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Overview of Governmental Fund Accounting Budget, Accounting, and Reporting Council May 29, 2014, Columbia Basin College Stuart Trippel, CPA, CGMA, Executive.

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Presentation on theme: "Overview of Governmental Fund Accounting Budget, Accounting, and Reporting Council May 29, 2014, Columbia Basin College Stuart Trippel, CPA, CGMA, Executive."— Presentation transcript:

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 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 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 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 Government issues $2,000,000 bonds

16 What’s the Difference? Dr.Cr. Scenario 1 (General Fund) One entry in the fund: Cash2,000,000 Other Financing Sources—Bond Proceeds2,000,000 Plus entries in the GLTL non-fund account: Current Portion of Bonds Payable200,000 Long-Term Portion of Bonds Payable1,800,000 Scenario 2 (Enterprise Fund) Entry in the fund only: Cash2,000,000 Bonds Payable2,000,000

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 Government purchases $300,000 capital asset

18 What’s the Difference? Dr.Cr. Scenario 3 (General Fund) One entry in the fund: Expenditures—Capital Outlay300,000 Cash300,000 Plus an entry in the GCA non-fund account: Equipment300,000 Scenario 4 (Enterprise Fund) Entry in the fund only: Equipment300,000 Cash300,000

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 fees30,000 Appropriations Public safety salaries$550,000 Public safety, other expenditures90,000

24 Transaction 1 Journal Entry Dr.Cr. Estimated revenues—property taxes600,000 Estimated revenues—licenses and fees30,000 Budgetary fund balance10,000 Appropriations—public safety salaries550,000 Appropriations—public safety other expenditures90,000

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 receivable600,000 Revenues—property taxes600,000 Cash590,000 Property taxes receivable590,000 Cash28,000 Revenues—licenses and fees28,000

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 salaries580,000 Cash580,000 Expenditures—public safety salaries12,000 Accrued salaries payable12,000

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. Encumbrances60,000 Budgetary fund balance reserved for encumbrances60,000 Budgetary fund balance reserved for encumbrances60,000 Encumbrances60,000 Expenditures—public safety other expenditures56,000 Vouchers payable56,000

31 The End Questions Discussion


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