Presentation on theme: "Overview of Governmental Fund Accounting"— Presentation transcript:
1Overview of Governmental Fund Accounting Budget, Accounting, and Reporting CouncilMay 29, 2014, Columbia Basin CollegeStuart Trippel, CPA, CGMA, Executive Director, Business and Student Support Services, Shoreline Community College
2ConceptsBasic concepts of fund accounting are common to both government entities and not-for-profit organizationsContrast with for-profit organizations (businesses)“How much money did we make?” versus “How did we spend the money?”Fund accounting is now primarily used in governmental reporting; earlier it was also used by not-for-profitsFAS 117 (issued 1993) changed to reporting by net asset classification for not-for-profitsSome not-for-profit organizations still use fund accounting internallyGovernment-owned colleges and universities account by fund but may report like not-for-profits (BTAs)
3Sources of Authority Governmental Accounting Standards Board (GASB) StatementsInterpretationsTechnical bulletinsImplementation guidesConcepts statementsLaw (RCW 43.88, appropriations acts)Regulation (State Administrative and Accounting Manual)Documented internal policies and proceduresAccounting literature
4The Accounting EntityFor purposes of fund accounting and reporting, the accounting entity for community and technical colleges is the State of WashingtonComprehensive annual financial report (CAFR) prepared annually and audited by the state auditor’s officeCAFR includes financial statements by fund as well as government-wide financial statements (intended to be more “user-friendly” and paint a broader picture)
5Colleges as “Entities” Individual CTCs are not accounting entities for purposes of the CAFR; the state is the entityBalances of individual accounts used by most CTCs are usually not material to the CAFR (some larger colleges’ accounts may be material)College financial statements are titled “_______ College, A Component Unit of the State of Washington”College statements present only the portion of activities of the state that is attributable to the transactions of the collegeAudit opinion letter will state that college financial statements “do not purport to, and do not, present fairly the financial position of the state of Washington . . .”
6What is a Fund? Self-contained accounting entity Own set of accounts AssetLiabilityRevenueExpenditure or expenseFund balance or other equityEach fund must balance individuallyIn some sense, individual pro-orgs in CTC accounting are “mini-funds”
7Categories of Funds Governmental funds FMS Fund Types 1, 2, and 3Governmental non-fund accounts (not self-balancing)FMS Fund Type 3Proprietary fundsFMS Fund Type 4Fiduciary fundsFMS Fund Type 5
8Governmental Funds General fund Special revenue funds FMS Fund Type 1, Fund 001Special revenue fundsFMS Fund Type 3; examples include Funds 145, 147, 148, 149, 846, and 860Capital projects fundsFMS Fund Type 1, Funds 057 and 060Debt service funds (not used at CTC level)Permanent fundsFMS Fund Type 2, Funds 843 (exceptional faculty endowment if held by college) and 859 (local endowment)
9Governmental “Non-Funds” General capital assets accountFMS Fund Type 3, Fund 997General long-term liabilities accountFMS Fund Type 3, Fund 999
10Proprietary Funds Internal service funds Enterprise funds FMS Fund Type 4; examples include Fund 443 (data processing), Fund 448 (printing), and Fund 460 (motor pool)Enterprise fundsFMS Fund Type 4; examples include Fund 522 (associated students), Fund 524 (bookstore), Fund 528 (parking), and Fund 570 (other auxiliary enterprises)
11Fiduciary Funds Pension trust funds (not used by CTCs) Private-purpose trust funds (not used by CTCs)Investment trust funds (not used by CTCs)Agency fundsFMS Fund Type 5, Funds 790 and 840
12Fund Reference Manual www.ofm.wa.gov/fund Generally not necessary to consult, but can sometimes be usefulProvides links to statutory authority (which may be very general)Provides description of fund and sources of revenueMay not always be completely up-to-date or entirely accurateAlways fun to look at!
13Measurement Focus and Basis Measurement focus — what is being measured?Flow of current financial resourcesFlow of economic resourcesBasis of accounting — when are we recognizing events?Modified accrualRevenue when measurable and availableExpenditures when liability is incurredAccrualWhen revenue is earnedWhen expense is incurred or asset consumed
14Application to Funds Governmental funds Current financial resources measurement focusModified accrual basis of accountingProprietary and fiduciary fundsEconomic resources measurement focusAccrual basis of accounting
15What’s the Difference?Consider the issuance of bonds under two different scenariosScenario 1General fundCurrent financial resources measurement focusModified accrual basis of accountingGovernment issues $2,000,000 bondsScenario 2Electric utility enterprise fundEconomic resources measurement focusAccrual basis of accounting
16What’s the Difference? Dr. Cr. Scenario 1 (General Fund) One entry in the fund:Cash2,000,000Other Financing Sources—Bond ProceedsPlus entries in the GLTL non-fund account:Current Portion of Bonds Payable200,000Long-Term Portion of Bonds Payable1,800,000Scenario 2 (Enterprise Fund)Entry in the fund only:Bonds Payable
17What’s the Difference?Consider the purchase of capital equipment under two different scenariosScenario 3General fundCurrent financial resources measurement focusModified accrual basis of accountingGovernment purchases $300,000 capital assetScenario 4Electric utility enterprise fundEconomic resources measurement focusAccrual basis of accounting
18What’s the Difference? Dr. Cr. Scenario 3 (General Fund) One entry in the fund:Expenditures—Capital Outlay300,000CashPlus an entry in the GCA non-fund account:EquipmentScenario 4 (Enterprise Fund)Entry in the fund only:
19Expenditures versus Expenses It’s the same money, the same checks being written, the same things being purchasedThe words are differentUnder the modified accrual basis, we speak of expendituresUnder the accrual basis, we speak of expensesGovernmental funds record expendituresOther funds record expenses
20Budgetary Accounting Funds sometimes use “budgetary accounting” We actually record the budget in journal entriesThis is used to allow ledgers to be prepared to assist in preventing overspending, which can have legal ramificationsInitial budget and modificationsEstimated revenues (GL 3110)Appropriations (or allotments) (GL 6210)Budgetary fund balance (GL 9100)Encumbrances are used for purchasing controlEncumbrances (GL 6410)Reserve for encumbrances (GL 9510)
21What About Our Statements? CTCs operate as agencies of the state of Washington and therefore use fund accountingWe have no choice whether to use governmental fund accountingSince we are engaged only in business-type activities, we report as if we were a single enterprise fundWe account one way and report another wayWe need to get from one way to anotherThe alternative would be to keep two sets of books and enter every transaction twiceThis would truly be double-entry bookkeeping!The state board has prepared a worksheet for us to use
23Transaction 1 The approved budget for the year follows Estimated RevenuesProperty tax revenues $600,000Licenses and fees 30,000AppropriationsPublic safety salaries $550,000Public safety, other expenditures 90,000
24Transaction 1 Journal Entry Dr.Cr.Estimated revenues—property taxes600,000Estimated revenues—licenses and fees30,000Budgetary fund balance10,000Appropriations—public safety salaries550,000Appropriations—public safety other expenditures90,000
25Transaction 2Property taxes of $600,000 were levied, and bills totaling that amount were mailed at the beginning of the year.During the year, $590,000 of property taxes were collected.Licenses and fees collected amounted to $28,000.
26Transaction 2 Journal Entry Dr.Cr.Property taxes receivable600,000Revenues—property taxesCash590,00028,000Revenues—licenses and fees
27Transaction 3 Salaries paid during the year amounted to $580,000; police officers earned an additional $12,000 that will be paid in January.
29Transaction 4Purchase orders for supplies were placed in the amount of $60,000.The entire amount ordered was received during the year, together with invoices totaling $56,000.The invoices were approved for payment.
30Transaction 4 Journal Entry Dr.Cr.Encumbrances60,000Budgetary fund balance reserved for encumbrancesBudgetary fund balance reserved for encumbrancesExpenditures—public safety other expenditures56,000Vouchers payable