Governmental Reporting Flashcards
What are the governmental accounting objectives?
Operational accountability and fiscal accountability
Has the govt entity been effective & efficient in its operations?
Has the govt entity compiled and achieved its budgets?
What are the four types of governmental funds requiring fund financial statements?
1) governmental funds
2) proprietary funds
3) fiduciary funds
4) component units
What elements are required by GASB to be presented in government financial statements?
MD&A (mgmt discussion & analysis) Government-wide financial statements Fund financial statements Notes to financial statements RSI (required supplementary information)
What levels of government follow GASB?
State & local. Fed does not follow GASB
What accounting basis do govt-wide and fund financial statements follow?
Govt-wide: accrual Funds - govt funds: modified accrual - proprietary funds: accrual - fiduciary funds: accrual - component units: accrual
What are governmental entity funds?
gov’t entity funds
General governmental activities, often funded by tax or other mandatory payments which are unique to goverments
E.g. highway construction, police dept
What are the five types of governmental funds?
gov’t entity funds
GenSpCapDebPerm
1) general funds
2) special revenue funds
3) capital projects funds
4) debt service funds
5) permanent funds
What are special revenue funds?
gov’t entity funds
Specific revenue funds earmarked to finance a specific purpose.
Special revenue funds used to account for and report the proceeds of specific revenue resources that are restricted/committed to specified purposes (other than debt service or capital projects). e.g. nicotine tax earmarked to fund schools
If the a govt activity is designed to be covered 50% or more by user fees, then it does NOT get accounted for in special revenue funds. If it is 50% or less, then special revenue fund.
Think of the objective of govt accting; operational/fiscal accountability. If less than 50% user fees fund the activity, then there should be separate accountability of for that fund.
What are capital projects funds?
gov’t entity funds
Funds used to account for the acquisition/use of financial resources to construct or acquire major long-lived general government capital assets (does not include capital assets for enterprise or fiduciary funds).
e.g. construction of townhall, park, or courthouse
What are the revenue sources for special revenue funds?
gov’t entity funds
Fees, grants, specific taxes, and other earmarked revenue sources
What are the revenue sources for capital project funds?
gov’t entity funds
Special tax revenue, capital grants
What are debt service funds?
gov’t entity funds
Account for accumulation of resources used to pay general long-term debt principal and interest liabilities
Most bond indentures will require separate funds for debt service revenues.
What are revenue sources for debt service funds?
gov’t entity funds
Can include a percentage of property taxes
What are permanent funds?
gov’t entity funds
Endowments received by the government where entities are not allowed to spend the principal. Only the earnings on the principal may be used to support the programs.
What are the revenue sources for permanent funds?
gov’t entity funds
Investment earnings
What are proprietary funds?
proprietary funds
Activities where the government entity provides goods/services for a charge (like commercial entities).
What are internal service funds?
proprietary funds
Funds that report any activity providing goods/services internally to other funds/depts/agencies of the govt and its component units, or to other govts on a cost-reimbursement basis.
e.g. maintenance dept, IT dept
What are the types of proprietary funds?
proprietary funds
1) internal service funds
2) enterprise funds
What are revenue sources for internal services funds?
proprietary funds
Includes billings for services, grants, and interest earnings
What are enterprise funds?
proprietary funds
Funds that report any activity for which a fee is charged to external users for goods/services.
e.g. city-operated utilities, airports, transit systems, public hospitals/universities
What are the criteria to use enterprise funds?
proprietary funds
A fund s/b an enterprise fund when any ONE of the following are met:
- pledge revenues: activity is financed with debt secured by a pledge of the net revenues
- law requires fees to cover: law requires that the activity’s cost of providing services be recovered w/ fees & charges, rather than with taxes or similar revenues
- designed for fees to cover: pricing policies of the activity establish fees & charges designed to recover its costs
What are revenue sources for enterprise funds?
proprietary funds
Include charges for services, interest, and investment income
What are fiduciary funds?
fiduciary funds
Used to report assets held by the govt as a trustee/agent for others, and therefore, cannot be used to support govt programs.
Govt is acting as the fiduciary
What are the types of fiduciary funds?
fiduciary funds
1) pension trust funds
2) investment trust funds
3) private purpose trust funds
4) custodial funds
What is a pension trust fund?
fiduciary funds
Fund used to report resources that are required to be held in trust for the members and beneficiaries of pensions and post-employment plans. Generally covers govt employees
What is an investment trust fund?
fiduciary funds
Fund where multiple govt entities pool resources/finances. One govt makes investment on behalf of other govts
What is a private purpose trust fund?
fiduciary funds
Fund where the govt acts as a trustee for a fund set-up for private purposes. The resources are restricted to the benefit of third parties (not the govt). e.g. scholarship fund
Endowment funds are the most common type.
What is a custodial fund?
fiduciary funds
Used to report resources held by a govt entity in a purely custodial capacity. Govt is simply acting as a conduit to collect and disburse funds. Govt has no equity in these funds. E.g. property taxes collected by the state for the local municipalities
What are component units?
component unit funds
Autonomous legally separate unit satisfying either of the following:
1) Primary govt is financially accountable for the unit. The unit raises/holds economic resources for the direct benefit of the primary govt. e.g. school district raises money which benefits the govt operating the school
2) The unit has a close financial relationship with the primary govt, such that exclusion of the unit from the govt FS would cause them to be misleading.
Why do governmental funds use modified accrual accounting?
modified accrual accting
Accrual accounting is designed to have revenues match expenses. Governmental entities don’t have revenues (taxes are imposed, not earned).
Govt’s need to have expenditures match the taxes, so they use modified accrual accting.
What is the current financial resources approach of govt fund accounting?
modified accrual accting
Modified accrual accounting ignores all future periods, only considering the current period.
- expenses in the current period should be covered by revenues/taxes in the current period.
- goal is to ensure current period expenditures are not paid by future taxpayers
When is revenue recognized under modified accrual accounting?
modified accrual accting
When measurable and available to be spent
Revenue is not earned by govts. Therefore, revenue is recognized then measurable and available to be spent (collectible this year or within 60-days of year-end)
When are expenditures recognized in govt fund accounting?
modified accrual accting
In the current period only. I.e., purchase of fixed assets are not capitalized/depreciated. They are an expenditure during the period in which the money is spent.
Debt is not capitalized as a liability. It is treated as other financing sources in the year received.
What are the financial statements for govt fund accounting?
modified accrual accting
Balance sheet - to present the financial position
Statement of Revenues, Expenditures, and Changes in fund balances - income/expense statement
What are the accounting types in govt fund accounting?
modified accrual accting
Budgetary accounting: ensure compliance w/ budget
Activity accounting: account for transactions (what happened)
revenues, expenses, assets, debt
Encumbrances accounting: account for issue of purchase orders; to control reckless expenditures
What are the fund balances in govt fund accounting?
modified accrual accting
1) Reserved:
- non-spendable
- restricted
- committed
- assigned
2) Unreserved
Fund balances are the corollary to equity in commercial accounting
What are the four types of reserved fund balances in govt fund accounting?
modified accrual accting
Non-spendable
Restricted
Committed
Assigned
What is a non-spendable fund balance?
modified accrual accting
Reserved fund balance that cannot be spent as they are not in a spendable form. I.e., inventory, prepayments
What is a restricted fund balance?
modified accrual accting
Reserved fund balance that is externally restricted for a specific purpose
What is a committed fund balance?
modified accrual accting
Reserved fund balance that is reserved for a specific purpose by a formal action from the govt entity
What is an assigned fund balance?
modified accrual accting
Reserved fund balance that is not restricted or committed, but is intended to be used for a specific purpose.
