Governmental Financial Reporting The Reporting Entity

1
Governmental Financial ReportingThe Reporting
Entity

• Chapter 5 Part 3
• Fund Financial Statements

2
Review of the Financial Reporting Model

• Chapter 5 Part 2

3
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

4
The Financial Reporting Model

• Minimum reporting requirements for external
  general purpose FS
• Managements Discussion Analysis (MDA)
• Classified as Required Supplementary Information
• Basic Financial Statements (BFS)
• Covered by audit opinion
• Required Supplementary Information (RSI)
• Other than MDA

5
Basic Financial Statements

• Government-wide financial statements
• Statement of Net Assets
• Statement of Activities
• Fund financial statements
• Notes to the financial statements

6
Comprehensive Annual Financial Report (CAFR)

• Goes beyond GASB requirements for general purpose
  external reporting
• Include non-GAAP information GAAP based
  information

7
Fund Level Financial Statements

• Chapter 5 Part 3

8
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

9
Fund Level Financial Statements

• Present all categories of funds
• Governmental
• Proprietary
• Fiduciary

10
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

11
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

13
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.