Transcript Intermediate Governmental Accounting 2015 Louisiana GFOA

Intermediate
Governmental Accounting
2015 Louisiana GFOA Winter
Conference
Presented by
Gregory S. Allison
UNC School of Government
What fun awaits…???
• Funds, funds, funds
– Governmental
– Proprietary
– Fiduciary
• Accounting for governmental fund revenues
and expenditures
• General capital assets and long-term liabilities
General Fund
• 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
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
General and Special Revenue Funds
• Measurement focus
– Current financial resources
• Basis of accounting
– Modified accrual
• No capital assets; no long-term debt
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
Property Tax Collection
Cash
Taxes Receivable
or
Cash
Deferred Inflows of Resources – Unavailable
Property Taxes
Taxes Receivable
Property Tax Revenue
Other Revenues
Accounts Receivable
Allowance for Uncollectibles
Revenue
or
Cash
Permits and Fees Revenue
Expenditures
Expenditures
Accounts Payable
Liquidate any applicable encumbrances
Collection of Receivables
Cash
Accounts Receivable
Delinquent receivables may require any
applicable allowance accounts to be adjusted
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
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
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
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
Interfund Activity (cont.)
• Interfund transfers
– Transfers for any reason
– Generally considered to be non-recurring
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
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
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
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)
Nonspendable Fund Balance
– Not in spendable form
– Legally/contractually required to remain
intact
– Examples
• Inventories/Prepaids
• Principal of a Permanent Fund
• Long-term receivables
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
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
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
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
Encumbrances
• Should be disclosed by major funds and
nonmajor funds in aggregate as part of
commitments
• No separate fund balance classification
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
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
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)
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
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
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
Transactions in Which the Item Should Be Reported as a
Deferred Inflow of Resources
•
•
•
Resources received in advance from another government in a governmentmandated 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
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
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
Capital Projects Funds
Capital Projects Funds
• 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
Typical Financing Sources
• Long-term borrowings (e.g., bonds)
• Intergovernmental grants
• Transfers
• Special assessments
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
Typical Journal Entries
• When bonds are issued…..
Cash
Other financing source
• When bond funds are expended…..
Expenditure
Cash
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
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.
Debt Service Funds
Debt Service Funds
• 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
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
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
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
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”
Accounting for
Revenues and Expenditures
in Governmental Funds
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
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
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
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
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
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
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
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)
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)
Donation of Capital Assets
• Capital asset donations generally affect
governmental activities in the governmentwide 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
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
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
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”
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)…..
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
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
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
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
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
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
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
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
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
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
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
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
Accounting for
Governmental Capital Assets
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
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)
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
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)
Financial Reporting
of
Capital Assets
Basic Reporting of
General Capital Assets
• Capital assets reported only at the
government-wide level for governmental-type
assets
• Capital asset reported at both governmentwide and fund financial levels for proprietary
funds
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 nondepreciable asset)
• Note disclosures now focus on changes in all
capital assets - by type (e.g., land, buildings)
and activity (govt./business-type)
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
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
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
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
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
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)
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
General Long-term Liabilities
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
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
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
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 governmentwide
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
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
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
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
Required Financial Statements
• Statement of Net Position
• Statement of Revenues, Expenses, and
Changes in Fund Net Position
• Statement of Cash Flows
Accounting Issues
• Rate covenant reporting
– Coverage issues, special reports, audit
• Restricted assets
– Common sources are customer deposits and
revenue bonds (bond covenants)
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
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)
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)
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
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
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
Statement of Cash Flows
• Required for enterprise funds
• Four categories
–
–
–
–
Operating activities
Noncapital financing activities
Capital and related financing activities
Investing activities
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
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
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
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
Fiduciary Funds
Fiduciary Funds
• Pension trust fund
• Investment trust fund
• Private-purpose trust fund
• Agency fund
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
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
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
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
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
Private-purpose Trust Fund
• Recipients and/or beneficiaries are outside
parties (i.e., not the government itself)
• May be expendable or nonexpendable in
nature
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
Agency Fund (cont.)
• No measurement focus
– Assets
– Liabilities
– No equity
• Accrual basis of accounting
• Statement of changes in assets and liabilities
required