Module 9: Proprietary Funds

Question 1

What are the reasons for use of proprietary funds?

Answer 1

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

Question 2

What are the two types of proprietary funds?

Answer 2

1) Enterprise Funds

2) Internal Service Funds

Question 3

Enterprise funds provide service to the ___________.

Answer 3

General Public

Question 4

Internal Service funds provide service to the ____________.

Answer 4

other government departments

Question 5

What are the accounting characteristics of proprietary funds?

Answer 5

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

Question 6

What is the accounting equation for proprietary funds?

Answer 6

Assets - Liabilities = Net Assets

Question 7

What are the required components of the financial statements of proprietary funds?

Answer 7

1) Statement of Net Assets
2) Statement of Revenues, Expenses and changes in Fund Net Assets
3) Statement of Cash Flows

Question 8

What are the three categories of Net Assets?

Answer 8

1) Invested in capital assets
2) Restricted Net Assets
3) Unrestricted Net Assets

Question 9

Proprietary Fund’s statement of cash flows are prepared in conformity of ________ standards.

Answer 9

GASB

Question 10

Does the statement of cash flows include cash and cash equivalents?

Answer 10

Yes

Question 11

What is required for proprietary funds but not governmental funds?

Answer 11

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

Question 12

Where should “Net Assets - Restricted” be reported?

Answer 12

Equity section of the Statement of Net Assets

Question 13

What are restricted assets?

Answer 13

Assets whose use is restricted by contractual agreements or legal requirements

Question 14

What do enterprise funds account for?

Answer 14

Services provided for:

1) gen public @ user charge basis
2) Gov body has determined it’s appropriate

Question 15

What are the possible reasons for use of enterprise funds?

Answer 15

1) Capital Maintenance
2) Public policy
3) Management Control
4) Accountability

Question 16

When MUST governments use enterprise funds?

Answer 16

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

Question 17

Where are Municipal Solid Waste Landfills (MSWLFs) accounted for?

Answer 17

Enterprise or Governmental Funds

Question 18

When are MSWLFs accounted for in enterprise funds?

Answer 18

When usage fees are charged

Question 19

What must the fees of MSWLFs cover?

Answer 19

ALL costs (costs incurred before, during and after landfill accepts waste)

Question 20

What do Closure and Post-closure costs include?

Answer 20

1) equipment installed and facilities constructed after the landfill stops accepting waste
2) Final Cover
3) Monitoring and Maintenance

Question 21

If the MSWLF is accounting for in an enterprise fund, governments must report:

Answer 21

1) Expense

2) Liability related to Closure and Post-Closure costs

Question 22

If the MSWLF is accounted for in a governmental fund, governments must report:

Answer 22

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)

Question 23

How long must operators monitor closed landfills?

Answer 23

30 years

Question 24

How do you calculate current year liability/expense for landfills?

Answer 24

[(Estimated total cost x Landfill capacity)/Total Landfill Capacity] - Amount recognized in the past

Question 25

What is included in pollution remediation costs?

Answer 25

1) Pre-cleanup activities
2) Cleanup activities such as removal and disposal of pollutions
3) Government oversight and enforcement
4) Post-remediation monitoring

Question 26

When should the costs of pollution remediation costs be estimated and recognized as an expense and liability?

Answer 26

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

Question 27

What is the primary purpose of Internal Funds?

Answer 27

to gain efficiency in the government’s operations

Question 28

What do the internal service funds account for?

Answer 28

Activities that provide good/services to other funds within the govt (occas. other govs) on a user-charge or cost reimbursement basis

Question 29

For internal service funds, where are the revenue & expenses closed to?

Answer 29

Excess of Cost over Billings

Question 30

Is the Internal Service fund activity presented in the GW FS?

Answer 30

No - it’s eliminated since it’s with the govt itself

Question 31

Debt Forgiveness

Answer 31

a partial or total pardon of debt

Question 32

External Subsidies

Answer 32

an amount of money, generally a grant, received by governmental entity from a non-governmental source

Question 33

Impact Fees

Answer 33

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

Question 34

Internal Subsidies

Answer 34

an amount of money, such as a transfer from the general fund, received by a government entity from another government source

Question 35

Self Insurance

Answer 35

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

Question 36

Tap Fees

Answer 36

fees charged by a governmental entity to new customers to hook up to its system

Question 37

Privatization

Answer 37

engaging an outside, private sector firm to provide services that have previously been performed inhouse