Module 9: Proprietary Funds Flashcards
What are the reasons for use of proprietary funds?
1) Account for operations & activities
2) Enhances management of activities in which goods/service are provided on a cost reimbursement basis
3) To compare benefits and costs of activities
4) Facilitate comparisons with private enterprises
What are the two types of proprietary funds?
1) Enterprise Funds
2) Internal Service Funds
Enterprise funds provide service to the ___________.
General Public
Internal Service funds provide service to the ____________.
other government departments
What are the accounting characteristics of proprietary funds?
1) Funds are nonexpendable (or revolving)
2) Focus on determining op. net income, changes in net assets
3) Full Accrual Basis
4) Measurement focus on all economic resources
What is the accounting equation for proprietary funds?
Assets - Liabilities = Net Assets
What are the required components of the financial statements of proprietary funds?
1) Statement of Net Assets
2) Statement of Revenues, Expenses and changes in Fund Net Assets
3) Statement of Cash Flows
What are the three categories of Net Assets?
1) Invested in capital assets
2) Restricted Net Assets
3) Unrestricted Net Assets
Proprietary Fund’s statement of cash flows are prepared in conformity of ________ standards.
GASB
Does the statement of cash flows include cash and cash equivalents?
Yes
What is required for proprietary funds but not governmental funds?
For FASB entities (NFP):
Cash flows from operating activities
Cash flows from financing activities
Cash flows from investing activites
For GASB entities (Governmental)
Cash flows from operating activities
Cash flows from Non-capital financing activities
Cash flows from Capital and Related financing activities
Cash flows from investing activities
Where should “Net Assets - Restricted” be reported?
Equity section of the Statement of Net Assets
What are restricted assets?
Assets whose use is restricted by contractual agreements or legal requirements
What do enterprise funds account for?
Services provided for:
1) gen public @ user charge basis
2) Gov body has determined it’s appropriate
What are the possible reasons for use of enterprise funds?
1) Capital Maintenance
2) Public policy
3) Management Control
4) Accountability
When MUST governments use enterprise funds?
1) Activity financed soley with rev debt instead of gov ob debt
2) Costs of providing services recovered by fees/charges
or 3) Pricing policy are designed to recover costs from fees and charges
Where are Municipal Solid Waste Landfills (MSWLFs) accounted for?
Enterprise or Governmental Funds
When are MSWLFs accounted for in enterprise funds?
When usage fees are charged
What must the fees of MSWLFs cover?
ALL costs (costs incurred before, during and after landfill accepts waste)
What do Closure and Post-closure costs include?
1) equipment installed and facilities constructed after the landfill stops accepting waste
2) Final Cover
3) Monitoring and Maintenance
If the MSWLF is accounting for in an enterprise fund, governments must report:
1) Expense
2) Liability related to Closure and Post-Closure costs
If the MSWLF is accounted for in a governmental fund, governments must report:
1) Liability/expense of post-closure costs in their GOVERNMENT WIDE statements
2) No expenditure shown in the Fund Statements (pay as you go basis)
How long must operators monitor closed landfills?
30 years
How do you calculate current year liability/expense for landfills?
[(Estimated total cost x Landfill capacity)/Total Landfill Capacity] - Amount recognized in the past
What is included in pollution remediation costs?
1) Pre-cleanup activities
2) Cleanup activities such as removal and disposal of pollutions
3) Government oversight and enforcement
4) Post-remediation monitoring
When should the costs of pollution remediation costs be estimated and recognized as an expense and liability?
1) The government knows or has reason to believe that a site is polluted
2) that it will be responsible for the cleanup
and 3) it can make reasonable estimate of its cost
What is the primary purpose of Internal Funds?
to gain efficiency in the government’s operations
What do the internal service funds account for?
Activities that provide good/services to other funds within the govt (occas. other govs) on a user-charge or cost reimbursement basis
For internal service funds, where are the revenue & expenses closed to?
Excess of Cost over Billings
Is the Internal Service fund activity presented in the GW FS?
No - it’s eliminated since it’s with the govt itself
Debt Forgiveness
a partial or total pardon of debt
External Subsidies
an amount of money, generally a grant, received by governmental entity from a non-governmental source
Impact Fees
fees charged to developers by a governmental entity for costs of anticipated improvements, such as sidewalks and parks, that will be necessary as a result of a development
Internal Subsidies
an amount of money, such as a transfer from the general fund, received by a government entity from another government source
Self Insurance
the retention of risk by an entity, as opposed to the transfer of risk to an independent third party through the purchase of an insurance policy
Tap Fees
fees charged by a governmental entity to new customers to hook up to its system
Privatization
engaging an outside, private sector firm to provide services that have previously been performed inhouse
