their care; although the accountability for privately owned enterprises may be clearly measured in either the net income of the entity or the increased wealth of its shareholders, governmental organizations are focused on providing efficient and effective delivery of services with public resources in compliance with applicable laws; identifying and displaying the accountability objectives of governmental organizations is integral to related accounting
What are the objectives of fund accounting and reporting?
foundational to governmental accounting is the concept of fund accounting; fund accounting enables service and mission-drive organizations to easily monitor and report compliance with spending purposes (fund restrictions), spending limits (budget), and other fiscal accountability objectives; governments use fund accounting to demonstrate fiscal accountability in their external reporting and use funds for internal accounting
The following industries commonly have the organizational characteristics and funding streams that lend themselves to the accountability objectives met by governmental reporting models
governmental units, colleges and universities, and health care organizations
however, NFPs not run by governments (like hospitals, universities, voluntary health and welfare organizations, and research organizations) do NOT use governmental accounting and reporting principles
Governmental accounting principles and standards
the governmental accounting standards board (GASB), which is the governmental counterpart of the FASB, establishes accounting and reporting standards for governments; the hierarchy of GAAP as it relates to governments is as follows: GASB accounting standards board statements are the most authoritative (category A) & GASB technical bulletins, GASB implementation guides, and literature of the AICP cleared by the GASB (category B)
governmental entities should consult guidance in category B documents in the event treatment for a transaction is not specified by a pronouncement in category A
Who are the users of governmental financial reports?
the 3 main groups of primary users of governmental financial reports are:
citizens, including taxpayers, voters, recipients of services, the media, researchers, etc.
legislative and oversight bodies, including state legislators, county and city commissioners, and executives with oversight authority
investors and creditors, including institutional investors, bond rating agencies, bond insurers, financial institutions, etc.
What are the uses of governmental financial reports?
they are used to make economic, social, and political decisions and to assess accountability by:
comparing actual financial results to budget
assessing financial condition and results of operations
assisting in determining compliance with finance-related laws, rules, and regulations
assisting in evaluating operating efficiency and effectiveness
accountability is the cornerstone of governmental financial reporting; interperiod equity, or the concept of balancing the budget on an annual basis, is a significant part of accountability
What are the characteristics of information in governmental financial reports?
understandability
reliability
relevance
timeliness
consistency
comparability
What are the key concepts in governmental accounting and reporting?
governmental accounting generally revolves around 3 themes that differentiate it from commercial and NFP accounting:
fund structure - there are 11 fund types that are classified in the following 3 generic categories: governmental funds, proprietary funds, and fiduciary funds
fund accounting - the application of different accounting principles to the funds in each generic fund grouping described above provides financial data consistent with the reporting accountability objectives of each fund; this feature of governmental accounting is a frequent source of exam questions
external reporting - reporting requirements include both fund-based and government-wide financial statement presentations supported by notes to the financial statements and a variety of required supplementary information
a fund is a sum of money or other resource segregated for the purpose of carrying on a specific activity or attaining certain objectives in accordance with specific regulations, restrictions, or limitations, constituting an independent fiscal and accounting entity; each fund is a self-balancing set of accounts
