1. Basic Financial Statements: Overview

2. Principle 1: Accounting & Reporting Capabilities  Present fairly and with full disclosure funds and activities in conformity with GAAP  Determine and demonstrate compliance with finance-related legal and contractual provisions

3. GAAP Requirements  Trying to assure comparability among and between governments  Full disclosure may result in much more information than “adequate” disclosure required by FASB

4. Categories and Types of Funds GOVERNMENTAL FUNDS  General Fund  Special Revenue Funds  Capital Projects Funds  Debt Service Funds  Permanent Funds PROPRIETARY FUNDS  Enterprise Funds  Internal Service Funds FIDUCIARY FUNDS  Pension Trust Funds  Investment Trust Funds  Agency Funds  Private Purpose Trust Funds

5. Governmental Funds  Most basic type of fund – use basic fund format defined earlier  Used to account for general government activities  Accounting equation does not allow for capital assets and long-term liabilities – necessitates use of nonfund accounts: General Capital Assets General Long-Term Liabilities

6. Nonfund accounts  General Capital Assets – property, plant, & equipment used in general operation of government  General Long-term Liabilities – debt used to finance capital assets and other long-term liabilities not recognized in the governmental funds

7. Proprietary Funds  Used to account for business-like activities of the government: Golf courses Maintenance operations Airports Utilities  May use more “traditional” accounting equation: Current Assets + Capital Assets Current + Long-term Liabilities Net Assets–=

8. Fiduciary Funds  Accounts for assets held by government in trustee or agency capacity for others  Not used to report assets held for government’s own use

9. Principle 5: Reporting Capital Assets Must know which fund type is using capital assets:  Proprietary fund – reported at fund and government-wide level  Fiduciary fund – reported only at fund level  Governmental Fund – reported only at government-wide level and in notes to financial statements

10. Principle 6: Valuation of Capital Assets  Report at historical cost (may use estimated cost of historical cost cannot be determined)  Cost of capital asset included charges to get it to intended location and ready for use  Donated capital assets reported at fair value at time of donation, plus charges to get it to intended location and ready for use

11. Principle 7: Depreciation of Capital Assets  Capital assets depreciated over useful lives  Inexhaustible capital assets (land and some land improvements) should not be depreciated  Infrastructure assets may be accounted for using the “modified approach”

12. Reporting depreciation depends on fund category  Proprietary fund – reported at fund and government-wide level  Fiduciary fund – reported only at fund level  Governmental Fund – reported only at government-wide level and in notes to financial statements

13. Principle 8: Accounting for Long-Term Liabilities Must know type of fund incurring liability  Proprietary Fund – report at fund and government-wide level  Fiduciary Fund – report only at fund level  Governmental Fund: Unmatured – report at government-wide level & in the notes Matured – report as fund liabilities

14. Principle 9: Measurement Focus (MF) and Basis of Accounting (BA) Government-Wide Financial Statements  Measurement focus is on economic [all] resources  Basis of accounting is accrual  Revenues, expenses, gains, losses, assets, & liabilities recognition depends on transaction: Exchange – when exchange takes place Nonexchange – according to GASBS 33

15. Principle 9: Measurement Focus (MF) and Basis of Accounting (BA) Governmental Fund Financial Statements  Measurement focus is on current financial resources  Basis of accounting is modified accrual  Revenues recognized in period they become available and measurable  Expenditures recognized when liability is incurred, except for interest on long-term debt which is recognized when due

16. Principle 9: Measurement Focus (MF) and Basis of Accounting (BA) Proprietary Fund Financial Statements  Measurement focus is on economic [all] resources  Basis of accounting is accrual  Revenues, expenses, gains, losses, assets, & liabilities recognition depends on transaction: Exchange – when exchange takes place Nonexchange – according to GASBS 33

17. Principle 9: Measurement Focus (MF) and Basis of Accounting (BA) Fiduciary Fund Financial Statements  Measurement focus is on economic [all] resources  Basis of accounting is accrual  Exception for certain liabilities of defined benefit pension plans and certain postemployment healthcare plans

18. Revenue Recognition Rules – Must be:  Earned or levied  Measurable  Available Collected in current period or soon enough thereafter to pay liabilities of the current period – usually considered to be 60 days If not collected within this period, reported as deferred revenues in current period and revenues in year when they become available

19. Expenditure Recognition Rules  For current operations & capital outlay, when liabilities to be paid currently by governmental funds are incurred  For debt service (principal and interest) when payments on long-term liabilities are due

20. Reporting Interfund Activity: Reciprocal interfund activity  Interfund loans (asset / liability) Short-term (due from / due to) Long-term (advance to / advance from)  Interfund services provided and used – recognized as revenue in providing fund and expenditure/expense in using fund

21. Reporting Interfund Activity: Nonreciprocal interfund activity  Interfund transfers Reported in governmental funds as Other Financing Sources / Uses Reported in proprietary funds after nonoperating revenues and expenses  Interfund reimbursements Repayment from one fund to another – increases expenditures / expenses in paying fund while decreases them in receiving fund Not separately reported in financial statements

22. Principle 13: Annual Financial Reports Minimum reporting requirements  Management’s Discussion & Analysis  Basic Financial Statements Government-wide financial statements Fund financial statements Notes to the financial statements  Required supplementary information other than MD&A

23. Principle 13: Annual Financial Reports Government-wide Financial Statements  Statement of Net Assets  Statement of Activities

24. Principle 13: Annual Financial Reports Governmental Fund Statements (Schedules)  Balance Sheet  Statement or Revenues, Expenditures, & Changes in Fund Balance  Statement or Revenues, Expenditures, & Changes in Fund Balance – Budget-to- Actual (may be either BFS or RSI)

25. Principle 13: Annual Financial Reports Proprietary Fund Statements  Statement of Net Assets / Balance Sheet  Statement of Revenues, Expenses, & Changes in Net Assets  Statement of Cash Flows

26. Principle 13: Annual Financial Reports Fiduciary Fund Financial Statements  Statement of Fiduciary Fund Net Assets  Statement of Changes in Fiduciary Fund Net Assets