WHY GOVERNMENTAL ACCOUNTING AND FINANCIAL REPORTING IS—AND ...
Chapter 5 Part 3 - Governmental Financial Reporting (Fund ...
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Transcript of Chapter 5 Part 3 - Governmental Financial Reporting (Fund ...
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Governmental Financial ReportingThe Reporting Entity
Chapter 5 – Part 3Fund Financial Statements
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Review of the Financial Reporting Model
Chapter 5 – Part 2
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The Financial Reporting Model
Financial reporting model defines contents of external financial reports– June 1999 = GASB No. 34
Current reporting model based on– Accountability
Fiscal– Complied with revenue & expenditure decisions of public
Operational– How efficiently business-type activities met operating
objectives
– Information useful for decision making
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The Financial Reporting Model
Minimum reporting requirements for external general purpose FS
1. Management’s Discussion & Analysis (MD&A) Classified as Required Supplementary Information
2. Basic Financial Statements (BFS) Covered by audit opinion
3. Required Supplementary Information (RSI) Other than MD&A
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Government-wide financial statements
– Statement of Net Assets
– Statement of Activities
Fund financial statements
Notes to the financial statements
Basic Financial Statements
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Comprehensive Annual Financial Report (CAFR)
Goes beyond GASB requirements for general purpose external reporting
Include non-GAAP information & GAAP based information
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Fund Level Financial Statements
Chapter 5 – Part 3
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Fund Level Financial Statements
Short-term focus - financial accountability Reported based on type of fund
– Governmental funds - modified accrual– Proprietary funds - essentially same as for-profit
entities
Information on fund level financial statements must be reconciled to information reported in GWS
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Fund Level Financial Statements
Present all categories of funds– Governmental– Proprietary– Fiduciary
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Fund Level Financial Statements
Presented for major funds & nonmajor funds in the aggregate– Page 131
Two governmental fund financial statements Three proprietary fund financial statements Two fiduciary fund financial statements
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The Concept of Major Funds
Prior to the implementation of GASB No. 34, the emphasis on fund statements was to prepare them by fund type & fund category. While the fund category statements remain, the emphasis is no longer on fund type but major funds.
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Major Fund Steps
Always general fund May designate additional funds as
major ISF never major fund
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Major Fund Steps
A two step process– 10% test
Item for fund type
– 5% test Same item for all fund types
Major fund exercise
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Governmental Fund Financial Statements
Balance sheet – page 133– Assets in order of liquidity– Liabilities in order of liquidation– Fund balance
Reserved– Not available for appropriation
Inventories, long-term interfund loans, encumbrances, etc. Designated
– Self imposed limitation on use of funds Unreserved & undesignated
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Governmental Fund Financial Statements
Statement of revenues, expenditures & changes in fund balance – page 135– Detailed revenues– Detailed expenditures– Other financing sources & uses– Special & extraordinary items
Extraordinary– Unusual & infrequent
Special– Unusual OR infrequent & within control of management
Not so special– Unusual OR infrequent & NOT within control of management
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Governmental Fund Financial Statements
Required reconciliation to GWS – page 133 & 136– Balance sheet to statement of net assets
Adjust for economic resource items– Capital assets & LTD
– Statement of revenues, expenditures, & changes in fund balance to statement of activities Adjust for accrual items
– Depreciation– Revenues deferred because not available – Accrued interest on LTD– Reclassify principle paid on LTD & purchases of capital assets– Gains/losses
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Proprietary Fund Financial Statements
Statement of net assets OR balance sheet – page 142– Statement of net assets = assets – liabilities = net assets– Balance sheet = liabilities + net assets = assets
Presentation– Assets in order of liquidity, liabilities in order of liquidation– Net assets
Invested in capital assets net of related debt Restricted
– Distinguish between legal & contractual Unrestricted
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Proprietary Fund Financial Statements
Statement of revenues, expenses & changes in fund net assets – page 144– Operating revenues & expenses
Directly related to goods/services provided by fund
– Nonoperating revenues & expenses Nonexchange Investment income
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Proprietary Fund Financial Statements
Statement of cash flows – page 145– Only fund category for which SCF is required– Direct method must be used– Four categories of cash flows
Operating Noncapital financing
– Interfund transfers Capital & related financing Investing
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Fiduciary Fund Financial Statements
• Statement of fiduciary net assets – page 146
• Statement of changes in fiduciary net assets – page 147• Not for agency funds
• Four columns max• Pension trust
• Investment trust
• Private purpose trust
• Agency
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Class Exercises – Part 3
Chapter Problem 5-2 & 5-3 on page 180
NOTE: These are not part of your required assignment for this chapter. They simply represent things we will discuss in class for this part of Chapter 5.