Presentation on theme: "Essentials of Accounting for Governmental and Not-for-Profit Organizations Chapter 9 Accounting for Special Purpose Entities, Including Public Colleges."— Presentation transcript:
2 Special Purpose Entities General Purpose Governments include: States, counties, cities, towns, and villages.Special Purpose Entities include: Fire protection districts, park districts, and public authorities.A Special Purpose Entity may be a component unit of a General Purpose government.
3 Special Purpose Entity Reporting If the entity is engaged in governmental and business type activitiesUse general GASB 34 reporting model (chapters 3-8) and report both fund basis and government-wide financial statementsIf the entity is engaged in multiple governmental activitiesUse general GASB 34 model, just omit enterprise funds statements which are not applicable. Again, report both fund basis and government-wide financial statements
4 Special Purpose Entity Reporting If the entity is engaged in single governmental activityThe entity can prepare governmental fund, government-wide statements, and reconciliation effects all on one statementIf the entity is engaged only in business-type activitiesThe entity can prepare enterprise fund financial statements (no need for government-wide)If the entity is engaged only in fiduciary type activitiesThe entity can prepare fiduciary fund financial statements (no need for government-wide)
5 Example – Combined Balance Sheet, Statement of Net Assets(position) General FundCapital Projects FundTotal Governmental FundsAdjustments to Government-wideStatement of Net Assets(position)AssetsCash$ ,500,000$ ,800,500$ ,300,500Investments500,000Taxes Receivable - Gross200,000Interest Receivable5,000Prepaid Items12,000Capital Assets-35,000,000Accumulated Depreciation(7,500,000)Total Assets$ ,217,000$ ,017,500$ ,500,000$ ,517,500Liabilities and Fund BalancesLiabilitiesAccounts Payable840,00062,500902,500Accrued Liabilities250,000Deferred Property Taxes65,000(65,000)Contracts payable - Retained %700,000Long-term Notes Payable15,000,000Total Liabilities1,155,000762,5001,917,50014,935,00016,852,500Fund BalancesNonspendableAssignedCapital projects58,0004,038,0004,096,000Unassigned992,000Total Fund Balances1,062,0005,100,000Net Assets(position)Net Investment in capital assets11,800,000Unrestricted5,865,000$ ,665,000Adjustments to convert to accrual
6 PUBLIC Colleges and Universities Public Colleges and Universities are owned by a government.Public College financial reporting is covered by GASB.Private Colleges are not owned by a government and their reporting falls under FASB guidance -- covered in chapter 11.Although there are more private than public colleges in the US, roughly 3/4 of the students attend public institutions.
7 Public Colleges and Universities – GASB 35 GASB 35 requires statements similar to those of special purpose governments under GASB 34.The effect is to require colleges to use the accrual basis and record long-term assets, including infrastructure, along with depreciation.
8 Public College Financial Reports Although public colleges may have governmental type activities, business type activities, or bothMost public colleges, will report as governmental units with “business activities only”.Therefore they will prepare enterprise fund statementsException: some community colleges that have power to levy property taxes, and may prepare both fund level and government-wide statements
9 Public College Statement of Net Assets(position) Assets and LiabilitiesAre classified as current and noncurrent.Net Assets(position) are Classified as1) Net Investment in capital assets2) Restricted-- Nonexpendable and Expendable3) Unrestricted
10 Unrestricted Net Asset Deficits Note: Deficits in unrestricted assets are common because:Colleges are not accustomed to setting aside funds for depreciation.States seldom fund compensated absences in advance.
11 Public College Statement of Revenues, Expenses and Changes in Net Assets(position) Format: Operating Revenues include:Student Tuition net of scholarship allowancesFederal and State GrantsAuxiliaryLess: Operating Expensesincluding depreciationPlus or minus: Nonoperating Revenues and ExpensesIncludes state appropriations, gifts, investmentincome, interest on capital debtPlus or minus: Capital appropriations, gift, endowment additionsEquals: Increase in net assets(position)Plus: Beginning net assets(position)Equals: Ending net assets(position)
12 Public College Statement of Cash Flows GASB Format Cash flows from Operating activities must be presented using the direct methodFour Parts (described on next slide)Reconciliation of Operating income to cash flows from operationsMay also have noncash financing and investing section
13 Public College Statement of Cash Flows GASB Format Classification of Cash Flows – GASB FormatOperating items: Excludes interest and dividend revenues and expensesNoncapital Financing: Includes state appropriations and gifts including endowmentsCapital Financing: Purchase of long-term assets and related gifts, appropriations and debt repayment including interestInvesting: Includes interest revenues, endowment and other investments kept separate