NFP & Governmental (5-15%)

Question 1

Who are the primary intended users of governmental FS?

Answer 1

1) citizens/taxpayers
2) school boards
3) investors/creditors

*Internal users are not considered primary users

Question 2

What are the 2 most important concepts of governmental financial reporting?

Answer 2

1) Accountability

2) Inter-period Equity (having CY revenues cover CY expenditures)

Question 3

What are the 6 characteristics of effective financial reporting?

Answer 3

TRUCCR

1) Timeliness
2) Relevance
3) Understandability
4) Consistency
5) Comparability
6) Reliability

Question 4

What financial statements are required for the government-wide financial statements?

Answer 4

1) Statement of Net Position (2 separate columns: gov/bus)

2) Statement of Activities (program exps, program revs, net programs, general revs)

Question 5

What financial statements are required for the governmental fund financial statements?

Answer 5

1) Balance Sheet (lists left to right all funds, including all non-major funds, then totals column)
2) Statement of Revs, Expends, Changes in FB (revs, expends, changes in FB, separate columns for non-major funds like BS)
* NO CF statement for governmental funds

Question 6

What are some common general fund revenues & expenditures?

Answer 6

revenues: property tax rev, licenses/permits, charges for services, fines
expenditures: salaries, operating expenses, capital outlays for buildings/improvements, debt service (principal/interest)

Question 7

What financial statements are required for the proprietary fund financial statements?

Answer 7

1) Statement of Net Position
2) Statement of Revs, Exps, Changes in Net Position
3) Statement of CF

• Organized by:
  1) Operating Revs
  2) Operating Exps
  3) Operating Income/Loss
  4) Non-Operating Revs & Exps
  5) Change in Net Position

Question 8

How is equipment purchased to be used within a proprietary fund reported?

Answer 8

Depreciated over its useful life just like in a for-profit business (Accrual method).

Question 9

What financial statements are required for the fiduciary fund financial statements?

Answer 9

1) Statement of Fiduciary Net Positions
2) Statement of Changes in Fiduciary Net Position (Additions/Deductions used)

• include column for each fund type
• never a major fund

Question 10

What is a major segment of notes to governmental financial statements?

Answer 10

Significant accounting policies including policies for things like:

• capital assets
• pension plans
• debt service schedule
• LT liabilities
• major projects

Question 11

What is within the MD&A?

Answer 11

• discusses CY results compared to PY
• provides explanation of FS & how different statements relate to each other
• overall financial position, reasons for major changes in fund balances
• deviations from budget

Question 12

What are some important features of the RSI?

Answer 12

• budget comparison
• infrastructure asset disclosures using modified approach
• other statistical data/schedules that provide add’l info on significant elements of government

Question 13

What is a component unit?

Answer 13

A legally separate organization that the primary government officials are financially accountable for OR the relationship is such that leaving it out of FS would be misleading/incomplete.

*blended or discretely

Question 14

What are the spendable fund balances?

Answer 14

• Restricted - reserved for specific purpose by external parties
• Committed - constrained by gov’s highest level of authority
• Assigned - intended to be used for specific purpose
• Unassigned - available for any purpose

Question 15

How are capital assets reported in governmental accounting overall?

Answer 15

Reported in Proprietary & Fiduciary funds, NOT in governmental funds.

Recorded at historical cost & depreciated.

Question 16

How are liabilities reported in the government-wide financials?

Answer 16

Can be reported at FV OR Discounted Value

• Unmatured LT debt (bonds, capital leases, judgements, unfunded pension plans, notes, other gov debt)

Question 17

What types of governmental accounts are budgeted?

Answer 17

• General Fund
• Special Revenue Fund

*other funds are not usually budgeted

Question 18

What are the steps of the budgetary process?

Answer 18

1) estimated revenues (DR balance)
2) appropriations (how much of that revenue will be spent?) (CR balance)
3) estimated other financing sources? (DR balance)
4) estimated other financing uses? (CR balance)
5) left over = budgetary fund balance (no normal balance)
* normally no changes to this during the year

Question 19

What is the entry to close the budget?

Answer 19

Simply to reverse the opening entry.

DR Appropriations
CR Estimated Revenues

Question 20

How are conditional pledges recognized/recorded?

Answer 20

Must wait until condition has been met to record revenue.

*Can record only the net amount expected to be collected within one year.

Question 21

How are unconditional pledges recognized/recorded?

Answer 21

Can recognize revenue in the period pledge is made.

*Can record only the net amount expected to be collected within on year.

Question 22

How do donations on behalf of a beneficiary with variance power get recorded? How do they get recorded without variance power?

Answer 22

*To choose the beneficiary of the donation.

With = can record the donation at FV.

Without = NFP is just an intermediary and records liability until the donation is transferred to beneficiary.

Question 23

What is a regular endowment? How should it be classified?

Answer 23

When an external party donates $ w/stipulation that endowment amount has to remain intact forever.

Net Assets with Donor Restrictions.

Question 24

What is a term endowment? How should it be classified?

Answer 24

When an external party donates $ w/stipulation that it is invested for a specific period of time and can then be spent.

Net Assets with Donor Restrictions.

Question 25

What is a quasi endowment? How should it be classified?

Answer 25

An amount set aside by governing body.

Net Assets without Donor Restrictions.

Question 26

How are NFP gains/losses reported?

Answer 26

As changes to Unrestricted Net Assets, unless there is a donor-imposed restriction, NFP’s do NOT use AFS or other investment classifications.

Question 27

How are collections art/historical treasures reported?

Answer 27

Do not have to be capitalized if:

1) held for public exhibition, education, research
2) AND protected & preserved
3) AND subject to policy that requires proceeds of items sold to be used to purchase other items for collection or for direct care of existing items already in possession.

Question 28

How are donated services reported?

Answer 28

FV as both revenue and expense if:

1) services donated require specialized skills
2) AND person possesses those skills
3) AND value of services can be measured

Question 29

For NFPs, how are unrealized gains & dividends reported on FS?

Answer 29

• included on Statement of Activities

- stay within the designation of original investment (net assets with/without donor restriction)

Question 30

How is the Statement of Functional Expenses reported? and who is required to report it?

Answer 30

• within the Statement of Activities
• schedule in the notes to the FS
• separate FS

*expenses are broken out to show what spent on program services and supporting services

every NFP is required to report expenses by nature & function