Section 2 - Ch2 Flashcards
1
Q
SLG Fund Categorioes (3 major funds)
A
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Governmental Funds:(Modified Accrual) used to account for general services provided to the public. There is no match between resources and their uses. Most governmental funds are supported through “nonexchange revenues” such as taxes, fines, grants, shared revenues.
- All transactions flow through operating statement (MA)
- Inflows are treated as revenue if “measurable” and “available” (MA)
- Outflows are treated as expenditures including capital transactions and principal payment on LT Debt (MA)
- Accrued interest on LT Debt is NOT recognized as an expenditure or liability (MA)
- No Capital Assets or LT obligations are on BS (MA)
- Inflows of resources from issuance of debt are “other financing sources”
- Proceeds from sale of capital assets are “other financing sources”
-
Proprietary Funds: (Accrual) a fee or charge is required to create a proprietary fund. Used to account for activities that are run like a “business”.
- Internal Service funds
- Enterprise funds
-
Fiduciary Funds: (Accrual) when a government holds assets as a trustee or agent (pension program). Assets cannot be used to support the government’s programs. Not reported at the government-wide level.
- Trust fund
- Agency fund
2
Q
Governmental Funds: (Modified Accrual) — all are Major Funds if meeting requirements in “Major Fund” Section, for 10% + 5% rule
A
-
General Fund (Major Fund): primary account for financial resources (most important fund)
- “All flows and balances of current financial resources”
- There can only be 1 General Fund, but it can have multiple accounts
- General fund is used for most admin services of gov’t: executive, legislative, judicial, HR, finance, facilities, overhead
- Public services General Fund is used for include:police, fire, social services, community recreation, economic development, sanitation
- 3 criteria to use a fund other than the General Fund:
- GAAP requirements
- Legal requirements
- Demands of sound financial administration may require use of another fund
-
Special Revenue Funds: used for identifiable purposes other than capital projects. Legal requirements often are imposed to segregate funds into SRF’s. (gas taxes are to be used for highway maintenance projects).
- Restricted or committed to expenditure for specific purposes
-
Capital Projects Funds: used to account for financial resources to be used for major capital projects and is only used if there is a legal provision to do so. Revenues in this fund include proceeds from issuing bonds, intergovernmental revenues, earmarked taxes, etc. Expenditures are for capital outlays.
- Face Value of bonds:reported as “other financing sources” on operating statement.
- Bond premiums or discounts:reported separately from bond proceeds.
- Cost to issue bonds:reported separately as a component of debt service.
-
Debt Service Funds: account for accumulation of resources to pay principal and interest on LT Debt.
- GASB requires use of DSF in 2 situations:
- When legal requirements mandate DSF use
- When financial resources are being accumulated for principal and interest payments
- Revenues from earmarked taxes, grants, investment earnings.Expenditures include debt service principal and interest (only the portion that is due and payable)
- Sinking Funds: money deposited annually to be able to pay principal at term end
- GASB requires use of DSF in 2 situations:
-
Permanent Funds: Account for resources that are legally restricted so that only interest earnings (no principal) may be used to support government programs. (bequests such as colleges, etc.)
- If the government benefits from the bequest à must establish a Permanent Fund
3
Q
Proprietary Fund Types
(Accural)
Economic Resource
used to account for activities run like a business
A
-
Enterprise Funds (Major Fund) [Customer: Business]: may be used to report any activity for which a user fee is charged to external users.
- Business type activities such as utilities or transit services or golf courses.
- If any one of the following criteria is met, must use an Enterprise Fund:
- Activity is financed with debt that is secured solely by a pledge of the net revenues from fees charged for the activity.
- require that the activity’s costs be recovered with fees rather than taxes
- Pricing policies designed to cover all costs including capital costs w/ fees.
- Enterprise Funds must comply with ALL FASB requirements unless they conflict with GASB.
-
Internal Service Funds (never a Major Fund) [Customer: other Gov’t units]:established for elements of government that provide a specific service to other funds or government units. (charge other branches of government for service provided — car pool)
- Objective is to “Break-Even” - Should not have a surplus or deficit
4
Q
Fiduciary Funds (Accrual) (never a Major Fund)
used to account for assets held in a trustee capacity or as an agent for others and cannot be used to support government programs
A
- Pension Trust Funds
- Investment Trust Funds
- Private-purpose trust funds
- Custodial/Agency funds: account for money the gov’t holds as an agent for some other organization in a temporary custodial capacity (fire dept fund). Agency funds should have NO equity balance (net position)… assets are offset by liabilities. (Reports ONLY Assets & Liabilities… NO Net position reported)
5
Q
Major Funds
Include Governmental Funds & Enterprise Funds
A
- Requirements to be a Major Fund:
- Total Assets, Liabilities, Revenues, OR Expenditures of the fund are at least 10% of the corresponding total of ALL funds of the category (governmental) OR fund type (enterprise); AND…
-
Total Assets, Liabilities, Revenues, OR Expenditures of the fund are at least 5% of the corresponding total for ALL governmental AND enterprise funds combined.
- Each of the 4 components (A,L, Rev, Exp) are analyzed individually.If any 1 of the 4 meets the criteria à MAJOR FUND.
- IF government officials believe a is particularly important, then they can report it as a Major Fund.
- Major Funds are reported separately on financial statements.
6
Q
Governmental Funds - Required Financial Statements
A
-
Balance Sheet
- Assets + Deferred outflows of resources =
Liabilities + Deferred inflows of resources + Fund Balances
- Fund Balance Reporting (II-64): Fund balance for gov’t funds should be reported in 5 classifications
- Nonspendable Fund Balance: amounts in non-spendable form (inv, L/T Loans or property)
- Restricted: External constraints (creditors), or law placed constraints on these funds
- Committed: Specific purpose by highest decision making authority
- Assigned: Constrained for specific purpose but not by highest authority (easier to change)
- UnAssigned
Also, note:
- Stabilization Arrangements: contingency/emergency fund
- Significant encumbrances not already noted in a fund above (i.e. restricted/committed/assigned) should be noted in financial statements
- 1st Reconciliation:
“Total governmental fund balance (BS)” <-> “Net position from governmental activities (Gov’t-wide statement of net position)”
-
Statement of Revenues, Expenditures and Changes in Fund Balances (Operating Statement)
- Rev – Exp = Excess (deficiency) + Other financing sources = Net change in fund balances
- Beg Fund Balance & End Fund Balance is listed at bottom.
- “Other Financing Sources and Uses” à proceeds from issuance of debt, transfers, capital leases, proceeds from sale of capital assets. Bond premiums are reported separately as “Other Financing Sources”. Issue Costs are reported as component of debt service.
- 2nd Reconciliation: “Statement of Rev, Exp, and Chgs in Fund Bal’s” ßà__Gov’t-wide statement of Activities
- In other words: Total change in Fund Balance of governmental funds <-> Change in Net position of governmental activities (Gov’t-wide Statement of Activities)
- in other words: Total change in Fund Balance of governmental funds ßà Change in Net position of governmental activities (Gov’t-wide Statement of Activities)
- Budgetary Comparison Statement
- Required Supplementary Information (RSI)
- Presented after the basic statements and the notes
- Original v. Final v. Actual for Gen and Major Funds (e.g. Special Revenue, etc.)
7
Q
Fiduciary Fund Statements (2 required)
A
- Statement of Fiduciary Net position (BS)
-
Statement of Changes in Fiduciary Net position
- Agency Funds are NOT reported.
8
Q
Budgetary Accounting and Reporting
4 Budgetary Accounts
A
4 Budgetary Accounts
- Estimated Revenues
- Budgetary Fund Balance
- Appropriations
- Encumbrances (SLG) / Obligations (Federal)
9
Q
Recording Estimated Revenues and Appropriations (Beginning of the Year Entry)
A
- IF “Estimated Revenues” > “Appropriations”:to record the operating budget for the year…
Estimated Revenue xx
Appropriations xx
Budgetary Fund Balance xx
- IF “Estimated Revenues”= “Appropriations”:NO Entry.
- IF “Estimated Revenues” < “Appropriations”:to record the operating budget for the year…
Estimated Revenue xx
Budgetary Fund Balance xx
Appropriations xx
10
Q
Recording Revenues (Journal Entry)
A
Recording Revenues:
Cash xx
Revenue xx
11
Q
Budgetary Revenue Reporting (Journal Entry)
A
Budgetary Revenue Reporting: If the government modifies estimated revenues during the year.
- IF “Estimated Revenues” were increased:
Est. Revenues xx
Budgetary Fund Balance xx
12
Q
Recording Encumbrances (Journal Entry)
A
Recording Encumbrances:
Encumbrance xx
Restricted/committed/assigned fund balance xx
When goods/services have been received, the encumbrance is relieved and an expenditure is posted:
Restricted/committed/assigned fund balance xx
Encumbrances xx
Expenditures xx
Vouchers Payable xx
13
Q
Closing Entries (End of the Year Entries)
A
Closing Entries (End of the Year Entries)
~Reverse the entries from the beginning of the year…
Appropriations xx
Budgetary Fund Bal xx
Estimated Revenue xx
***Appropriation – Expenditures – Encumbrances = Available Balance***
14
Q
Budgetary Reporting
Required for the General Fund and each Major special revenue fund (TEST)
A
*Budgetary Reporting:
-
Budgetary Comparison Schedule: is Required Supplementary Information (RSI).
- Required for the General Fund and each Major special revenue fund (TEST)
- No Requirement for variance between final budget and actual budget, but encouraged.
- Columnar Requirements:Original budget, Final budget, Actual budget.
- Original Budget includes any amounts carried forward from prior years.
- Final Budget = Original Budget adjusted by transfers, supplemental appropriations.
-
Reconciliation (REQUIRED) between the budgetary comparison schedule and GAAP operating statement if budget is prepared on a basis other than GAAP.
- Reconcile transactions posted on the Modified Accrual Basis. (basis & timing differences)
15
Q
CAFR 3 Sections (TEST)
A
- Introductory Section
- Includes all basic information about the organizational unit
- Letter of Transmittal (most important element): contains accounting standards, description of component units, local economy, long range planning, cash management, risk financing, independent audit, and awards.
-
Financial
- Auditor’s report, MD&A
- Basic Financial Statements
- Govt-wide financial statements
- Statement of net position
- Statement of activities
- Governmental Funds
- Balance Sheet
- Statement of revenues, expenditures, and changes in fund balances
- Budgetary comparison statement
- Proprietary Funds
- Statement of net position
- Statement of revenues, expenses, and changes in fund net position
- Statement of cash flows
- Fiduciary Funds
- Statement of fiduciary net position
- Statement of changes in fiduciary net position
- Govt-wide financial statements
- Notes to financial statements
- Describe the basis of accounting (accrual for gov’t wide financial statements, and all fund statements except Gov’t Fund statements which are modified accrual)
- For Gov’t fund statements modified accrual: describe length of time used to define “available” for revenue recognition (i.e. 60 days property tax, 90 days San Fran, or 120)
- RSI (Required supplementary information other than MD&A)
- Info on individual non-major funds and other non-required supplementary info
- Statistical
- Objective of statistical section is to provide users with additional historical perspective, detail, and an understanding to assess economic condition of the entity.
- 5 categories:Financial trends, Revenue capacity, Debt capacity, Demographic and economic, and Operations (info for current period + 9yrs prior usually req)
- Narrative Explanations
