Introduction to Governmental Organizations & Fund Accounting

Question 1

What are the Governmental topics most likely to appear on the CPA exam?

Answer 1

Deferred outflows of resources, Deferred inflows of resources, and Net position
as perscribed under GASB Statement no.63

&

Pension plan reporting (GASB statement no.67) and Pension Accounting and Reporting by employers (GASB Statement no. 68)

Question 2

What are the main characteristics that drive Government accounting and reporting?

Answer 2

A) No profit motive
B) Lack of clear ownership
C) Non-exchange services - contributors of resources do not receive proportionate share of benefits
D) Compliance w/laws & regulations
E) Formal Budget Process

Question 3

What are the different types of Governmental Entities?

Answer 3

1) State & Local Governments:
- towns, cities, county, parish, state governments
- also called “ general purpose governments”
2) Special Purpose Governments
- school districts, transit authorities
3) Agencies & Commissions:
- economic development, convention bureau

Question 4

What are the GASB level of authorities?

Answer 4

Level A) GASB Statements & Interpretations ie officially established accounting principles
Level B) GASB Technical Bulletins & AICPA Industry guides
Level C) AICPA Practice Bulletins if made specifically applicable to state and local government & cleared by GASB
Level D) GASB Implementation Guides and widely recognized practices prevalent in state and local government

Question 5

What is the purpose of the GASB Conceptual Framework?

Answer 5

To provide a framework for GASB by developing and rising standards
*concept statements are not authoritative GAAP!
Rather they provide guidance

Question 6

What are the 5 GASB Conceptual statements that have been released to date thus far?

Answer 6

1) Objectives of financial reporting
2) Services efforts and accomplishments
3) Financial Reporting
4) Elements of Financial Reports
5) Service efforts & accomplishments (amendment to Concept Statement 2)

Question 7

What is the key objective of Financial Reporting for governments?

Answer 7

ie Concept Statement 1
Accountability
Interperiod equity - are current year resources sufficient to pay current year services?

Question 8

What are they key characteristics of Governmental Financial Reporting

Answer 8

ie Concept Statement 1, cont.
Timeliness
Relevance
Understandability
Comparability
Consistency
Reliability

“TRUCCR” (Trucker)

Question 9

What are and how are “Service Efforts & Accomplishments” reported in Governmental accounting?

Answer 9

ie. Concept Statement 2
It is a voluntary report
Service efforts = inputs eg. cost of fire department
Service accomplishments = what you received from the inputs can be either outputs or outcomes
- Outputs : eg. # of fire alarms responded to
- Outcomes: eg. % of fire alarms responded to w/ in 5 min.

Question 10

What is the hierarchy of reporting in Governmental Financial Reporting?

Answer 10

ie Concept Statement 3

1) Recognition in basic financial statements
2) Note disclosure
3) Required supplemental information (RSI)
4) Other supplemental information (not required)

Question 11

What are the elements of Financial Statements for GASB? highly likely to be tested

Answer 11

ie Concept Statement 4

1) Assets
2) Liabilities
3) Deferred Outflow of Resources*
4) Deferred Inflow of Resources*
5) Net Position*

*updated and highly tested

Question 12

What are the different categories of Funds found in Fund accounting?

Answer 12

1) Governmental Funds
2) Proprietary Funds
3) Fiduciary Funds

Question 13

What is a Fund?

Answer 13

A fund is both:
A fiscal entity (accounts for cash & noncash resources)
&
An accounting entity (debits=credits)

Question 14

What is a Governmental Fund? And what are the specific funds under this category of Fund ?

Answer 14

A fund that accounts for sources, uses and balances of general government financial resources (eg. taxes)

• General Fund: catchall, everything not required to be accounted for under other Funds
• Special Revenue Funds: resources that are restricted or committed for a specific purpose (other than debt service or capital projects)
• Capital Projects Fund: resources that are restricted or committed for construction or acquisition of capital facilities or capital assets
• Debt Service Funds: resources set aside to pay service principal and interest expenditures
• Permanent Funds: accounts for endowments in which earnings are restricted to support government programs dedicated to a Public Purpose

Question 15

What is a Proprietary Fund? And what are the specific funds under this category of Fund?

Answer 15

A fund that accounts for business-type activities

• Enterprise Funds: accounts for business-type activities in which the PUBLIC is the primary user. Thus may be charged to public. Also uses ACCRUAL accounting
• Internal Service Funds: accounts for business-type activities in which other GOVERNMENTAL DEPARTMENTS are the Primary user

Question 16

What is a Fiduciary Fund? And what are the specific funds under this category of Fund?

Answer 16

A fund that accounts for resources held by a government in its capacity as a trustee or agent for the benefit of others
- Pension Trust Funds: assets held in trust to provide Employee retirement benefits

• Private Purpose Trust Funds: assets held in trust created to benefit Individuals
• Investment Trust Funds: assets held in trust for Other Participants, usually other Governments
• Agency Funds: assets held in Custodial fashion,

Question 17

What is a mnemonic to help remember the 11 different Fund types?

Answer 17

“DRIP the CEG PIPPA”

PIPPA = Fiduciary Fund types: Pension, Investment Trust, Private Purpose, and Agency

The vowels (I & E) in “DRIP the CEG”: represent the Proprietary Funds: Internal and Enterprise

The consonants in “DRIP the CEG” are the governmental funds: Debt Service, Special Revenue, Permanent, Capital Projects, General.