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11-1
Chapter Eleven
Accounting for Accounting for State and Local State and Local Governments, Governments,
Part IPart I
McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
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Government-wide Financial Statements
GASB Statement No. 34
Requires the production of two sets of statements:
Fund-Based Financial Statements
Report all revenues and costs of providing
services each year and all resources available to the
governmental unit.
Show restrictions on the use of resources, and measures, in the short term, revenues
and expenditures from certain activities.
Important Difference in Focus
Fund-based financial statementsFocus on specific activities Primary measurement focus is on flow
and amount of current resourcesUtilize modified accrual accountingAssess fiscal accountability
Government-wide financial statementsReport on activities as a wholeAssess operational accountabilityFocus on all economic resourcesUtilize accrual accountingComparable to ‘corporate’ accounting
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Governmental Funds
Accounting for activities
related to serving the
public.
Proprietary Funds
Accounting for business-
type activities.
Fiduciary Funds
Accounting for financial resources
held for others as trustee.
Fund Accounting Classification
All funds fall into one of three broad classifications.
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Governmental Funds - General Fund
Used to account for all financial resources except those accounted for in other funds.
In 2008, 58% of Baltimore’s governmental funds (over $1.2 Billion) were accounted for in the General Fund.
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Governmental Funds - Special Revenue Fund
Expenditures are legally restricted.
Resources must be spent for specific purposes.
St. Paul, Minnesota, requires that receipts from charitable gambling must be used to support youth athletics or “otherwise as legally determined.”
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Governmental Funds - Capital Projects Fund
Accounts for costs incurred to acquire or build major governmental facilities.
The actual asset is not recorded in this account, but the money to finance its purchase or construction is.
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Governmental Funds - Debt Service Funds
Record financial resources accumulated to pay long-term liabilities and interest when due.
Does not account for the actual debt
In 2008, Birmingham, Alabama, reported paying out $16 million in principal payments and $17 million in interest payments from its debt service funds.
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Governmental Funds - Permanent Funds (Endowments)
Account for assets donated to the government by external donors with stipulation that the principal cannot be spent.
In 2008, Dallas, Texas reported nearly $9 million in funds to maintain four different parks.
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Proprietary Funds - Enterprise Funds
May be used to account for any government activity that is financed, at least in part, by user charges.
An activity MUST be accounted for here if, any one of the conditions below are met . . . Costs are recovered from user fees Fees are set high enough to recover costs Net revenues generated by the activity
provide the sole security for the activity’s debts
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Proprietary Funds - Internal Service Funds
Account for any operation that provides services to OTHER governmental departments.
Inter-departmental fees are charged on a cost-reimbursement basis.
Accounted for similar to for-profit operations in the private sector.
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Fiduciary Funds
Investment TrustInvestments held on behalf of others
Private-Purpose TrustPrincipal and interest are both for the benefit of parties outside the government
Pension TrustEmployee retirement
Agency FundsAny resources held by the government as an agent for others (some taxes and tolls fall into this category)
Account for assets that are held in a
Trustee Capacity for External Users
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11-13 Government-Wide Financial Statements
Two statements are required:1)Statement of Net Assets2)Statement of Activities
Reporting is separated into governmental activities
(government funds and most internal service funds) and
business-type activities (enterprise funds and remaining
internal service funds).
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Fund-Based Financial Statements
Fund-Based statements will
include information on fiduciary funds.
Two statements are required:1)Balance Sheet
2)Statement of Revenues, Expenditures, and Changes in
Fund Balance
Fund-Based Financial Statements
These statements will differ from the Government-Wide financial statements for three reasons.
The Internal Service Funds are included in separate statements for Proprietary Funds.
The current financial resources measurement basis is used.
The modified accrual accounting approach is used.
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Procedures –Importance of Budgets The budget serves several purposes:
Expresses public policy Expresses financial intentProvides spending limitsCompares actual results to the budget
as a means of evaluating performanceIndicates proposed deficits
The budget is recorded in the books as a DEBIT to estimated revenues, and a CREDIT to each “appropriation” approved.
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