Basic Financial Statements: Overview

Notes to the Financial Statements

FundFinancial Statements

FiduciaryFunds

ProprietaryFunds

GovernmentalFunds

7 - 8 Financial Statements

Links[Worksheets]

Reconciliations(Explanations)

Government-wideFinancial Statements

TotalPrimary Government

Business-TypeActivities

GovernmentalActivities

2 Financial Statements

Principle 1:Accounting & Reporting Capabilities

Present fairly and with full disclosure funds and activities in conformity with GAAP

Determine and demonstrate compliance with finance-related legal and contractual provisions

GAAP Requirements

Trying to assure comparability among and between governments

Full disclosure may result in much more information than “adequate” disclosure required by FASB

Categories and Types of Funds

GOVERNMENTAL FUNDS General Fund Special Revenue Funds Capital Projects Funds Debt Service Funds Permanent Funds

PROPRIETARY FUNDS Enterprise Funds Internal Service Funds

FIDUCIARY FUNDS Pension Trust Funds Investment Trust Funds Agency Funds Private Purpose Trust

Funds

Governmental Funds

Most basic type of fund – use basic fund format defined earlier

Used to account for general government activities

Accounting equation does not allow for capital assets and long-term liabilities – necessitates use of nonfund accounts: General Capital Assets General Long-Term Liabilities

Nonfund accounts

General Capital Assets – property, plant, & equipment used in general operation of government

General Long-term Liabilities – debt used to finance capital assets and other long-term liabilities not recognized in the governmental funds

Proprietary Funds

Used to account for business-like activities of the government: Golf courses Maintenance operations Airports Utilities

May use more “traditional” accounting equation:

Current Assets

+

Capital Assets

Current +

Long-term

Liabilities

Net Assets– =

Fiduciary Funds

Accounts for assets held by government in trustee or agency capacity for others

Not used to report assets held for government’s own use

Principle 5:Reporting Capital Assets

Must know which fund type is using capital assets:

Proprietary fund – reported at fund and government-wide level

Fiduciary fund – reported only at fund level

Governmental Fund – reported only at government-wide level and in notes to financial statements

Principle 6:Valuation of Capital Assets Report at historical cost (may use

estimated cost of historical cost cannot be determined)

Cost of capital asset included charges to get it to intended location and ready for use

Donated capital assets reported at fair value at time of donation, plus charges to get it to intended location and ready for use

Principle 7:Depreciation of Capital Assets

Capital assets depreciated over useful lives

Inexhaustible capital assets (land and some land improvements) should not be depreciated

Infrastructure assets may be accounted for using the “modified approach”

Reporting depreciation depends on fund category

Proprietary fund – reported at fund and government-wide level

Fiduciary fund – reported only at fund level

Governmental Fund – reported only at government-wide level and in notes to financial statements

Principle 8:Accounting for Long-Term Liabilities

Must know type of fund incurring liability Proprietary Fund – report at fund and

government-wide level Fiduciary Fund – report only at fund level Governmental Fund:

Unmatured – report at government-wide level & in the notes

Matured – report as fund liabilities

Principle 9:Measurement Focus (MF) and Basis of Accounting (BA)Government-Wide Financial Statements Measurement focus is on economic [all]

resources Basis of accounting is accrual Revenues, expenses, gains, losses,

assets, & liabilities recognition depends on transaction: Exchange – when exchange takes place Nonexchange – according to GASBS 33

Principle 9:Measurement Focus (MF) and Basis of Accounting (BA)Governmental Fund Financial Statements Measurement focus is on current

financial resources Basis of accounting is modified accrual Revenues recognized in period they

become available and measurable Expenditures recognized when liability is

incurred, except for interest on long-term debt which is recognized when due

Principle 9:Measurement Focus (MF) and Basis of Accounting (BA)Proprietary Fund Financial Statements Measurement focus is on economic [all]

resources Basis of accounting is accrual Revenues, expenses, gains, losses,

assets, & liabilities recognition depends on transaction: Exchange – when exchange takes place Nonexchange – according to GASBS 33

Principle 9:Measurement Focus (MF) and Basis of Accounting (BA)Fiduciary Fund Financial Statements Measurement focus is on economic [all]

resources Basis of accounting is accrual Exception for certain liabilities of defined

benefit pension plans and certain postemployment healthcare plans

Revenue Recognition Rules – Must be: Earned or levied Measurable Available

Collected in current period or soon enough thereafter to pay liabilities of the current period – usually considered to be 60 days

If not collected within this period, reported as deferred revenues in current period and revenues in year when they become available

Expenditure Recognition Rules

For current operations & capital outlay, when liabilities to be paid currently by governmental funds are incurred

For debt service (principal and interest) when payments on long-term liabilities are due

Reporting Interfund Activity:Reciprocal interfund activity

Interfund loans (asset / liability) Short-term (due from / due to) Long-term (advance to / advance from)

Interfund services provided and used – recognized as revenue in providing fund and expenditure/expense in using fund

Reporting Interfund Activity:Nonreciprocal interfund activity Interfund transfers

Reported in governmental funds as Other Financing Sources / Uses

Reported in proprietary funds after nonoperating revenues and expenses

Interfund reimbursements Repayment from one fund to another – increases

expenditures / expenses in paying fund while decreases them in receiving fund

Not separately reported in financial statements

Principle 13:Annual Financial Reports

Minimum reporting requirements Management’s Discussion & Analysis Basic Financial Statements

Government-wide financial statements Fund financial statements Notes to the financial statements

Required supplementary information other than MD&A

Principle 13:Annual Financial Reports

Government-wide Financial Statements Statement of Net Assets Statement of Activities

Principle 13:Annual Financial Reports

Governmental Fund Statements (Schedules)

Balance Sheet Statement or Revenues, Expenditures, &

Changes in Fund Balance Statement or Revenues, Expenditures, &

Changes in Fund Balance – Budget-to-Actual (may be either BFS or RSI)

Principle 13:Annual Financial Reports

Proprietary Fund Statements Statement of Net Assets / Balance Sheet Statement of Revenues, Expenses, &

Changes in Net Assets Statement of Cash Flows

Principle 13:Annual Financial Reports

Fiduciary Fund Financial Statements Statement of Fiduciary Fund Net Assets Statement of Changes in Fiduciary Fund

Net Assets