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Intermediate Governmental Accounting 2015 Louisiana GFOA Winter Conference Presented by Gregory S. Allison UNC School of Government.

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Presentation on theme: "Intermediate Governmental Accounting 2015 Louisiana GFOA Winter Conference Presented by Gregory S. Allison UNC School of Government."— Presentation transcript:

1 Intermediate Governmental Accounting 2015 Louisiana GFOA Winter Conference Presented by Gregory S. Allison UNC School of Government

2 What fun awaits…??? Funds, funds, funds – Governmental – Proprietary – Fiduciary Accounting for governmental fund revenues and expenditures General capital assets and long-term liabilities

3 General Fund – The General Fund should be used to account for and report all financial resources not accounted for and reported in another fund Language for the General Fund being used when another fund is not required dropped Minimum number of funds principle dropped in GASB 34 Required by GAAP and limited to one per governmental unit Blended component units – One general fund of primary government only – General fund of blended component unit becomes a special revenue fund for the reporting entity

4 Governmental Fund Type Definitions (cont.) Special Revenue Fund – Used to account for and report proceeds of specific revenue sources that are restricted or committed to expenditure for specified purposes other than debt service or capital projects Must have 1 or more restricted or committed revenue sources - should be a substantial portion – should be the foundation of a fund – more than significant, but not necessarily a majority Resources should be recorded as revenues in special revenue funds Should not include moneys held in trust Capital reserve funds Disclose purposes of major special revenue funds and revenues and resources used in those funds

5 General and Special Revenue Funds Measurement focus – Current financial resources Basis of accounting – Modified accrual No capital assets; no long-term debt

6 Property Tax Levy Taxes Receivable Property Tax Revenue Allowance for Uncollectibles or Taxes Receivable Deferred Inflows of Resources – Unavailable Property Taxes Allowance for Uncollectibles No bad debts expenditure All revenues net of allowance for uncollectibles Accounting for motor vehicle property taxes has changed – LGC will issue guidance – Levy is at time of collection – Unregistered vehicles

7 Property Tax Collection Cash Taxes Receivable or Cash Deferred Inflows of Resources – Unavailable Property Taxes Taxes Receivable Property Tax Revenue

8 Other Revenues Accounts Receivable Allowance for Uncollectibles Revenue or Cash Permits and Fees Revenue

9 Expenditures Accounts Payable Liquidate any applicable encumbrances

10 Collection of Receivables Cash Accounts Receivable Delinquent receivables may require any applicable allowance accounts to be adjusted

11 Interfund Activity Two classes of interfund activity – Reciprocal interfund activity (interfund equivalent of exchange transactions) Interfund loans – balance sheet only Interfund services provided and used – approximates external exchange value – Non-reciprocal interfund activity (interfund equivalent of nonexchange transactions) Interfund transfers Interfund reimbursements

12 Interfund Activity (cont.) Interfund loans – Interfund receivable/payable reflects current portion of loan – Advances to/from funds reflects long-term portion of loan – Current and long-term definitions mirror private sector in this case – Both current and long-term portions should be fund liabilities

13 Interfund Activity (cont.) Interfund Services Used / Provided – Evidenced by revenue in one fund and expense/expenditure in other fund – Common in internal service funds – Similar to transactions with outside party – Approximates external exchange value e.g., water and sewer service provided to general fund

14 Interfund Activity (cont.) Reimbursements – Reductions of expenditures or expenses in one fund and increases of expenditures / expenses in another fund – Usually correction of error or cost allocation

15 Interfund Activity (cont.) Interfund transfers – Transfers for any reason – Generally considered to be non-recurring

16 Other Accounting Issues for General/Special Revenue Funds Sales of capital assets - OFS if material – Special item in some cases Payments in lieu of taxes – Interfund services provided / used if payment approximates external exchange value – Transfer otherwise TANs, RANs and GANs are always fund liabilities Interfund insurance premiums may be reimbursements or interfund services provided / used

17 Extraordinary Items Both unusual and infrequent in nature (APB 30) Not under management control – Environmental disaster – Natural disaster (location may determine) – Large bequest by citizen to a small government

18 Special Items Either unusual or infrequent in nature Should be material – materiality may vary between statements Within management control – Sales of certain governmental assets – Special termination benefits – Early retirement programs – Significant forgiveness of debt Should be reported before extraordinary items

19 Fund Balance for Governmental Funds Nonspendable (any governmental funds) Restricted for (any governmental funds) Committed to (any governmental funds) Assigned to (any governmental funds) Unassigned (General Fund only for positive balances, used for negative residuals of other governmental funds)

20 Nonspendable Fund Balance – Not in spendable form – Legally/contractually required to remain intact – Examples Inventories/Prepaids Principal of a Permanent Fund Long-term receivables

21 Restricted Fund Balance Externally-imposed restrictions – Grantors – Debt covenants Restricted by law through constitutional provisions or enabling legislation – External resources – Legally enforceable that resources may only be used for specified purposes

22 Committed Fund Balance Fund balance that is committed by formal actions of the governing board Formal actions are required to “undo” any limitations placed by formal action (can’t just be appropriations lapsing) Set in place prior to year end, but amount can be calculated after year end Similar to a current “high level” designation by a board

23 Assigned Fund Balance Fund balance amounts that are intended to be used for a particular purpose but are NEITHER restricted NOR committed Assigned Fund Balance includes the following: – All remaining spendable amounts (positive) in governmental funds except the General Fund – General Fund amounts that have designations (e.g., subsequent year’s budget appropriation) Assignments may occur any time before the issuance of the financial statements Assignment ability may be delegated by the board

24 Unassigned Fund Balance Residual classification for the General Fund Use for other governmental funds ONLY for negative residuals Fund balance that has not been assigned to other funds Fund balance that has not been restricted, committed, or assigned for particular purposes in the General Fund

25 Encumbrances Should be disclosed by major funds and nonmajor funds in aggregate as part of commitments No separate fund balance classification

26 Transactions in Which the Item Should Be Reported as a Deferred Outflow of Resources Resources advanced to another government in a government-mandated or voluntary non-exchange transaction when time requirements are the only eligibility requirement that has not been met (GASB 33) – applies to governmental funds as well Debit amounts (captioned losses years ago) on current and advance refundings (GASB 23, GASB 62) – excess of reacquisition price of refunding debt over net carrying amount – Recognized as a component of interest expense – Over the life of the old debt or the new debt whichever is shorter In the future – payments made to a pension plan accounted for under GASB 68 between the actuarial valuation date and the end of the fiscal year

27 Transactions in Which the Item Should Be Reported as a Deferred Outflow of Resources (Cont.) Amount paid in an intra-entity transfer of future revenues by transferee government (GASB 48) – also applies to governmental funds – Asset and revenue not reported until appropriate revenue recognition criteria are met – Deferred outflow to be recognized over the life of the sales agreement Decrease in fair value of derivative instrument associated with an effective hedge

28 Transactions in Which the Item Should Continue To Be Reported as an Asset Resources advanced to another government in a government-mandated or voluntary non-exchange transaction when eligibility requirements (other than time requirements) have not been met (GASB 33) – applies to governmental funds as well Purchase of future revenues from a government outside of the financial reporting entity (GASB 48, Paragraph 14) Prepaid insurance cost on debt issuance – set up as an asset and expensed over the life of the related debt in a systematic and rational manner Pension plan’s net position exceeds total pension liability (GASB 27) Prepayments (NCGA 1)

29 Transactions in Which the Item Should Be Reported as an Inflow of Resources (Revenue) Amount received from sale of revenues by transferor government where recognition as revenue is appropriate under the exceptions in GASB 48, Paragraph 14 – also applies to governmental funds Fees received from purchase of loan(s) Loan origination fees received (except points) Commitment fees – When the commitment is exercised – Upon expiration of the commitment period if the commitment is unexercised – In the period received if the likelihood that the commitment will be exercised is remote

30 Transactions in Which the Item Should Be Reported as an Outflow of Resources (Expense) Debt issuance costs, except for prepaid insurance, (Statements 7 and 62) - note – this change does not affect the calculation of “Invested in capital assets, net of related debt” on the statement of net assets Initial direct costs of operating leases by lessor – applies to governmental funds (GASB 62) Acquisition costs for insurance entities and public entity risk pools (GASB 10, GASB 62) Fees paid on purchase of loan(s) Direct loan origination costs

31 Transactions in Which the Item Should Continue To Be Reported as a Liability Resources received in advance from another government in a government-mandated or voluntary non-exchange transaction when eligibility requirements (other than time requirements) have not been met (GASB 33) – applies to governmental funds as well Resources received in advance on an exchange transaction (GASB 62) Resources received in advance in relation to a derived tax revenue nonexchange transaction (GASB 33) – applies to governmental funds as well Premium revenues for insurance entities and public entity risk pools received in advance (GASB 10, GASB 62) Commitment fees to originate or purchase a loan before the commitment is exercised

32 Transactions in Which the Item Should Be Reported as a Deferred Inflow of Resources Resources received in advance from another government in a government- mandated or voluntary non-exchange transaction when time requirements are the only eligibility requirements that have not been met (GASB 33) – applies to governmental funds as well Resources received in advance related to an imposed nonexchange transaction (e.g., prepaid property taxes) (GASB 33) ) – applies to governmental funds as well – Before the period for which property taxes are levied – Before the period when resources are required to be used or when use is first permitted for all other non-exchange transactions in which the enabling legislation includes time requirements Points received by a lender – recognized in a systematic and rational manner as revenue over the life of the loan

33 Transactions in Which the Item Should Be Reported as a Deferred Inflow of Resources (Cont.) Credit amounts (captioned gains years ago) on current and advance refundings (GASB 23, GASB 62) – excess of net carrying amount over reacquisition price of refunding debt – Recognized as a component of interest expense – Over the life of the old debt or the new debt whichever is shorter Amount received from sale of future revenues by transferor government, other than for exceptions in GASB 48, Paragraph 14 – also applies to governmental funds Amount received from intra-entity transfer of future revenues by transferor government (GASB 48) – also applies to governmental funds – Recognize revenue over the duration of the sales agreement Asset recorded in governmental fund, but revenue is not available (NCGA 1) Increase in fair value of derivative instrument associated with an effective hedge

34 Other Items “Deferred” should only be for deferred outflows and inflows of resources Major Fund criteria amended – Assets + deferred outflows of resources – Liabilities + deferred inflows of resources For deferred inflows and deferred outflows of resources – no distinction between current and noncurrent is needed

35 Capital Projects Funds

36 Used to account for financial resources used to acquire/construct major general governmental capital facilities Same measurement focus and basis of accounting as all governmental funds

37 Typical Financing Sources Long-term borrowings (e.g., bonds) Intergovernmental grants Transfers Special assessments

38 Specific Accounting Issues Records revenues, expenditures and other financing sources/uses Long-term debt and related capital assets are recorded in the government-wide statements Either one or several individual funds may be used Bond premiums, discounts and issuance costs are recorded at time of occurrence

39 Typical Journal Entries When bonds are issued….. Cash Other financing source When bond funds are expended….. Expenditure Cash

40 Bond Anticipation Notes Typically short-term financings Generally considered a fund liability May be considered long-term if…. – Original maturity is greater than one year OR – Original maturity is less than one year AND all legal steps have been taken to refinance Refinancing (or irrevocable legal steps taken) between balance sheet date and audit opinion date

41 Other Accounting Issues with Capital Projects Funds Arbitrage – Fund liability or government-wide (when is payment due?) Disposition of fund balance or deficit – Not set rules – Usually dependent upon originating funding sources Same rules for combining/individual stmts.

42 Debt Service Funds

43 Required by GAAP as follows – Legally required (e.g., bond order, statutes) – Resources are being accumulated to pay future debt service – Grants restricted for debt service Current financial resources measurement focus Modified accrual basis of accounting

44 Expenditure Recognition Generally recognized when due Option for early recognition – Payments scheduled early in fiscal year – Resources set aside late in previous fiscal year – Option should be consistently applied – Related bond principal removed from government-wide statements Defaults require current principal and interest to be fund liabilities

45 Current/Advance Refundings Advance refundings – Legal defeasance – In-substance defeasance Proceeds of refunding bonds reported as other financing sources Use of refunding proceeds to escrow agent reported as an other financing use Use of internal source funds to escrow agent reported as an expenditure

46 Current/Advance Refundings (cont.) Defeasance results in removal of refunded debt from balance sheet If defeasance does not occur, both refunded and refunding debt remains (e.g., crossover refunding) Current refundings accounted for similar to advance refundings

47 Other Accounting Issues for Debt Service Funds Taxes restricted for debt service fund should be reported directly in the fund Fund balance in the debt service fund is generally reported as “restricted”

48 Accounting for Revenues and Expenditures in Governmental Funds

49 Revenue Recognition - Modified Accrual Revenue recognized when “susceptible to accrual” for governmental funds – Measurable and available – Available means collected or to be collected soon enough to pay liabilities of current period – Legal availability must be considered – Availability periods differ among governments – Revenue reported net of bad debt allowances

50 Property Tax Revenue Recognition Issues (Real Property) Receivable recorded as of the levy date Property tax revenue “susceptible” when… – Physically collected (as long as revenue is not collected before period intended to finance) – Collections are no more than 60 days after the end of the reporting period

51 Property Tax Revenue Recognition Record as revenue and adjust deferred inflow at year-end, OR Record as deferred inflow when levied and as revenue when collected Either approach acceptable

52 Property Taxes - Other Issues Prepayments – Taxes levied to finance a subsequent year’s budget – Not intended to finance current period – deferred inflows of resources Prepayments and uncollected taxes should be separately captioned

53 Sales Tax Revenue Recognition Sales tax recognized as per GASB #22 – Measurable and available criteria apply – Sales taxes “in hands” of government collecting agents (e.g., merchants) should be accrued

54 Miscellaneous Revenue Recognition Issues Many revenues simply recognized as collected in cash – Permits – Various licenses – Parking tickets and other punitive fees – Other revenues not measurable at year end

55 Recognizing Entitlements and Shared Revenues Entitlements/shared revenues – Measurable and available criteria appropriate – No recognition for revenue collected in advance of period intended to finance (deferred inflows of resources) – Revenue and receivable possible if not collected, but measurable and available

56 Expenditure-driven Grant Revenue Recognition Revenue recorded when… – Grant-related expenditures have occurred – Other grant-related requirements have been met If payment has not been received… – Record revenue and receivable (if measurable and available criteria have been met)

57 Revenue Recognition - Donations Financial resource donations – Receivable when a legal claim established – Revenue recognized when measurable and available – Most donations, however, are recognized on a cash basis (e.g., become a “claim” once they are actually received in cash)

58 Donation of Capital Assets Capital asset donations generally affect governmental activities in the government- wide financial statements For assets for which sale or dissolution has occurred by year-end…revenue recognized If intent is to sell and sale occurs before statements are issued, reflect an asset (e.g., “assets held for resale”) and revenue

59 Other Types of Revenues - Recognition Issues Investment income – Interest receivable and associated revenue should be calculated and recorded if measurable and available – Change in fair market value reflected through interest income

60 Other Revenues (cont.) Service-type special assessments – Receivable recorded when service is provided – Revenue recorded using the measurable and available criteria – Revenue not meeting measurable and available should be recorded as deferred inflows of resources

61 Changes in Accounting Principles - Revenues Effective at beginning of the year of change Cumulative effect of accounting change reported as fund balance restatement for earliest year presented Revenues restated for each year presented Change briefly disclosed in notes “As restated”

62 Expenditure Recognition Generally recognized when liability is measurable and has been incurred There are some regular exceptions to the general rule (related to the fund financial statements)…..

63 Compensated Absences Guidance as per GASB Statement No. 16 Expenditures for amounts to be liquidated with current financial resources Accrued vacation – Based on past service/past event – Payment must be considered probable – Valuation based upon current salary levels – Salary-related benefits must be included

64 Compensated Absences (cont.) Sick leave – Liability normally not accrued as most sick plans are based on future events – Liability is accrued if sick plan, or portion of it, converts to a past event basis (e.g., incentive plans with payout provisions) and payout will occur to employee and/or third party – Conversion of sick leave to service time is not accrued

65 Compensated Absences (cont.) Liability for accrued vacation and appropriate sick leave related to governmental funds is, in almost all cases, simply reported in the government-wide financial statements as governmental activities

66 Claims and Judgments Liability on balance sheet when incurred – Fund liability when to be liquidated with current resources – Government-wide financial statements (governmental activities)for future liquidations Fund expenditure and liability for adjudicated claims

67 Claims and Judgments (cont.) Incurred but not reported (IBNR) – Event that has occurred by the fiscal year end – Probable that claim will be made – Probably that claim will prevail IBNRs are often based upon past history IBNR liabilities must be reported if material and meet the above-mentioned criteria

68 Miscellaneous Expenditure Issues Unfunded pension contributions/OPEB – Fund liability and expenditure for portions to be liquidated with current financial resources – Often reflected as a government-wide liability only – Accounting vs. actuarial liabilities – OPEB Early retirement/other incentive offers – Recognized when employees accept offer – Same rules for fund and government-wide liability reporting

69 Miscellaneous Expenditure Issues (cont.) Pension types – Defined contribution plans Expenditure = Required Contribution – Defined benefit plans Expenditure = Actuarial Required Contribution ARC must comply with GASB # 27/GASB #45 parameters

70 Miscellaneous Expenditure Issues (cont.) Landfill closure and postclosure care costs - either fund or government-wide liability Debt service generally recorded as an expenditure when due Inventories and prepaids – Purchases method - expenditure when purchased (requires fund balance reservation) – Consumption method - expenditure when used

71 Lease Accounting Private sector guidance applicable (FASB Statement No. 13) Includes guidance for both operating and capital leases Fiscal funding clauses do not affect capitalization criteria

72 Lease Accounting (cont.) Lessee accounting – Present value of minimum lease payments Other financing source (reduced by amount of down payment, if applicable) Expenditure Year of inception only Purpose of “phantom entry” – Regular debt service payments accounted for as expenditures

73 Lease Accounting (cont.) Lessor accounting – Lease receipts reported as revenue once measurable and available criteria has been met – Lease receivables that do not meet the criteria are reported as deferred inflows of resources

74 Changes in Accounting Principles - Expenditures Expenditures that couldn’t be reasonably estimated earlier Change in method of applying GAAP – LIFO to FIFO New GASB standards Same reporting issues as discussed earlier with revenue changes

75 Accounting for Governmental Capital Assets

76 General Capital Assets Includes tangible and intangible assets – infrastructure required Asset valuations – Historical cost (all costs incurred in readying asset for use) – Estimated historical cost – Fair market value for donations – Present value of net minimum lease payments for assets under capital lease Capitalized interest not allowed – GASB Statement No. 37

77 General Capital Assets (cont.) Details by asset class reported either on the statement of net assets or in the note disclosures – Land – Buildings – Equipment – Improvements – Intangibles (example - computer software) – Construction in progress Must separate depreciable and non-depreciable capital assets (if significant)

78 General Capital Assets (cont.) Accumulated depreciation reported on face of statement or in notes – more detail reported Capitalization threshold guidance Useful life guidance Calculating depreciation – Class of asset – Network – Subsystem – Individual asset

79 Special Accounting Issues Transfer of assets between funds – Governmental to proprietary – Proprietary to governmental Foreclosure – Intent to resell (difference between value of tax due and value of property – expenditure) – No intent to resell (expenditure for amount of tax due….asset reported in government-wide statements)

80 Financial Reporting of Capital Assets

81 Basic Reporting of General Capital Assets Capital assets reported only at the government-wide level for governmental-type assets Capital asset reported at both government- wide and fund financial levels for proprietary funds

82 General Capital Asset Reporting (cont.) Government-type asset infrastructure is now reported and capitalized All capital assets are subject to depreciation at the government-wide level (unless it is a non- depreciable asset) Note disclosures now focus on changes in all capital assets - by type (e.g., land, buildings) and activity (govt./business-type)

83 Specific Reporting Conventions Capital assets should be reported net of accumulated depreciation in the statement of net position – Accumulated depreciation may be reported on the face of the statement or simply in the notes – Accumulated depreciation by type of asset reported in the note disclosures

84 Conventions (cont.) Depreciation expense for both governmental and business-type activities reported in the statement of activities – Depreciation expense reported within functional categories – Note disclosures detail the amount of depreciation expense included in each functional category

85 Conventions (cont.) Summary of significant accounting policies – Policy for capitalizing all assets, including governmental activity infrastructure – Policy for estimating useful lives – Useful lives by category of capital asset

86 Conventions (cont.) Capital asset activity disclosed by governmental and business-type activities – Beginning and ending balances – Capital acquisitions – Sales or other dispositions – Current period depreciation expense – Reductions in accumulated depreciation

87 Conventions (cont.) Disclosures (cont.) – Changes in accumulated depreciation by type of asset – Summary of depreciation expense by governmental function or business-type activity – Description and rationale for assets not being depreciated

88 Implementation Guide Clarifications Capitalization of interest applies only to business-type activities If asset is transferred from enterprise fund to governmental activities, the capitalized interest is not removed Zoo animals are generally capitalized and depreciated (rare exception – breeding colonies)

89 Capitalization of Software Purchased software should be capitalized if material Annual licensing fees should not be capitalized if they are period costs GASB Statement No. 51 provides guidance on capitalization of externally-developed and internally-developed software

90 General Long-term Liabilities

91 Nature of General LT Liabilities Liabilities associated with governmental funds Liabilities NOT reported with governmental funds Liabilities generally reported only at the government-wide level

92 General Long-term Liability Accounting Issues Debt to be repaid by proprietary funds is a fund liability for those funds Government-wide reporting reflects accrual accounting – Discounts, premiums, underwriters fees are deferred and amortized

93 General Long-term Liability Accounting Issues (cont.) Long-term debt remains in government wide financial statements until due Common general liabilities – Bonds payable – Claims and judgments – Compensated absences – Unfunded pension obligations – Closure and postclosure care costs

94 General Long-term Liability Accounting Issues (cont.) Rebatable arbitrage – Fund liability if funded and to be repaid with current financial resources – Government-wide if not funded or to be repaid in the future Unfunded pension/OPEB obligation – No actuarial liability on the balance sheet – Unfunded employer contribution in government- wide

95 General Long-term Liability Accounting Issues (cont.) Advances between funds should be shown as fund liabilities Bond anticipation notes (BANs) – Usually a fund liability – Government-wide liability if… Refinancing occurs between fiscal year end and audit opinion date Irrevocable legal steps taken to refinance during this same period

96 General Long-term Liability Accounting Issues (cont.) Special assessment debt – Governmental commitment… shown in government-wide with special caption – Backed with taxing power…shown as any other GO debt – No commitment…not in government-wide

97 Enterprise Funds GAAP only requires the use of enterprise funds when any of the following is true for the principal revenue sources: – Activity financed with debt secured solely by pledge of system revenues – Laws or regulations require costs (including capital costs) be recovered with fees or user charges – Pricing policies are designed so fees and charges cover costs (including capital costs) Enterprise Funds may be used when goods or services are provided to external users and a fee is charged

98 Enterprise Funds (cont.) Flow of economic resources measurement focus Accrual basis of accounting Budgetary considerations – Fixed or flexible budgets common – Budget-to-actual presentation in the individual statements and schedules

99 Required Financial Statements Statement of Net Position Statement of Revenues, Expenses, and Changes in Fund Net Position Statement of Cash Flows

100 Accounting Issues Rate covenant reporting – Coverage issues, special reports, audit Restricted assets – Common sources are customer deposits and revenue bonds (bond covenants)

101 Accounting Issues (cont.) Interest capitalization required for proprietary funds – FASB #34 for non-specific borrowings Capitalization period from beginning of construction Not offset by interest earnings – FASB #62 for specific borrowings Usually associated with tax-exempt debt Capitalization period from date of borrowing Offset by interest earnings

102 Accounting Issues (cont.) Arbitrage rebate shown as a fund liability – May be reflected as an offset to interest earnings – Need to determine amount due within 1 yr (not different than other liabilities) Payments to General Fund – Indirect cost / Administrative services – Expense (NOT a transfer)

103 Accounting Issues (cont.) Payment in lieu of taxes – Quasi-external transaction – Based on value of services Refundings (GASB Statement No. 23) – Difference between amount of refunded debt and reacquisition price deferred and amortized over shorter of life of old or new debt – Deferred amount netted with refunding debt on balance sheet (pre-GASB 65)

104 Accounting Issues (cont.) Landfill closure/postclosure care costs – Required by GASB Statement No. 18 – Costs of closure/postclosure recognized over useful life of landfill – Expense based on landfill capacity used to date – Changes in estimates for current and prior periods handled in the current period

105 Misc. Capital Asset Issues All infrastructure assets must be capitalized Capital grants reported as capital contributions before transfers Capitalized interest must be included Assets transferred (contributed) from other funds should be valued at net book value as if the assets had always been in the proprietary fund

106 Operating Statement Format Operating revenues Operating expenses – Includes depreciation and other non-cash items Non-operating revenues/expenses – Items not generated by operations Capital contributions Special items Extraordinary items Transfers in/out – NOT other financing sources/uses

107 Statement of Cash Flows Required for enterprise funds Four categories – Operating activities – Noncapital financing activities – Capital and related financing activities – Investing activities

108 Other Cash Flow Reporting Issues Reconciliation to cash and cash equivalents Cash equivalents – Not a required caption – Pooled cash and investments – If used, strict definition must be followed Investments with ORIGINAL maturities of 90 days or less Reconcile to Statement of Net Assets

109 Cash Flow Categories Operating activities – Cash inflows/outflows related to operations – Considered a residual category Non-capital financing activities – Other financing activities NOT related to capital – Transfers/Grants/Property Taxes – Operating subsidies

110 Cash Flow Categories (cont.) Capital Financing Activities – Capital purchases – Proceeds of capital debt – Sales of capital assets – Grants for capital items Investing activities – ALL investment income – Purchases/sales of investments

111 Other Issues Combining statements required for non-major funds – Major funds shown in Basic Financial Statements Individual fund statements may be shown to provide additional detail GASB 62 codifies how guidance from FASB and predecessor accounting standards setters applies to proprietary funds and government-wide financial statements Unbilled receivables should be accrued at year end

112 Fiduciary Funds

113 Pension trust fund Investment trust fund Private-purpose trust fund Agency fund

114 Overall Characteristics Total economic resources measurement focus Accrual basis of accounting Reported only in the fund financial statements (i.e., NOT reported in the government-wide statements) Reported by fund type in the basic financial statements

115 Fiduciary Fund Accounting Issues Usually all trust funds are evidenced by a legal trust agreement Budgetary considerations – Annual budget not required under G.S. 159 – If budget is adopted, the modified accrual basis would be used

116 Pension Trust Fund Used when government sponsors a plan for its employees’ and acts as its trustee Statement of cash flows not required Equity referred to as net position, though not with same three categories as discussed previously

117 Pension Trust Fund (cont.) Statement of plan net position Statement of changes in plan net position – Separate operating statement required – Additions instead of revenue – Deductions instead of expense Six years of various RSI

118 Investment Trust Funds Required by GASB Statement No. 31 for external investment pools Balance sheet and operating statement similar to pension trust funds Internal portion of external pool may be included

119 Private-purpose Trust Fund Recipients and/or beneficiaries are outside parties (i.e., not the government itself) May be expendable or nonexpendable in nature

120 Agency Fund Required when assets are being held in a strict custodial capacity – Common for tax collecting arrangements – Special assessment debt with no governmental commitment – Certain pass-through grants as per GASB Statement No. 24

121 Agency Fund (cont.) No measurement focus – Assets – Liabilities – No equity Accrual basis of accounting Statement of changes in assets and liabilities required


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