1. Overview of Governmental Fund Accounting
Budget, Accounting, and Reporting Council
May 29, 2014, Columbia Basin College
Stuart Trippel, CPA, CGMA, Executive Director, Business and Student Support Services, Shoreline Community College

2. Concepts
Basic concepts of fund accounting are common to both government entities and not-for-profit organizations
Contrast 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-profits
FAS 117 (issued 1993) changed to reporting by net asset classification for not-for-profits
Some not-for-profit organizations still use fund accounting internally
Government-owned colleges and universities account by fund but may report like not-for-profits (BTAs)

3. Sources of Authority Governmental Accounting Standards Board (GASB)
Statements
Interpretations
Technical bulletins
Implementation guides
Concepts statements
Law (RCW 43.88, appropriations acts)
Regulation (State Administrative and Accounting Manual)
Documented internal policies and procedures
Accounting literature

4. The Accounting Entity
For purposes of fund accounting and reporting, the accounting entity for community and technical colleges is the State of Washington
Comprehensive annual financial report (CAFR) prepared annually and audited by the state auditor’s office
CAFR includes financial statements by fund as well as government-wide financial statements (intended to be more “user-friendly” and paint a broader picture)

5. Colleges as “Entities”
Individual CTCs are not accounting entities for purposes of the CAFR; the state is the entity
Balances 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 college
Audit 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 . . .”

6. What is a Fund? Self-contained accounting entity Own set of accounts
Asset
Liability
Revenue
Expenditure or expense
Fund balance or other equity
Each fund must balance individually
In some sense, individual pro-orgs in CTC accounting are “mini-funds”

7. Categories of Funds Governmental funds
FMS Fund Types 1, 2, and 3
Governmental non-fund accounts (not self-balancing)
FMS Fund Type 3
Proprietary funds
FMS Fund Type 4
Fiduciary funds
FMS Fund Type 5

8. Governmental Funds General fund Special revenue funds
FMS Fund Type 1, Fund 001
Special revenue funds
FMS Fund Type 3; examples include Funds 145, 147, 148, 149, 846, and 860
Capital projects funds
FMS Fund Type 1, Funds 057 and 060
Debt service funds (not used at CTC level)
Permanent funds
FMS Fund Type 2, Funds 843 (exceptional faculty endowment if held by college) and 859 (local endowment)

9. Governmental “Non-Funds”
General capital assets account
FMS Fund Type 3, Fund 997
General long-term liabilities account
FMS Fund Type 3, Fund 999

10. Proprietary 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 funds
FMS Fund Type 4; examples include Fund 522 (associated students), Fund 524 (bookstore), Fund 528 (parking), and Fund 570 (other auxiliary enterprises)

11. Fiduciary Funds Pension trust funds (not used by CTCs)
Private-purpose trust funds (not used by CTCs)
Investment trust funds (not used by CTCs)
Agency funds
FMS Fund Type 5, Funds 790 and 840

12. Fund Reference Manual www.ofm.wa.gov/fund
Generally not necessary to consult, but can sometimes be useful
Provides links to statutory authority (which may be very general)
Provides description of fund and sources of revenue
May not always be completely up-to-date or entirely accurate
Always fun to look at!

13. Measurement Focus and Basis
Measurement focus — what is being measured?
Flow of current financial resources
Flow of economic resources
Basis of accounting — when are we recognizing events?
Modified accrual
Revenue when measurable and available
Expenditures when liability is incurred
Accrual
When revenue is earned
When expense is incurred or asset consumed

14. Application to Funds Governmental funds
Current financial resources measurement focus
Modified accrual basis of accounting
Proprietary and fiduciary funds
Economic resources measurement focus
Accrual basis of accounting

15. What’s the Difference?
Consider the issuance of bonds under two different scenarios
Scenario 1
General fund
Current financial resources measurement focus
Modified accrual basis of accounting
Government issues $2,000,000 bonds
Scenario 2
Electric utility enterprise fund
Economic resources measurement focus
Accrual basis of accounting

16. What’s the Difference? Dr. Cr. Scenario 1 (General Fund)
One entry in the fund:
Cash
2,000,000
Other Financing Sources—Bond Proceeds
Plus entries in the GLTL non-fund account:
Current Portion of Bonds Payable
200,000
Long-Term Portion of Bonds Payable
1,800,000
Scenario 2 (Enterprise Fund)
Entry in the fund only:
Bonds Payable

17. What’s the Difference?
Consider the purchase of capital equipment under two different scenarios
Scenario 3
General fund
Current financial resources measurement focus
Modified accrual basis of accounting
Government purchases $300,000 capital asset
Scenario 4
Electric utility enterprise fund
Economic resources measurement focus
Accrual basis of accounting

18. What’s the Difference? Dr. Cr. Scenario 3 (General Fund)
One entry in the fund:
Expenditures—Capital Outlay
300,000
Cash
Plus an entry in the GCA non-fund account:
Equipment
Scenario 4 (Enterprise Fund)
Entry in the fund only:

19. Expenditures versus Expenses
It’s the same money, the same checks being written, the same things being purchased
The words are different
Under the modified accrual basis, we speak of expenditures
Under the accrual basis, we speak of expenses
Governmental funds record expenditures
Other funds record expenses

20. Budgetary Accounting Funds sometimes use “budgetary accounting”
We actually record the budget in journal entries
This is used to allow ledgers to be prepared to assist in preventing overspending, which can have legal ramifications
Initial budget and modifications
Estimated revenues (GL 3110)
Appropriations (or allotments) (GL 6210)
Budgetary fund balance (GL 9100)
Encumbrances are used for purchasing control
Encumbrances (GL 6410)
Reserve for encumbrances (GL 9510)

21. What About Our Statements?
CTCs operate as agencies of the state of Washington and therefore use fund accounting
We have no choice whether to use governmental fund accounting
Since we are engaged only in business-type activities, we report as if we were a single enterprise fund
We account one way and report another way
We need to get from one way to another
The alternative would be to keep two sets of books and enter every transaction twice
This would truly be double-entry bookkeeping!
The state board has prepared a worksheet for us to use

22. Working an Example
We’re going to work a very brief, very simple example for a general fund of a city
Remember that the general fund uses the current financial resources measurement focus and the modified accrual basis of accounting
This is the approach most different from what we do in our BTA-only college financial statements and in enterprise funds
The same measurement focus and basis would apply to special revenue funds (e.g., Fund 145, Fund 148, Fund 149)
Source: Martin Ives, Terry K. Patton, and Suesan R. Patton, Introduction to Governmental and Not-for-Profit Accounting, 7th ed. (Upper Saddle River, N.J.: Pearson Education, 2013), Exercise 4-8 (p. 120), © 2013 Pearson Education, Inc.

23. Transaction 1 The approved budget for the year follows
Estimated Revenues
Property tax revenues $600,000
Licenses and fees 30,000
Appropriations
Public safety salaries $550,000
Public safety, other expenditures 90,000

24. Transaction 1 Journal Entry
Dr.
Cr.
Estimated revenues—property taxes
600,000
Estimated revenues—licenses and fees
30,000
Budgetary fund balance
10,000
Appropriations—public safety salaries
550,000
Appropriations—public safety other expenditures
90,000

25. Transaction 2
Property 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.

26. Transaction 2 Journal Entry
Dr.
Cr.
Property taxes receivable
600,000
Revenues—property taxes
Cash
590,000
28,000
Revenues—licenses and fees

27. Transaction 3 Salaries paid during the year amounted to $580,000;
police officers earned an additional $12,000 that will be paid in January.

28. Transaction 3 Journal Entry
Dr.
Cr.
Expenditures—public safety salaries
580,000
Cash
12,000
Accrued salaries payable

29. Transaction 4
Purchase 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.

30. Transaction 4 Journal Entry
Dr.
Cr.
Encumbrances
60,000
Budgetary fund balance reserved for encumbrances
Budgetary fund balance reserved for encumbrances
Expenditures—public safety other expenditures
56,000
Vouchers payable

31. The End
Questions
Discussion