Transcript New York State Government Finance Officers* Association

NEW YORK STATE
GOVERNMENT FINANCE OFFICERS’
ASSOCIATION, INC.
Advanced Forum
Governmental Accounting
April 1, 2014
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TODAY’S PRESENTERS:
Dr. Kevin Bronner
Professor of Governmental Accounting
State University of New York at Albany
William O’Reilly
Chief Financial Officer
Albany County Airport Authority
John A. Savash, II
Associate Professor of Accounting
Elmira College
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Topics To Be Covered
• Specialized public-sector accounting
classifications including modified accrual and
accrual accounting. (Bronner)
• Which fund to account for a given function or
activity? (Bronner)
• Basic journal entries for governmental,
proprietary, and fiduciary accounts. (Bronner)
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Topics Continued
• Budgeting journal entries and budget
comparisons statements. (O’Reilly).
• Basic steps in converting fund data for
inclusion in government-wide financial
statements. (Savash)
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Class Resources
• Accounting and Reporting Manual, Office of
New York State Comptroller (2011).
• City of Rochester, New York Comprehensive
Annual Financial Report of the Year Ended
June, 30, 2013.
• City of Rochester, NY 2012-2013 Budget.
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Session #1: Measurement Focus and
Basis of Accounting
• Current financial resource measurement focus
used for Governmental Funds.
• Modified Accrual Accounting.
• Economic resources measurement focus used
for Proprietary Funds.
• Accrual Accounting.
• The same transaction can be accounted for
differently depending on the basis of
accounting.
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Governmental Funds
General Fund accounts for all financial resources
except those to be accounted for in another fund.
Special Revenue Funds account for financial
resources that are legally restricted to expenditures
for a specific purpose.
Capital Projects Funds account for financial
resources to be used for the acquisition or
construction of major capital facilities.
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More Governmental Funds
Debt Service Funds account for the
accumulation of resources for, and the payment
of, general long term debt and principal and
interest.
Permanent Funds account for resources that are
legally restricted to the extent that only
earnings, not principal, may be used for the
purposes that benefit the government or its
citizenry.
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Governmental Funds
Accounting Equation
• FA (Financial Assets) - RL (Related Liabilities) =
FB (Fund Balance)
• General Capital Assets (GCA) account group
contains all long term assets.
• General Long Term Liability (GLTL) account
group contains all long term debt.
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Governmental Funds Issues
• Long term assets seen as a current
expenditure when built and not placed on the
balance sheet presentation.
• Long term debt not included in fund structure
or balance sheet.
• Account groups are separate accounting
systems related to the funds.
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Governmental Fund Account Groups
• General Capital Asset Account Group contains
the long term assets.
• General Long Term Debt Account Group
contains the long term debt.
• These are separate lists of items not on the
balance sheet.
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Proprietary Funds
• Enterprise Funds are financed primarily with
fees or user charges.
• Business-type accounting where a yearly net
income is developed using revenues and
expenses.
• Long term assets and debt included in the
fund.
• Depreciation used.
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Enterprise Funds Used For…
• Water system.
• Sewer systems.
• Landfill systems with user fees.
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Internal Service Fund
• Accounts for financing of goods or services
provided by one department or agency to
other departments of the governmental unit
or to other governments.
• Business type accounting with net income
presentation.
• Example: Motor pool.
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Agency and Fiduciary Funds
• Agency fund used where the government is
an agent or custodian of money.
• Example: Tax collection agency fund.
• Pension Trust Fund accounts for funds held
for members/beneficiaries of pension funds or
other employee benefit plans.
• Private-Purpose Trust Funds for other trust
arrangements where the asset is maintained.
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City of Rochester CAFR
•
•
•
•
•
•
Government-wide Statement of Net Position
Statement of Activities
Accrual based accounting
Capital assets shown
Non current liabilities (debt) shown
Depreciation used
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City of Rochester
Governmental Funds
•
•
•
•
Balance Sheet for General Fund.
Modified accrual accounting used.
No long term assets on balance sheet.
Long term assets reflected as an expenditure
in the year they are paid.
• No long term debt.
• No depreciation expense
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City of Rochester Issues
•
•
•
•
Governmental funds used modified accrual.
Enterprise funds use accrual.
Government-wide statements use accrual.
Transactions viewed separately in the
accounting system.
• Year end reconciliation of modified accrual
costs need to be converted to accrual basis.
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Expenditure/Expense Entry for
Long Term Capital Assets
• Governmental Funds:
Expenditures Building
Cash
Dr.
xxx
Cr.
xxx
• Expenditures item is run through the Income
Statement and closed to Fund Balance at year
end.
• Asset places in General Capital Asset Account
Group and not on Balance Sheet.
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Enterprise/Fiduciary Fund
Building Addition
• Enterprise Fund:
Buildings
Cash
Dr.
xxx
Cr.
xxx
• Item is placed on the Balance Sheet.
• Depreciation journal entries to be made.
Sheet.
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Enterprise/Fiduciary Fund
Depreciation Entry
• Enterprise Fund:
Dep. Expense Building
Acc. Dep. Buildings
Dr.
xxx
Cr.
xxx
• Depreciation Expense Buildings is an income
statement account that reduces net income.
• Accumulated Depreciation- Buildings is a balance
sheet account that is subtracted from the
Buildings account.
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Long Term Debt Issue for
Governmental Funds
• Governmental Funds:
Cash
Other Fin. Sources Bonds
Dr.
xxx
Cr.
xxx
• Other Financing Sources Bonds is an Income
Statement Account closed to Fund Balance at
year end.
• Debt shown in account group and not on balance
sheet.
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Enterprise/Fiduciary Fund
Debt Journal Entry
• Enterprise Fund:
Cash
Long Term Bonds
Dr. Cr.
xxx
xxx
• Long Term Bonds is a balance sheet account.
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Session #2: Fund Accounting Exercise
• Please refer to the Journal Entry Exercises
found in your binder.
• The objective is to make journal entries which
illustrate how events are accounted for
differently based on the use of modified
accrual accounting vs. accrual accounting, and
the type of fund used.
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Session #3: Budgeting Aspects in
the Accounting System
• GASB Statement No 41 Budgetary Comparison
Schedules – Perspective differences an
Amendment to GASB Statement No 34
updates the accounting requirements.
• Budgeting statement to reconcile budget
amounts and actual amounts.
• Budget based journal entries.
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City of Rochester, New York Budget
Comparison Statement for 2013
• Shows Final to Actual amounts for key budget
items by fund.
• General Fund Real Property Tax Final Budget =
$ 139,939,000 vs. Actual of $143,096,000 .
• General Fund Expenditures in Final Budget =
$347,639,000 vs. Actual of $328,526,000 in
14 areas.
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The Accountant’s Issue
• You have to record the budget when it is
passed (and amended) and then track the
budget in great detail so you can present the
final budget vs. actual presentation at year
end.
• A simple journal entry such as recording a
payroll expenditure has to be tied to the
budget amount so it can be recorded in the
right account.
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Level of Control
• See OSC Accounting and Reporting Manual at
p. 22-23 in the binder.
• Budget Item in code 1410.0 = $14,500.
• If there is a request to exceed the $14,500 in
spending, it should be approved by the
governing board.
• Strong accounting control for budget vs.
actual worked into the accounting system.
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Special General Ledger Budgeting
Selected Accounts in ARM (p. 24)
•
•
•
•
510 Estimated Revenues
511 Appropriated Reserves
599 Appropriated Fund Balance
960 Appropriations
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Ledgers Involved
See Binder Session #3:
1.
2.
3.
4.
General Ledger
Expenditures Ledger
Revenues Ledger
Modified Budget and Actual Presentation
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Budget Related Transactions
1. The budget is passed with $10,000 in
estimated property tax revenues and
appropriations of $10,000 which is
comprised of a computer purchase for
$1,000 and general fund labor of $9,000.
2. The computer system is ordered for $1,000.
3. The computer system arrives and is paid for
in cash for $1,000.
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Budget Transactions (cont.)
4) $8,000 of labor is used and paid for in cash.
5) $10,000 of property taxes collected in cash.
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Budget Passed With
$10,000 in Revenues and
$10,000 in Appropriations
510 Estimated Rev.
$10,000
960 Appropriations
$10,000
-- To record the adopted budget
• General Ledger Accounts in use.
• Entry reversed at end of budget period.
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Budget Detail
• Account XXX Property Tax Revenues $10,000
• Account XXX Computer Purchase for $1,000
• Account XXX Labor of $9,000
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Budgeting Accounting
Key Subsidiary Ledgers
• An Expenditure Ledger keeps track of
Appropriations, Encumbrances, and Actual
Spending and Budget Revisions. (Computer
purchase for $1,000 encumbered but not
labor).
• A Revenues Ledger keeps track of Estimated
Revenues, Actual Revenues, and Budget
Revisions. (Property tax revenue of $10,000).
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Encumbrance Accounting
• When good or services included in the budget
are ordered, a journal entry must be made to
ensure that more goods or services can not be
ordered than are included in the budget.
• Account 521 Encumbrances
• Account 821 Reserve for Encumbrances.
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Three Transactions in
Encumbrance Accounting
1. Goods or services are ordered.
2. A portion or the whole amount of the goods
or services arrive.
3. The goods or services are paid for or a
payable account is used.
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Journal Entry Exercise
• Appropriation made for purchase of $1,000 computer system.
• Accounting department should review the purchase order for the
item which shows the budgetary account.
Journal Entry:
521 Encumbrances-Computers
821 Reserve for Enc.-Computers
-To reflect computer ordered
$1,000
Expenditures Subsidiary Ledger Entry Also Made.
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$1,000
Computer Order for $1,000 Arrives
and is Paid in Cash
Journal Entry:
821 Reserve for Enc.
$1,000
521 Encumbrances
$1,000
-To record ordered goods that arrived.
xxx Expenditures-Computer $1,000
xxx Cash
$1,000
-To record purchase of computer.
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Computer Does Not Arrive
At Year End?
• Account 521 closed at year end to the
Unreserved Fund Balance Account.
909 Fund Balance
$1,000
521 Encumbrances
$1,000
-To close encumbrances at year end.
-Entry reversed on Day 1 of Next Year if
Encumbrance is to be opened.
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Budgeting Journal Entry Exercise
Additional Transactions:
• Only $8,000 of Labor Used in Fiscal Year and is
paid for in Cash.
• $10,000 in property taxes collected in Cash.
• Show general journal end subsidiary journal
transactions.
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Budget Accounting Exercise
Included in Binder
• Make the journal entries required for each
transaction shown in the exercise.
• General Ledger, Expenditures Ledger,
Revenues ledger to be used.
• Modified Budget and Actual Presentation.
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Session #4: Converting Governmental
Fund Data for Inclusion in the
Government Wide Financial Statements
• We have funds with a different basis of
accounting and we have to convert
governmental fund data to present it in accrual
accounting form.
• See City of Rochester, New York financial
statements in the binder.
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City of Rochester Government-wide
Financial Statements
• Statement of Net Position showing
Governmental Activities and Business-type
Activities.
• A balance sheet with assets, liabilities, and
Net Position and other items.
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Statement of Activities
• Primary government and business-type
activities distinction in right column.
• Major revenue categories shown.
• Cost categories for items such as general
government, police, fire.
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Government Wide
Accounting Categories
• Governmental activities include funds used for
governmental funds and the Capital Asset
Account Group and the Long Term Debt
Account Group.
• Business-type activities relate to enterprise
fund activities.
• Fiduciary funds not included.
• All funds to use accrual accounting.
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Four Key Data Conversion Tasks
1. Governmental activities to be recorded as a
single entity and not by separate fund.
2. General Capital Asset Account Group and
General Long Term Debt Account Group
activities to be included in the statements.
3. Accrual accounting used for the presentation.
4. Internal Service Fund part of governmental
activities.
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Case Study on Data Conversion
• See tab in binder for Session #4.
• Governmental funds financial statements.
• Governmental funds account groups and plant
accounting data.
• List of potential adjustments.
• Specific adjustments in the case study.
• Two conversion worksheets.
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Initial Steps in Data Conversion
• Step #1: Prepare fund financial statements for
all funds using modified accrual accounting for
governmental funds, and full accrual basis for
Proprietary and other required funds.
• Step #2: Prepare a pre closing trial – balance
type worksheet for governmental funds
grouped together, and proprietary funds
grouped together.
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Data Conversion continued
• Step 3: For the statement of net assets take
the balance sheet for the governmental funds
and make worksheet adjustments to it.
• Add long term assets and accumulated
depreciation.
• Add long term debt items.
• Eliminate internal due to and due from
categories.
• Adjust deferred items.
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Data Conversion continued
• Step 4: Add columns for governmental funds
to business type activities to develop line
items for the Statement of Net Position.
• Never include fiduciary funds in the
presentation since they are in a trust
arrangement and can not be used for other
purposes.
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Activities Statement Data Conversion
• Depreciation added to expense accounts.
• Long term assets addition taken out of
expense accounts.
• Current year bond financing costs taken out of
the income statement and not reflected as
other financing sources.
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Workshop Recap
• Brief summary of key points on the basis of
accounting, budgetary accounting, and data
conversion for government-wide financial
statements.
• Questions?
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Contact NYS GFOA
126 State St., 5th Fl.
Albany, NY 12207
518-465-1512
www.nysgfoa.org
© 2014—New York State Government Finance Officers’
Association, Inc.
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