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GOVERNMENTAL

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Title: GOVERNMENTAL


1
GOVERNMENTAL
  • ACCOUNTING

2
Governmental Accounting
  • Many concepts are similar to financial
    accounting, but terminology and procedures
    differ.
  • Governmental Accounting Standards Board (GASB)
    generates standards.

3
Governmental AccountingUser Needs
  • Concepts Statement 1, GASB
  • Basic Groups of Users
  • Citizenry
  • Legislative and Oversight Bodies
  • Investors and Creditors

4
Nature of of Governmental Activities
Charter
  • Extensive Legal Requirements
  • Constitutions, charters, and statutes regulate
    governmental units.
  • Some legal provisions pertain to accounting and
    financial reporting matters
  • Keeping separate set of books for certain
  • activities.
  • Being audited by outside CPAs.

5
Nature of Governmental Activities
  • Absence of a Profit Motive
  • Question of What to Measure?
  • Revenues Costs of Providing Services?
  • Inflows and Outflows of all Resources?
  • Inflows and Outflows of certain Resources?

6
Government Finance Officers Association (GFOA)
  • Equivalent to the AICPA for the private sector.
  • To enhance and promote professional management of
    governmental units --- publishes/provides the
    following
  • Books, periodicals, monthly newsletter.
  • Services to members.
  • Software.

7
GAAFR The Blue Book
GAAFR
  • Stands for Governmental Accounting, Auditing and
    Financial Reporting
  • Published by the GFOA.
  • Neither prescribes nor authoritatively
    interprets GAAP for governmental units.
  • Provides detailed guidance (many examples) for
    applying governmental GAAP.
  • Widely used by governmental units.

8
Governmental Accounting Standards Board (GASB)
  • Created in 1984
  • Sister organization to the FASB
  • Establishes GAAP for state and local government
  • No authority to establish GAAP for the federal
    government.
  • Seven members--simple majority vote needed

9
Jurisdictional Arrangement Between GASB and FASB
  • GASB --- primary responsibility for state and
    local governmental units.
  • Must follow FASB rules if GASB says so.
  • May elect to follow a FASB rule if GASB has not
    addressed a specific issue --- if election made,
    must use ALL such rules.

10
Basic Principles of the GASB Codification
Grouped into 7 Categories
  • Accounting Reporting Capabilities
  • Types of Funds
  • Basis of Accounting
  • Financial Reporting
  • Long-Term Liabilities
  • Capital Assets
  • Budgets and Budgetary Accounting

11
Accountability and Governmental Accounting
  • Governmental Accounting Statements attempt to
    answer 3 questions related to Accountability

Where did the financial resources come from?
What amount of financial resources is presently
held?
Where did the financial resources go?
12
Reporting Diverse Governmental Activities - Fund
Accounting
  • Governmental units have many different types of
    activities.
  • No common motivation links these activities.
  • Each activity operates quasi-independent,
    self-balancing sets of accounts called funds.
  • Examples include
  • Public Safety
  • Sanitation
  • Health Welfare
  • Education
  • Parks Recreation
  • Judicial System
  • Water and Sewer
  • Employee Pensions

13
Fund Accounting
  • Fund Accounting Accounting for certain
    activities/operations separately from all other
    operations.
  • Fund --- self-balancing set of accounts
  • Reporting Entity --- focus on service
  • Financial Statements --- focus on accountability

14
Fund Accounting Classification
Governmental Funds
Proprietary Funds
Fiduciary Funds
Accounting for activities related to serving the
public.
Accounting for business-type activities.
Accounting for financial resources held for
others in a trustee capacity.
15
Fund Accounting ClassificationGovernmental Funds
Let's Talk About Each Fund
16
Governmental FundsGeneral Fund
  • Used to account for all financial resources
    except those accounted for in other funds.
  • In 2011, 60 of Baltimores governmental funds
    were accounted for in the General Fund.

17
Governmental FundsSpecial Revenue Fund
  • Expenditures are legally restricted.
  • Revenues that must be spent for specific
    purposes.
  • St. Paul, MN, requires that money received for
    the sale of zoo animals, must be spent to acquire
    NEW animals for the zoo.

18
Governmental FundsCapital Projects Fund
  • Used to account for costs to acquire or build
    major governmental facilities.
  • The asset is not recorded in this account, but
    the funds to acquire or build it are accounted
    for here.

19
Governmental FundsDebt Service Fund
  • Used to account for financial resources collected
    to pay long-term liabilities and interest.
  • In 2011, Birmingham reported paying out 11
    million in principal payments and 15 million in
    interest from its Debt Service Funds.

20
Governmental FundsPermanent Fund (Endowments)
  • Used to account for funds donated to the
    government by external donors.
  • In 2008, Dallas reported nearly 8 million in
    funds donated to take care of city parks.

21
Fund Accounting ClassificationProprietary Funds
22
Proprietary FundsEnterprise Fund
  • Used to account for any government activity that
    is financed by user charges.
  • An activity MUST be accounted for here if, any
    one of the conditions below are met . . .

Net revenues provide the security for the
activitys debts.
The the law requires costs to be recovered from
user fees.
Fees are set high enough to recover costs..
23
Proprietary FundsInternal Service Fund
  • Used for any unit that provides services to the
    OTHER governmental departments.
  • Inter-departmental fees are charged.
  • Tennessee Tech University charges the departments
    for the use of University vehicles.

24
Fund Accounting Classification
25
Account Groups
  • No longer reported on the Financial Statements
  • Used to keep track of general capital assets and
    long-term debt
  • Types
  • General Fixed Asset Account Group (GFAAG)
  • General Long-Term Debt Account Group (GLTDAG)

26
Basis of Accounting
  • Modified Accrual Basis Used for Governmental
    Funds
  • General Fund
  • Special Revenues Fund
  • Capital Projects Funds
  • Debt Service Funds
  • Permanent Funds

27
Basis of Accounting
  • Modified Accrual Means
  • REVENUES Recognize in period in which they
    become available and measurable.
  • Available means Collectible within the current
    period or soon enough thereafter to be used to
    pay current period liabilities.

28
Basis of Accounting
  • Full Accrual (when earned) Basis Funds
  • Proprietary Funds ---
  • Enterprise Funds
  • Internal Service Funds
  • Fiduciary Funds ---
  • Trust
  • Agency

29
Governmental Fund Accounting Major Account
Classification
  • Recording the Budget
  • Controlling Accounts
  • Revenues
  • Other Financing Sources
  • Appropriation/Expenditures
  • Other Financing Sources/Uses
  • Encumbrances

30
Fund AccountingEquity Section
  • ASSETS minus LIABILITIES

Governmental and Proprietary
Fiduciary Funds Funds
FUND BALANCE NET ASSETS
Reserved Invested
in Capital Assets Unreserved
net of related debt

Restricted
Unrestricted
31
Budgets and Budgetary Accounting
  • Annual Budgets for the General Fund and the
    Special Revenue Funds --- always recorded in the
    general ledger for control purposes.
  • Optional for Capital Projects Funds and Debt
    Service Funds.

32
Recording the Budgetary Entries
  • Fund Balance Composition
  • Estimated Revenues
  • Estimated Other Financing Sources
  • - Appropriations
  • - Estimated Other Financing Uses
  • Fund Balance
  • Journal Entry
  • Estimated Revenues xx
  • Estimated Other Financing Sources xx
  • Appropriations xx
  • Estimated Other Financing Uses xx
  • Fund Balance (Derived) xx

33
REVENUE
  • AN INFLOW OF ASSETS

34
Common Revenue Sources
  • Taxes
  • Licenses and Permits
  • Intergovernmental Revenues
  • Charges for Services
  • Fines and Forfeits
  • Miscellaneous
  • Interest, Rents, Sales of Fixed Assets
  • Other Financing Sources (OFS)

35
Income from Legal Claims
  • Property Taxes --- Levy of Taxes
  • Charges for Services --- Performing Services
  • Sales Taxes --- Taxable Sale by Business
  • Income Taxes --- Taxpayer Earning Income

36
  • GUIDE TO RECOGNIZING REVENUES
  • Revenues STAND ALONE.
  • Not earned as in the private sector.
  • Delivery of services requires expenditures
  • Delivery of service does not generate
    revenues.
  • Come from outside the government unit

37
Property Taxes
  • Local governments derive most revenue from
    property taxes - based on value (ad valorem
    taxes)
  • Recognize as Revenue when levied
  • Collected in the current period or soon enough
    thereafter
  • Need allowance for uncollectible
  • Deferred revenue if not available

38
Sales Taxes
  • Recognize when merchant files sales tax return
  • Measurable
  • Available
  • Charges for Services
  • Recognize revenue when billing for services
    rendered

39
Licenses and Permits
  • Difficult to predict accurate amounts
  • Normally recognize revenue when cash is received
  • Fines
  • Options
  • when tickets are issued
  • date fine is due
  • actual payment date
  • Common practice - when cash is received

40
Investment Income
  • Record all investments at Fair Value
  • mark-to-market
  • unrealized gains/losses are recognized as revenue
    in period
  • Interest and dividends accrued as earned

41
Grants Other Intergovernmental Revenues
  • Restricted Grants --- Expenditure Driven
  • Food Stamps,
  • Pass-Through Grants (if administered)
  • On-Behalf Payments
  • Unrestricted Grants --- recognize upon award
  • Entitlements --- recognize upon award

42
Deferred Revenues
  • Liability recorded if
  • unearned or
  • not legally available

Donations
  • Treatment by Type of Asset
  • Current Assets --- FMV
  • Fixed Assets to be used --- Account Groups at FMV
  • Fixed Assets to be sold --- Short-Term
    Investments at FMV

43
Tax Anticipation Notes
  • Recorded as a liability
  • Always short-term
  • Will not be converted into long-term so never in
    the account group

44
Other Financing Sources
  • Not a Revenue
  • Proceeds from Issue of Long-Term Debt
  • Sale of a Fixed Asset (up to original cost)
  • Transfer of Resources from Another Fund

45
EXPENDITURES
  • OUTFLOW OF ASSETS

46
Examples of Expenditures
  • Wages and Salaries
  • Compensated Absences
  • Vacations
  • Sick Leave
  • Pensions
  • Claims and Judgments
  • Supplies
  • Prepayments
  • Fixed Assets
  • Leases
  • Debt Service
  • Principal
  • Interest

47
Accounting for Expenditures
  • Recognize --- when liability is both measurable
    and incurred
  • Current Liabilities
  • Funded by Current Taxpayers
  • Use Available Financial Resources
  • Exception Interest on Long Term Liabilities
  • Long Term Liabilities go in the Long Term Account
    Group

48
Other Financing Uses
  • Not an Expenditure
  • Operating Transfers of Resources to Other Funds
  • Not classified as Expenditures in remitting
    fund to avoid double counting

49
ENCUMBRANCES
  • RESERVING ASSETS

50
  • Encumbrances --- commitments related to
    unperformed/executory contracts for goods or
    services.
  • Special General Ledger Accounts --- purpose which
    is to prevent spending more than has been
    appropriated.
  • ENTRIES HAVE NO EFFECT ON REPORTED OPERATIONS.

51
Encumbrances - Year 1
  • Commit to Future Expenditure
  • Encumbrance Control xx
  • F.B. Reserve for Encumbrances xx
  • When Invoice is Received
  • F.B. Reserve for Encumbrances xx
  • Encumbrance Control xx
  • Expenditures Control xx
  • Vouchers Payable xx
  • Year-End
  • Fund Balance xx
  • Encumbrance Control xx
  • Expenditures Control xx

52
Encumbrances - Year 2
At Beginning of the Year Reinstate
Encumbrances Encumbrances xx Fund
Balance xx When Invoice is Received F.B. Reserve
for Enc. xx Encumbrances xx Expenditures xx Vou
chers Payable xx
At year-end Fund Bal xx Expenditures xx
53
Inventories of Supplies
  • Consumption Method
  • Preferred Method-- parallels business practice.
  • ACQUISITION of inventory is treated as the
    conversion of resources (debit Inventory).
  • USE of inventory is treated as an outflow of
    resources (credit Inventory and debit
    Expenditures or Expenses).
  • Purchases Method
  • ACQUISITION of inventory is treated as an outflow
    of resources (debit Expenditures or Expenses).

54
Supplies Expenditure Consumption Method
  • Acquisition
  • Inventory - Supplies xx
  • Vouchers Payable xx
  • Record Expenditure Upon Consumption
  • Expenditures - Supplies xx
  • Inventory - Supplies xx
  • Year end
  • Fund Balance - Unreserved xx
  • Fund Balance -Reserve for Supplies xx

55
Supplies ExpenditurePurchase Method
  • Record expenditure upon acquisition
  • Expenditure - Supplies xx
  • Vouchers Payable xx
  • Inventory - Supplies xx
  • Fund Balance - Reserve for Supplies xx

56
Prepayments
  • Purchases Method
  • Expenditure - Insurance xx
  • Vouchers Payable xx
  • Consumption Method
  • Prepaid Insurance xx
  • Vouchers Payable xx
  • Expenditure - Insurance xx
  • Prepaid Insurance xx

57
Year End Closing Entries
  • Close the Budget
  • Appropriations xx
  • Budgetary Fund Balance xx
  • Estimated Revenues xx
  • Close the Actual Accounts
  • Revenues xx
  • Expenditures xx
  • Encumbrances xx
  • Fund Balance xx

58
Special Revenue Fund
  • Same accounting as the General Fund
  • May have expenditure-driven grants
  • If on behalf payments are administered by the
    government, activities are accounted for here
  • Accounts for expendable trust fund activity where
    both principal and earnings are used to support
    government activities or programs

59
CAPITAL PROJECT FUND (CPF)
  • Acquisition of major General Fixed Assets through
  • Purchase
  • Construction
  • Capital lease
  • Same basic accounting and reporting model as
    General Fund or Special Revenue Funds

60
CPF Funding Sources Sources
  • Interfund Operating Transfers (Credit OFS)
  • Long-Term Borrowing (Credit OFS)
  • Intergovernmental Grants (Credit Revenue)
  • Special Assessments (Credit Revenue) --- levied
    against property owners or other beneficiaries

61
CPF ACCOUNTING ACTIVITIES
  • Record Budget on an annual basis
  • Interim Financing (Bond Anticipation Notes)
  • Record Costs Charged to Projects
  • Interest on Temporary Investments is Revenue
  • Intergovernmental Grants are Revenues
  • Disposition of Bond Premiums/Discounts, Accrued
    Interest, and Issuance Costs

62
CPF ResourcesBond Issued at Premium
  • Issue Bond
  • Cash 1,509,000
  • OFS - Bond Proceeds 1,509,000
  • Transfer Premium to Debt Service Fund
  • Other Financing Uses 9,000
  • Cash (or Due to Debt Service Fund) 9,000

63
CPF ResourcesBond Issued at Discount
  • Issue Bond
  • Cash 1,491,000
  • OFS - Bond Proceeds 1,491,000

Additional financing may have to come from a
transfer from the general fund or project may
have to be scaled back.
64
CPF ResourcesBond Anticipation Notes (BANS)
  • Issued as short-term interim financing
  • Accounted for in GLTDAG if
  • maturity gt 1 year or
  • maturity ? 1 year and
  • all steps have been taken to refinance on
    long-term basis
  • intent is supported by ability to consummate
    refinancing
  • All other BANS are current (Fund Liabilities)

65
CPF Resources Special Assessments
  • Compulsory levy made against certain property to
    defray part or all of the cost of an improvement
    service
  • Assume general/specific benefit to property
    owners assessed
  • If proceeds from special assessment are related
    to debt --- is government obligated in some
    manner?
  • yes credit OFS-Bond Proceeds
  • no credit Contributions from Property Owners
  • Debt not issued --- Credit OFS-Transfer from
    Other Funds

66
CPFCapital Project Funds Year End
  • Project Complete
  • --- Close Revenues and Expenditures to Fund
    Balance
  • --- Transfer any residual fund equity to
    source(s)
  • Project Incomplete
  • Close revenues OFS, Expenditures OFU to the
    Fund Balance
  • Close open encumbrances against F. B. -- leave
    F.B.- Reserve for Encumbrance
  • Reestablish at beginning of next year
  • Encumbrance xx
  • F.B. xx

67
CPF Acquisition Capital Lease
  • Use FASB 13 criteria to assess lease contract
  • Entries
  • Expenditure - Fixed Asset xx
  • Other Financing Sources xx
  • (Lease Liability recorded in GLTDAG)
  • Expenditure - Lease Principal xx
  • Expenditure - Lease Interest xx
  • Cash xx
  • (Fixed Asset recorded in GFAAG)

68
Debt Service Fund
  • Used to account for the financial resources
    accumulated to cover the payment of principal and
    interest on general government obligations
  • Used when legally mandated, or
  • Accumulating resources to satisfy term bond
    indenture
  • requirements for future years debt service
    payments

69
Debt Service FundTypes of Debt Serviced
  • Most common are Bond Issues
  • usually serial debt
  • term bonds are rare
  • Capital Lease Obligations
  • Notes and Warrants Payable
  • Other

70
Debt Service FundSources of Financing
  • Property Taxes (usually transferred in from
    another fund)
  • Sales Tax
  • Special Assessments
  • Income from Investments (net of any arbitrage)
  • Refunding or Defeasance

71
Debt Service Fund Special Assessment
  • Levied to provide for indebtedness incurred for
    general government special assessment projects.

Noncurrent Special Assessments Receivable
included in fund assets are offset by deferred
revenue and do not result in revenue or affect
fund balance
72
Debt Service FundExpenditure Recognition
  • Modified Accrual report principal and interest
    expenditures when legally payable (i.e., does not
    accrue unmatured principal or interest)
  • Accrual permitted, but not required, if
  • resources for debt service accumulated in fund by
    year end and
  • payment due early next year
  • if accrual option is used, must accrue entire
    debt service payment due early next year

73
Debt Service FundFund Balance Reserves
  • Excess of Assets over Liabilities
  • Fund Balance Reserved for Debt Service
  • Amount usually equal to highest years principal
    plus interest payments
  • Amount Available in GLTDAG at year end should
    equal amount in debt service fund for future
    principal payments
  • If not, then adjusting entry is made

Amount Available xx Amount to be Provided xx
74
Debt Service Fund Refunding Defined
  • Issuance of new debt to finance payment of
    interest and principal of existing debt
  • Current Refunding - use refunding proceeds to
    retire debt immediately
  • Advance Refunding - place proceeds in escrow and
    use to pay interest and principal in future
    (in-substance defeasance)
  • Reasons for Refunding or Defeasance
  • Lower Effective Interest Rates
  • Extend Maturity Dates
  • Revise Payment Schedules
  • Remove or Modify Restrictions

75
Debt Service Fund Reporting Refunding
Defeasances
  • Debt Service Fund Entry
  • Cash
    xx
  • OFS-Proceeds of Refunding Bonds xx
  • Refunding issue is reported in General Long Term
    Debt Account Group
  • Defeased/Retired Debt is removed from General
    Long Term Debt Account Group

76
Account Groups
General Fixed Assets - GFAAG General Long-Term
Debt - GLTDAG
  • Common Features
  • Focus on general government as whole
  • Accounting procedures
  • List and Offset Accounting Entries
  • Primarily add to/remove from list

77
Classification of Fixed Assets
  • Land
  • Building (or Building and Improvements)
  • Infrastructure (or Improvements other than
    Buildings)
  • Machinery and Equipment
  • Construction in Progress (no capitalized interest)

78
General Fixed Asset Account Group
  • Acquisition and initial valuation
  • Cost
  • Estimated Cost
  • Gifts Fair Market Value
  • Foreclosure Lower of FMV or Amount Due for Taxes
  • Eminent Domain Compensation to Owner
  • Escheat FMV

79
Fixed Assets
  • Not all funds account for report capital assets
  • General Fixed Assets --- Fixed assets not
    accounted for in a specific fund are reported in
    the General Fixed Asset Group
  • Depreciation Expense --- not reported in the
    operating statement of the governmental funds
  • Accounting Equation for Fixed Assets
  • Fixed Asset Investment in GFA---(Source of
    funding)

80
Classification of Investment in GFA by Financing
Source
  • General Fund and Special Revenue Funds
  • General Revenues
  • Special Revenues
  • Capital Projects Funds
  • Long-Term Borrowing
  • Special Assessments
  • Intergovernmental Grants-in-Aid
  • Interfund Transfers

81
Fixed Asset Acquisition
  • Acquisition
  • Expenditure - Fixed Assets xx
  • Vouchers Payable (Cash) xx
  • (then fixed asset is recorded in account group)
  • If borrow to acquire the asset
  • Cash xx
  • Other Financing Sources xx
  • (then long-term debt is recorded in account group)

82
Long-Term Liabilities
  • Certain funds account for and report long-term
    liabilities.
  • Long-term liabilities not accounted for in a
    specific fund are General Long-Term Liabilities
    (GLTL)
  • Accounted for in the General Long Term Debt
    Account Group
  • Liability of the government as a whole and not
    that of any specific fund.

83
General Long Term Debt Account Group
  • All unmatured debt except that of the
    Proprietary Funds
  • Unmatured Principal
  • Secured (typically) by Full Faith Credit
  • Not a liability of any one fund

84
GLTD --- Examples
  • General Government
  • Bond Issue
  • Special Assessment Debt
  • Long-term Notes
  • Claims and Judgments
  • Compensated Absences
  • Capital Lease Liabilities
  • Unfunded Pension Contributions
  • Unfunded Landfill Closure and Postclosure
    Care

85
GLTDAG Accounting Equation
  • When Incurred
  • Amount to be provided Long-term
    obligation
  • While Debt is Outstanding
  • (Amount available Amount to be provided)
    Long-term obligation
  • When Debt Matures
  • Reverse Accounts from Account Group

86
PROPRIETARY FUNDS
87
Proprietary Funds
  • Pertaining to a Proprietor Users of goods or
    services --- charged on the basis of consumption
  • Types
  • Enterprise Goods or Services provided to the
    General Public
  • Internal Service Goods or Services provided
    Inter or Intra- Governmental Units

88
Proprietary Funds Common Features
  • Accounting - Full Accrual
  • Fixed Assets and Long-Term Debt maintained in the
    fund
  • Applicability of Pertinent Business (i.e., FASB)
    Pronouncements
  • Reporting Interfund Transactions
  • Financial Statements Required

89
Proprietary Funds Accounting Principles
  • Similar to For-Profit Enterprises
  • GAAP applied except where it has been
    specifically overridden by a GASB pronouncement
  • GASB 20
  • Must apply all pertinent GAAP (ARBs, APBs, SFASs,
    etc.) through SFAS 102 unless conflict
  • May apply GAAP from SFAS 103 to present --Choices
  • apply ALL, unless conflict or
  • apply NONE, unless adopted by GASB
  • GASB 34 May apply those FASB standards and
    interpretations limited to NFP organizations

90
Proprietary Funds Financial Statements
  • Balance Sheet
  • Statement of Revenues, Expenses, and Changes in
    Net Assets
  • Statement of Cash Flows
  • Plus
  • Combining Statements
  • Segment Information

91
Enterprise Funds
  • Fund use is mandatory to account for operations
    financed or operated like a business
  • Provide goods/services, to the public, on
    continuing basis for a fee
  • Intended to recover (most of) the full costs of
    providing goods/services
  • Use is optional when the entity engages in
    activities for which the governing body deems net
    income type information appropriate

92
Examples of Enterprise Funds
  • Public Utilities
  • Public Transportation Systems
  • Recreational Facilities
  • Parking Facilities
  • Lotteries
  • Airports
  • Hospital/Healthcare Facilities
  • Landfills

93
Enterprise Funds Non-operating Revenues
  • Capital Contributions
  • Operating Transfers
  • Loans
  • Others
  • Grants
  • Tap Fees
  • Impact Fees
  • Internal and External Subsidies
  • Debt Forgiveness from General Government

94
Enterprise Funds Capital Contribution
  • Recorded as Interfund Transfer
  • Included in the Statement of Revenues, Expenses,
    and Changes in Net Assets as Nonoperating Revenue
  • No separate Contributed Capital on Balance Sheet
  • Not Residual Equity Transfers

95
Enterprise Funds Restricted Assets
  • Way to have a Fund within a Fund
  • Distinctively titled Restricted Asset, Liability
    and Equity Reserve Accounts
  • Customer Deposits
  • Construction Financed by Bond Issue
  • Debt Service
  • Contingencies

96
Internal Service Fund
  • Services to Other Governmental Departments
  • Cost-Reimbursement Basis
  • Intermediary Fiscal and Accounting Entity
  • Economy/Efficiency
  • Equitable Cost Sharing

97
Internal Service Fund Pricing Policies
  • Charges should be Based on Cost
  • Charges cannot be excessive
  • Pricing often includes Total Costs and Total
    Consumption of Goods or Services

98
Fiduciary Funds
99
Fiduciary Funds
  • Used to account for assets received and held by
    government acting as trustee or custodian for
    individuals, organizations, businesses, or other
    governments
  • Difference - Duration of Fiduciary Responsibility
  • Agency Fund Short-Term Fiduciary Responsibility
  • Trust Funds Long-Term Fiduciary Responsibility

100
Types of Trust Funds
  • Private Trust
  • Expendable
  • Nonexpendable
  • Investment Trust
  • Pension Trust

101
Trust Funds Private Purpose Expendable
  • Can spend both Principal (Corpus) and Earnings
  • Financial Statements
  • Statement of Net Assets
  • Statement of Changes in Net Assets

102
Trust FundsPrivate Purpose Nonexpendable
  • Can Spend Only Earnings
  • Principal (Corpus) Stays Intact
  • Financial Statements
  • Statement of Net Assets
  • Statement of Changes in Net Assets

103
Investment Trust Funds
  • Used to Account for Pooled Investment Funds and
    Other Investment Activity
  • Financial Statements
  • Statement of Net Assets
  • Statement of Changes in Net Assets

104
Pension Accounting
  • GASB 25
  • Annual Pension Cost - Actuarial Method
  • Acceptable Annual Required Contribution (ARC)
  • Determination of Normal Cost
  • Unfunded Actuarial Accrued Liability and
    Amortization

105
Pensions ARC - Actuarial Required Contribution
  • Portion of ARC that will be paid from current
    resources
  • Expenditures - Pension Benefits xx
  • Accrued Wages and Salaries xx
  • Portion of ARC that will be paid in future
  • Amount to be provided... xx
  • Long-term liability for pension benefits xx

106
Pension Claims and Judgements
  • Follow FASB 5 Accrue if probable and reasonably
    estimable
  • Amount to be paid from current resources
  • Expenditures - Claims/Judgments xx
  • Accrued Claims and Judgments xx
  • Amount to be paid in the future
  • Amount to be Provided... xx
  • Long-term Liability for Claims and
    Judgments xx

107
Pension Reporting
  • Statement of Net Plan Assets
  • Investments at FMV
  • Fixed income securities not amortized
  • Fixed assets reported at depreciated cost
  • No liability reported for actuarial present
    value of future benefits
  • Actuarial information (must comply with
    established parameters assumptions) reported as
    Required Supplementary Information (RSI)
  • Statement of Changes in Net Plan Assets
  • Reports on additions and deductions
  • Identifies changes in net plan assets

108
Agency Funds
  • Used for
  • Tax Collections for Other Governments
  • Payroll Deductions
  • Pass-Through Grants
  • Grants, Entitlements, Shared Revenue
  • GASB required Agency Funds
  • Government has no program/discretion
  • No obligation special assessment debt service

109
Agency Funds
  • Accounting Equation
  • Assets Liabilities
  • Financial Statement
  • Statement of Net Assets

110
FINANCIAL REPORTING
111
Coverage of Fund Accounting Procedures
112
The Operating Statement for Governmental Fund
  • REVENUES Always classified by source.
  • EXPENDITURES
  • Classified by character
  • Current, Capital Outlay, or Debt Service
  • Then by function (for example)
  • Health, Welfare, Sanitation, Public Safety

113
OPERATING STATEMENT FORMAT
  • OPERATING STATEMENT--Use the all-inclusive
    format which includes the analysis of the fund
    balance (modified accrual basis funds) or net
    assets (accrual basis funds) for the period
  • Revenues (Inflows) Expenditures
    (Outflows) Excess of Revenues over
    Expenditures
  • Fund Balance, 1/1/11
  • Fund Balance, 12/31/11

114
Balance Sheet Format
  • BALANCE SHEET--Display restrictions of the
    fund balance in the following manner
  • Fund Balance Reserved for
    encumbrances 33,000
    Unreserved.................................
    417,000 Total Fund
    Balance.............. 450,000
  • Numerous types of restrictions can exist--thus
    several types of reservations may be used.

115
  • Time to Clear Things Up ---Any Questions?
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