Introduction Chapter 1: Getting to know you….

Comparison of GNPs with Business Different mission - no profit motive Budget - legal document –most significant financial document –budgets drive accounting Level of services - expenditures drive revenues Need to assure interperiod equity

What other Characteristics? Many different types of GNPs –cities, towns, counties, school districts, special tax districts, states, townships, hospitals, universities –schools, hospitals, social service orgs., universities, civic orgs., cultural orgs., religious orgs., foundations, etc.) Short-term focus of managers Business-type activities

What is a Government? Indicators of governments: –power to tax –right to assess residents’ annual fees –power to issue tax-exempt debt –governing body either elected by the citizens or appointed by another government –another government can dissolve it or assume its assets

Purposes of Financial Reporting Assess financial condition Compare actual results with the budget Determine compliance with laws and regulations Evaluate efficiency and effectiveness

Uses of Financial Reports Main users: –3 main users identified by GASB: citizens and taxpayers investors and creditors governing boards (legislators) –Other users donors and grantors regulatory and oversight agencies employees and other constituents

Objectives of Financial Reporting GASB Objectives - for S&L governments –accountability (interperiod equity, budgetary and fiscal compliance, service efforts and accomplishments) –current standards - compliance reporting –dual model proposed FASB Objectives - for not-for-profits –similar to GASB, but with less emphasis on budgetary compliance

Who Establishes Standards? GASB FASB AICPA Hierarchy - pg agreement on GAAP FASAB- for federal government (GAO, Treasury, OMB)

Problem 1-6 impact on budget? impact on YE financial statements? impact on economic well-being? Impact: story or status?

Problem 1-10: How to Account?