INTERMEDIATE GOVERNMENTAL ACCOUNTING - … GOVERNMENTAL...6/22/16 1 1 P INTERMEDIATE GOVERNMENTAL...

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AllenLLP

INTERMEDIATEGOVERNMENTALACCOUNTING

KarinSlater,CPFOCFOMontroseCountySchoolDistrict

June23,2016

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TheGovernmentalEnvironment

•  Keyenvironmentalcharacteris=cs–  Twocharacteris=csofthegovernmentalenvironmenthavehadanimportantimpactonthedevelopmentofpublic-sectoraccoun=ngandfinancialrepor=ngprac=ce:1)Notalloftheac=vi=esofstateandlocalgovernmentshavethesamefinancialobjec=ves(opera=onalaccountability).

2)Governmentshaveaspecialresponsibilitytodemonstratethattheyhavecompliedwithrestric=onsontheuseofresources(fiscalaccountability).

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•  Differentfinancialobjec=vesfordifferentac=vi=es–  Privatesectorenterprisessetouttomakeaprofitbyprovidinggoodsorservicestocustomers

◊  Some=messervicesofferedbygovernmentsfunc=oninmuchthesamewayasprivate-sectorbusinessessotheyaredescribedasbusiness-typeac=vi=es(i.e.governmentoperatedgolfcourses).

◊  Some=messervicesofferedbygovernmentsdonotfunc=onlikeprivate-sectorbusinessessotheyaredescribedasgovernment-typeac=vi=es(i.e.publicsafety.)

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•  Fiscalaccountability–  Budgetsinthepublicsectorfunc=onasmorethanjustafinancialplan.Theyaretheconcretemanifesta=onofalegisla=vebody’sabilitytosetpublicpolicy.

–  Theappropriatedbudgetofastateorlocalgovernmentenjoystheforceoflawandviola=onsaresubjecttolegalsanc=ons

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•  FundAccoun=ng–  Intheprivatesectorgenerallyeventhemostcomplexbusinessesarepresentedasasingle,unitaryen=tyforthepurposesoffinancialrepor=ng.

–  Governments,however,arerequiredtousefundrepor=ngtoaccompanytheirgovernmentwidefinancialstatements.

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•  Specialmeasurementfocusandbasisofaccoun=ngforgovernmenten==es–  Government’susetwodifferentmeasurementfocus.

◊  Business-typeac=vi=esuseaneconomicresourcesmeasurementfocus.

◊  Government-typeac=vi=esuseafinancialresourcesmeasurementfocus.

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FinancialReporKngModel

•  Fundaccoun=ng-wasspecificallydevelopedtoprovideinforma=ononfiscalaccountabilitytousersofthefinancialstatements.

•  Government-widefinancials–TheGASBdeterminedthatgovernment-widefinancialstatementsarenecessarytoprovideinforma=ononopera=onalaccountability.

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GovernmentalFunds(Government-typeacKviKes)

•  Governmentalfundsinclude:–  Generalfund–  Specialrevenuefunds–  Capitalprojectfunds–  Debtservicefunds–  Permanentfunds

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GovernmentalFunds

•  Generalfund–isthechiefopera=ngfundofastateorlocalgovernment.GAAPprescribesthatthegeneralfundbeused“toaccountforandreportallfinancialresourcesnotaccountedforandreportedinanotherfund.”

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GovernmentalFunds

•  Specialrevenuefunds–usedtoaccountforandreportproceedsofspecificrevenuesourcesthatarerestrictedorcommicedtoexpenditureforspecifiedpurposeotherthandebtserviceorcapitalprojects.Notesshoulddisclosethepurposeforeachmajorspecialrevenuefund.

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GovernmentalFunds

•  Debtservicefunds–usedtoaccountforandreportfinancialresourcesthatarerestricted,commiced,orassignedtoexpenditureforprincipalandinterest.–  Careshouldbetakeninapplyingthenumberoffundsprincipalwithregardstodebtservicefunds.Soundfinancialmanagementdictatesthatgovernmentsshouldaccountforeachdebtissueseparatelyintheiraccoun=ngsystems,butasingledebtservicefundiso+ensufficientforexternalfinancialrepor=ngpurposes.

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GovernmentalFunds

•  Capitalprojectsfunds–usedtoaccountforandreportfinancialresourcesthatarerestricted,commiced,orassignedtoexpenditureforcapitaloutlays,includingtheacquisi=onorconstruc=onofcapitalfacili=esandothercapitalassets.Excludescapitalprojectsfinancedbyproprietaryfunds,trustfunds,privateorganiza=ons,orothergovernments.

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GovernmentalFunds

•  Permanent–usedtoaccountforandreportresourcesthatarerestrictedtotheextentthatonlyearnings,andnotprincipal,maybeusedforpurposesthatsupporttherepor=nggovernment’sprograms,thatis,forthebenefitofthegovernmentoritsci=zenry.

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ProprietyFunds(business-typeacKviKes)

•  ProprietaryFunds–  1)Enterprisefunds–  2)Internalservicefunds

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ProprietaryFunds

•  Enterprisefunds–maybeusedtoreportanyac=vityforwhichafeeischargedtoexternalusersforgoodsorservices(definedasan“exchange”or“exchangelike”transac=onasdiscussedinGASB33).GAAPalsorequirestheuseofanenterprisefundwhere:–  Debtbackedsolelybyfeesandcharges–  Legalrequirementtorecovercostswithfeesandcharges–  Pricingpoliciesoftheac=vityestablishfeesandchargesdesignedtorecovercosts

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ProprietaryFunds

•  Internalservice–usedtoallocatethecostofcertainsharedac=vi=estootherfunds.–  Theuseofaninternalservicefundisneverrequiredandmustalwaysbeeliminatedingovernment-widestatements.

–  Thegoalofaninternalservicefundshouldbetomeasurethefullcostofprovidinggoodsorservicesforthepurposeoffullyrecoveringthatcostthroughfeesorcharges.Fullcost,forthispurposeincludesthecostofcapitalassetsusedinprovidinggoodsorservicestocustomers.

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FiduciaryFunds

•  GAAPdefinesfiduciaryfundsasfundsthatareused“toreportassetsheldinatrusteeoragencycapacityforothersandthereforecannotbeusedtosupportthegovernment’sownprograms.”

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FiduciaryFunds

•  Fiduciaryfunds–  Pensionandotheremployeebenefittrustfunds–  Investmenttrustfunds–  Privatepurposetrustfunds–  Agencyfunds

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BasisofAccounKng

•  Basisofaccoun=ngdetermineswhenthegovernmentwillrecognizetransac=onsintheaccoun=ngrecordsandwhentheywillbereportedinthefinancialstatements.–  Governmentalfundsusethemodifiedaccrualbasisofaccoun=ng.

–  Proprietaryfundsusetheaccrualbasisofaccoun=ng.

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BasisofAccounKng

•  Accrualbasisofaccoun=ngrecognizestransac=onswhentheyoccur,despitethe=mingoftherelatedcashflows.–  Usingthisbasisofaccoun=ng,revenuesarerecognizedintheaccoun=ngperiodwhichtheybecomeobjec=velymeasurableandthegovernmentearnsthem.

–  Expensesarerecognizedintheperiodincurredassumingthattheyaremeasurable.

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BasisofAccounKng

•  Modifiedaccrualbasisofaccoun=ngmodifiestheaccrualbasisofaccoun=ngtoreflectthespendingoffinancialresources.–  Revenuesarerecognizedwhentheyaremeasurableandavailable.

◊  Measurablemeansyouhavesomeobjec=vewaytoquan=fytherevenue.

◊  Availablemeanscollec=blewithinthecurrentperiodorsoonenoughtherea+ertobeusedtopayliabili=esofthecurrentperiod.

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MeasurementFocus

•  Measurementfocusdetermineswhatagovernmentmeasuresandreportsinitsfinancialstatements.–  Governmentsusetheflowofcurrentfinancialresourcesmeasurementfocus.

–  Proprietaryfundsusetheeconomicresourcesmeasurementfocus.

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Governmentalvs.ProprietaryFunds

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RevenueRecogniKonforGrants

•  The“available”criterionappliestoreimbursementgrants.Forexpendituredrivengrantsingovernmentalfunds,revenuesarerecognizedatthe=meoftheexpenditureonlyifthereimbursementwillbereceivedwithinthegovernment’speriodofavailability.

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Government-WideStatements

•  Thegovernment-widestatementsinclude:–  StatementofNetPosi=on.–  StatementofAc=vi=es(costofservicesapproach).–  Economicresourcesmeasurementfocus.–  Accrualbasisofaccoun=ng.–  Governmentalac=vi=es.–  Business-typeac=vi=es.–  Discretelypresentedcomponentunits.

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StatementofNetPosiKon(PreviouslyStatementofNetAssets)

•  Allassets(includingcapitalassets)•  DeferredInflows•  Allliabili=es(includinglong-termliabili=es)•  DeferredOullows•  Netposi=on(ratherthanfundbalances,retained

earnings;GASB34wascalledtotalnetassets).–  Investedincapitalassets,netofrelateddebt–  Restricted–  Unrestricted

•  Choicebetweenclassifiedformatororderofliquidity.

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DeferredOuVlows(1of3)

•  DeferredouVlowofresources:aconsumpKonofnetposiKonbythegovernmentthatisapplicabletoafuturereporKngperiod

• HasaposiKveeffectonnetposiKon,similartoassets

•  OuVlowofresources:aconsumpKonofnetposiKonbythegovernmentthatisapplicabletothereporKngperiod

StatementofNetPosiKon

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StatementofNetPosiKonDeferredOuVlows(2of3)

SometransacKonsinwhichtheresulKngitemshouldbereportedasadeferredouVlowofresources(currentlyclassifiedasassets)–GrantpaidinadvanceofmeeKngKmingrequirement–Deferredamountsfromtherefundingofdebt(debits)–Coststoacquirerightstofuturerevenues(intra-enKty)–Deferredlossfromsale-leaseback

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StatementofNetPosiKonDeferredOuVlows(3of3)

SometransacKonsinwhichtheresulKngitemshouldbereportedasadeferredouVlowofresources(currentlyclassifiedasassets)-Debtissuancecosts(otherthaninsurance)

•  IniKaldirectcostsincurredbythelessorforoperaKngleases

•  AcquisiKoncostsforriskpools•  LoanoriginaKoncosts

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StatementofNetPosiKonDeferredInflows(1of3)

•  Deferredinflowofresources:anacquisiKonofnetposiKonbythegovernmentthatisapplicabletoafuturereporKngperiod

• HasanegaKveeffectonnetposiKon,similartoliabiliKes

•  Inflowofresources:anacquisiKonofnetposiKonbythegovernmentthatisapplicabletothereporKngperiod

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SometransacKonsinwhichtheresulKngitemshouldbereportedasadeferredinflowofresources(currentlyclassifiedasliabiliKes)–GrantsreceivedinadvanceofmeeKngKmingrequirement–Taxesreceivedinadvance–Deferredamountsfromrefundingofdebt(credits)–Proceedsfromsalesoffuturerevenues–Deferredgainfromsale-leaseback

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SometransacKonsinwhichtheresulKngitemshouldbereportedasadeferredinflowofresources(currentlyclassifiedasliabiliKes)–“Regulatory”credits(gainsorotherreducKons)–“Unavailable”revenueingovernmentalfunds–LoanoriginaKonfees(excludingpoints)–lessoraccounKng–Commitmentfees(acerexerciseofexpiraKon)

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DifferencefromFundStatements(1of2)

•  Long-termassets–  Receivables–  CapitalAssets

•  Liabili=es–  Debt–  CompensatedAbsences–  ClaimsandJudgments–  PensionBenefitObliga=on–  OtherPostEmploymentBenefits(OPEB)

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DifferencefromFundStatements(2of2)

•  Inventory(expensewhenusedratherthanwhenpurchased).Previouslyhadtheop=onofusingtheconsump=onmethodorthepurchasemethod,butnowwecanonlyusetheconsump=onmethod.

•  Interestpayableonlong-termdebt.

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CapitalInfrastructureAssets

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DepreciaKon

•  Thingstoconsiderinimplemen=ngdeprecia=on.–  Depreciablelives–  Deprecia=onmethods–  Capitaliza=onthreshold–  Inwhatdepartmentofthegovernmentdoestheassetbelong?

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DefiniKonofInfrastructure

•  Infrastructure,definedas:–  Long-livedcapitalassetsthatcanbepreservedforasignificantlygreaterperiodthanmostcapitalassets

–  Normallysta=onaryitems–  Examples:

◊  Roadsandbridges,dams◊  Waterandsewersystems

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InfrastructureAssets

•  Repor=ngalterna=ves–  Historicalcostbaseddeprecia=on–  Modifiedapproach

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“Modified”Approach

•  Nodeprecia=onisrequiredifthegovernmentdemonstratesthatitismaintainingqualifyinginfrastructureassetsapproximatelyatorabovethecondi=onlevelestablished.

•  Condi=onassessmentsmustbeperformedatleasteverythreeyears.

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StatementofAcKviKes

•  Netcostformat(expensesminusprogramrevenue–netcost)

•  Expensesbyfunc=ons/programs•  Revenuesby:

–  Program(chargesforservicesandprogramspecificopera=ngandcapitalgrants)or

–  General(i.e.taxesandothernonprogramrevenue)

•  Special,extraordinaryitemsandtransfers

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Expenses

•  Expensesarereportedbyfunc=on–  Directexpenses–required–  Indirectexpensesalloca=onpermiced

◊  Separatecolumnforindirectexpensesifallocated–  Deprecia=on–  Interest

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ProgramandGeneralRevenues

•  Programrevenuesreducethenetcostofaprogram.–  Chargesforservices–  Programspecificgrantsandcontribu=ons

•  Netcostisfinancedbygeneralrevenues.Allrevenuesaregeneralrevenuesunlesstheyarerequiredtobereportedasprogramrevenues.

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DifferencesfromFundStatements

•  Recogni=onofrevenuesonaccrualbasis.–  Propertytaxes–noavailabilitycriterion,recordedonfullaccrualbasisofaccoun=ng.

–  Recogni=onofexpensesforlong-termliabili=es.◊  Compensatedabsences◊  Claimsandjudgments◊  Pensionbenefitobliga=on◊  OPEB

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GASB34RequirementsFundLevelStatements

•  FundPresenta=ons–  Majorfunds–  Non-majorfundspresentedinasinglecolumnbycategory–  Majorfundconceptdoesnotapplytofiduciaryfundsorinternalservicefunds

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MajorFundCriteria

•  GeneralFundisalwaysamajorfund•  Individualfundis:

–  Atleast10percentofassetsincludingdeferredoullows,liabili=esincludingdeferredinflows,revenue,expenditures/expenses,(excludingextraordinaryitems)oftherelevantcategoryorfundtype

•  Atleast5percentoftotalgovernmentalandenterprisefundscombined

•  Otherfundsthataredeemedtobeimportantforseparatedisclosure

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GovernmentalFundStatements

•  RequiredStatements:–  BalanceSheet–  StatementofRevenue,Expenditures,andChangesinFundBalances

–  Characteris=csofgovernmentalfundstatements:◊  Currentfinancialresourcesmeasurementsfocus◊  Modifiedaccrual◊  Reconcilia=onrequiredtogovernment-widestatementsforbothstatements

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TreatmentofInternalServiceFunds

•  Removethe‘doublingup”effectofinternalservicefundac=vity.

•  Generally,assetsandliabili=esarereportedwithgovernmentalac=vi=es–unlessinternalservicefundsprimarilysupportbusiness-typeac=vi=es.

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ProprietaryFunds

•  Economicresourcesmeasurementfocus•  Accrualbasisofaccoun=ng•  Enterpriseredefined

–  Debtsecuredsolelybypledgeofnetrevenuesfromfeesorcharges

–  Lawsorregula=onsrequirerecoveryofcost–  Pricingpolicydesignedtorecovercost

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ProprietaryFundStatements

•  ClassifiedStatementofNetPosi=on•  StatementofRevenue,Expenses,andChangesinNet

Posi=on•  StatementofCashFlows•  Reconcilia=onrequiredforfinancialposi=onand

opera=ngstatements(ifnecessary)

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•  StatementofNetPosi=on(previouslyNetAssets)–  Classified–currentvs.longterm–  Restrictedassetsmustbereportedassuch–  Netposi=on

◊  Investedincapitalassets,netofrelateddebt◊  Restricted◊  Unrestricted

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•  Opera=ngStatement–  Dis=nguishbetweenopera=ngandnon-opera=ng–  Capitalcontribu=onsandtransfersreportedseparately

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•  CashFlow–  Fourcategoriesofcashflows

◊  Opera=ng◊  Non-capitalfinancing◊  Capitalandrelatedfinancing◊  Inves=ng

Directmethodisrequiredforcashflows

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ComponentUnitPresentaKons

•  Discretepresenta=oningovernment-widestatements•  Majorcomponentunitrepor=ngchoices:

–  Separatecolumnsinthegovernment-widestatements–  Separatestatementsa+erfundpresenta=ons–  Condensedinforma=oninthenotes

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RequiredSupplementaryInformaKon

•  Budgetarycomparisonsforgeneralfundandmajorspecialrevenuefunds–  Originalandfinalbudget–  ActualonbudgetarybasisorGAAPbasis–  Reconcilia=ontoGAAPbasisstatements–  Whenapplicable–infrastructure-modifiedapproach

◊  Threemostrecentcondi=onassessments◊  Es=matedamounttomaintainandpreserveversusactualamountforthelastfiveyears

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MD&AManagementDiscussionandAnalysis

•  TheMD&Aisasec=onofagovernment'sannualreportinwhichmanagementdiscussesnumerousaspectsofthecompany,bothpastandpresent.Amongotherthings,theMD&Aprovidesanoverviewofthepreviousyearofopera=onsandhowthegovernmentfaredinthat=meperiod.Managementwillusuallyalsotouchontheupcomingyear,outliningfuturegoalsandapproachestonewprojects.

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MD&A

•  TheMD&Aisaveryimportantsec=onofanannualreport,especiallyforthoseanalyzingthefundamentals,whichincludemanagementandmanagementstyle.Althoughthissec=oncontainsusefulinforma=on,investorsshouldkeepinmindthatthesec=onisunaudited.

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MD&A

•  MD&A’sshould:• enablereaderstoviewthegovernmentthroughthe

eyesofmanagement;• complementaswellassupplementfinancial

statements;• bereliable,thatis,complete,fairandbalanced,and

providingmaterialinforma=on—namely,informa=onthatcouldinfluenceareasonableinvestorinmakingadecisiontoinvestorcon=nuetoinvestinthegovernment;

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MD&A

•  Haveaforward-lookingorienta=on;• focusonmanagement’sstrategyforgenera=ngvalue

forinvestorsover=me;• bewriceninplainlanguage,withcandorandwithout

exaggera=on,andembodythequali=esofunderstandability,relevance,comparabilityandconsistencyoverrepor=ngperiods.

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FinancialStatementDataAnalysis

•  MD&Aistheonlyrequiredcomponentofthefinancialstatementsthathascompara=veinforma=on.Thesecompara=vesummariesorschedulesinclude:–  NetPosi=ons–  ChangesinNetPosi=ons–  CapitalAssets–  Long-termdebt

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FiscalHealthAnalysisforColoradoCounKesandMunicipaliKesRaKo1:CashtoLiabiliKesRaKo(CLR)

En=ty-WideUnrestrictedCashandInvestmentsEn=ty-WideCurrentLiabili=es

RaKo2:UnrestrictedFundBalanceRaKo(UFB)

GeneralFundUnrestrictedFundBalanceGeneralFundtotalExpenditures(NetofTransfers

RaKo3:DebtBurdenRaKo(DBR)

TotalGovernmentalRevenueofFund(s)PayingDebtTotalGovernmentalDebtPayments

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FiscalHealthAnalysisforColoradoCounKesandMunicipaliKesRaKo4:TaxRevenueperCapita(TRC)

TotalGovernmentalFundsTaxRevenuePopulaKon

RaKo5:ExpendituresperCapita(EPC)

GeneralFundTotalExpenditures(NetofTransfersPopulaKon

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FiscalHealthAnalysisforColoradoCounKesandMunicipaliKesRaKo6:OperaKngMarginRaKo(OMR)GeneralFundTotalRevenue–(GeneralfundTotalExpenditures,NetofTransfersGeneralFundTotalRevenue

•  RaKo7:EnterpriseFundsNetPosiKon(EFNP)CurrentYearNetPosi=onoftheEnterpriseFundPriorYearNetPosi=onoftheEnterpriseFundhcp://www.leg.state.co.us/OSA/coauditor1.nsf/LocalGovPublic?openform

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CAFRPreparaKon

•  DiscussionTopics–  CAFRPrepara=on-overviewandcommonpilalls–  CapitalAssets–presenta=onanddisclosureissuesandstrategies

–  Long-TermDebt–presenta=onanddisclosureissuesandstrategies

–  RevenueRecogni=onandDeferredRevenue–governmentalvs.government-wide

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CAFRPreparaKonCommonPiVallsinCAFRPresentaKon•  Conver=ngfrommodifiedaccrualtofullaccrual

statements•  Footnotesdonotagreewithwhatispresentedinthe

basicfinancialstatements•  Implementa=onofnewpronouncementsandrelated

disclosures

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CAFRPreparaKonKeystoPreparingCAFR•  Repor=nginforma=oninthefundstatementsunderthe

correctfunc=onalorac=vity–  (i.e.interestexpenditures,debtprincipalpaymentsandcapitaloutlay)

•  Preparingfootnotedisclosuresthat=eintothebasicfinancialstatementsandprovideenoughinforma=ontoagreetoreconcilingitems–  (debtdisclosure,capitalassetsdisclosureandaccountsreceivabledisclosure)

•  Reducethenumberofsubsidiaryschedules.Themoreschedulesandprepara=onworksheetsthatarecreated,thegreaterthelikelihoodofanerror

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CAFRPreparaKonKeystoPreparingCAFR

•  Investedincapitalassets,netofrelateddebt–  Itemstoexcludefromthecalcula=on

◊  Unexpendedbondproceeds.Bondsonlybecomecapital-relateddebt,andbondproceedsonlybecomecapitalassets,astheproceedsareexpendedforacapitalpurpose.

◊  *Bondissuancecosts.Unlikepremiumsanddiscounts,unamor=zedbondissuancecostsdonot"followthedebt"andareignoredforpurposesofthiscalcula=on.

◊  *Internalborrowings.Borrowingswithintheprimarygovernmentdonotqualifyforpurposesofthiscalcula=on.

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CAFRPreparaKonKeystoPreparingCAFR•  Investedincapitalassets,netofrelateddebt(con=nued)

–  Itemstoincludeinthecalcula=on◊  Intangiblecapitalassets.Thefactthatacapitalassetisintangibledoesnotmakeitanythelesscapital.

◊  Refundingbonds.Refundingbondsassumethecharacterofthedebttheyreplace.Accordingly,bondsusedtorefundcapital-relateddebtarethemselvesconsideredtobecapital-related.

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CAFRPreparaKonCapitalAssets

•  Keyiscapitalassetfootnote•  Typicalgovernmenthasnumerousassetsinconstruc=on

inprogressaccountanditisrecommendedthatgovernmentsconsideratransfercolumntoaccountforcompletedprojectsthatgetmovedfromnondepreciableassetstodepreciable

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•  Capitaladdi=ons-Purchasedassetsversuscontributedassets–  Purchasedassetsarefundexpendituresandtoreconciletofullaccrualbasis

needto“credit”expenditures–  Ifcapitaloutlayreportedinthefundstatementsdoesnotagreetothe

purchasedcapitaladdi=onsneedtodeterminethoseitemsreportedundercapitaloutlayandwhatfunc=ontheybelongforrepor=ngonthestatementofac=vi=es

–  Ifcapitaloutlayalreadyreportedwithinfunc=onalexpendituresinthefundstatementsneedtoremovetheappropriatecapitaladdi=onsfromthefunc=onalexpenditurestoreporttheaccrualbasedfunc=onalexpenses

–  Contributedassetsarenotconsideredfundexpendituresorrevenuesandneedto“credit”appropriatecapitalcontribu=onrevenueac=vity

–  Helpfultodis=nguishbetweenaddi=onsthatarecontributedversuspurchasedtoaidthereaderwhencomparingfundac=vi=es

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•  Disposalofcapitalassets-Repor=ngandcalcula=nggain/loss–  Governmentsrou=nelyreportdisposalsofcapitalassets.Thisac=vity

isreportedinthedele=oncolumnofthefootnoteanditisimportanttoproperlyexplaininthereconcilia=onwhattypeofac=vitythisrepresentedduringtheyear

–  Disposalsthemselvesarenotreportedinthegovernmentfundstatements

–  Cashproceedsreceivedarereportedinthefundstatementsasotherfinancingsource

–  Government-widepresenta=onreportdifferenceofbookvalueofdisposalandproceedsreceivedfromsaleofcapitalassetsasagain/lossonsaleofassets.Thelossisreportedasafunc=onalexpensewithintheproperfunc=onalrela=vetotheassetdisposedofandthegainistypicallyreportedasageneralrevenue

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•  Deprecia=on–  Reconcilingamounttoagreetothefootnoteaddi=onfigure–  Detailinfootnotetodisclosetheexpensebyfunc=on

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CAFRPreparaKonLong-TermLiabiliKes

•  Agenda–  Reviewdisclosurerequirements–  Presenta=onsugges=ons–  Inter-rela=onshipsandaccuracychecks

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•  CommonDisclosureRequirements(GASBCod.2300)–  Shouldincludealllong-termliabili=es,includingcompensatedabsencesandclaimsandjudgments

–  Tableofchanges–  Amountduewithinoneyearofstatementdate–  Whichgovernmentalfundstypicallyusedtoliquidateotherlong-termliabili=essuchascompensatedabsencesinprioryears

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•  CommonDisclosureRequirements(GASBCod.2300)–  Debtservicerequirementstomaturity–principalandinterest(variableratedebtshoulduserateinplaceatyearendanddisclosevariableratestructure)

–  Debtrefunding–  Interestrates,maturitydates,subordinatefeatures(generallyaccepted)

–  Pledgedassetsandrestric=vecovenants(SFASNo.5)

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•  ComponentUnitDisclosure(Cod.2300.115)–  Uptoprofessionaljudgment–  Basedoncomponentunit’ssignificancetototaldiscretelypresentedcomponentunitsandrela=onshiptoprimarygovernment

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•  OtherSpecialDisclosure/Repor=ng–  Bond,taxorrevenuean=cipa=onnotes–  Specialassessmentdebt–  Demandbonds–  Conduitdebt

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•  Presenta=onSugges=ons–  Includetableofchangesatthebeginningofyourlong-termliabili=esfootnote

–  Includealllongtermliabili=esinthesametable–  Totaltheen=retableandreflectthatamountinyourreconcilia=on

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•  Inter-rela=onshipsandaccuracychecks–  UsesubtotalsinthetablethatwillagreedirectlytotheSONPandGovernmentalFundsStatementofRevenue,ExpendituresandChangesinFundBalance:

◊  Endingamounts–currentandlongterm=SONP◊  Newdebtissued=StatementofRevenue◊  PremiumsordiscountsshouldbeseparateOtherFinancingSource/Use=StatementofRevenue

◊  Principalpayments=StatementofRevenue◊  Lossonrefunding–disclosureshouldstateamountofprincipalrefunded

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•  Inter-rela=onshipsandaccuracychecks–  InternalServicefunddebt–eithershowseparatelyinfootnoteorinreconcilia=on,toagreetobalancesheet

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CAFRPreparaKonRevenueRecogniKonandDeferredRevenue

•  Agenda–  Reviewstandards–modifiedaccrualversusaccrual–  Rela=onship–government-widevs.governmentalfunds–  Rela=onshiptoreconcilia=ons–governmentalfundsandgovernment-widestatements

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•  Standards–Modifiedaccrualbasis-GASBCodifica=on1600.106–  Revenuesaretoberecognizedintheaccoun=ngperiodtheybecomebothmeasurableandavailabletofinanceexpendituresofthefiscalperiod

–  Availablemeanscollec=blewithinthecurrentperiodorsoonenoughtherea+ertobeusedtopayliabili=esofthecurrentperiod

–  Lengthof=meusedtodefineavailableshouldbedisclosedinthesummaryofsignificantaccoun=ngpolicies

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•  Standards–AICPAAccoun=ngandAuditGuide–StateandLocalGovernments6.12–  Notesthatmanygovernmentsusethepropertytaxstandardandaccruebasedoncashreceivedduringadefinednumberofdaysa+eryearend

–  Manygovernmentsapplythis=meperiodapproachforalltypesofrevenuesandinallgovernmentalfunds

–  Paragraph6.13–Differencesbetweenamountreportedasreceivablesandtheamountsrecognizedasrevenuesarereportedasdeferredinflows(aliability)(PriortoGASB63&GASB65wascalleddeferredrevenues)

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CAFRPreparaKonRevenueRecogniKonandDeferredRevenue•  StandardsGenerally

–  Measurabilityisusuallynottheproblem–  Defining“available”istheproblem–  Realkeytodefiningavailabilityiswhethersuchresourceswillbeusedtopayliabili=esofthecurrentperiod

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•  Rela=onship–government-widevs.governmentalfunds–  Asauditorshaveseentwocommonproblems:

◊  Measurabletransac=onisrecordedasrevenueinbothpresenta=ons,regardlessofwhencashwasreceived

◊  Measurabletransac=onisdeferredinbothpresenta=ons,eventhoughaccrualbasisaccoun=ngclearlyrequiresrevenuerecogni=on

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85


•  Examples–  Developmentfeestobepaidoveraperiodofseveralyears–  Long-termnotesreceivable

•  DisclosureExamples–  Considerinclusionoffootnoteifextensivedifferencesexist

86

GASB–“ALottoGetOurArmsAround”

87

ExposureDracs/PreliminaryViews

•  PreliminaryViews–  Recogni=onofElementsofFinancialStatementsandMeasurementApproaches

–  EconomicCondi=onRepor=ng:FinancialProjec=ons

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88

GASB65–ItemsPreviouslyReportedasAssetsandLiabiliKes•  Objec=veofthisStatementistodeterminewhethercertainbalancescurrentlyreportedasassetsandliabili=esshouldcon=nuetobereportedassuchorinsteadshouldbereportedas:–  Adeferredoullowsofresources,or–  Anoullowofresources(expense/expenditure);

•  Or–  Adeferredinflowsofresources,or–  Aninflowsofresources(revenue).–  Effec=veforperiodsbeginninga+erDecember15,2012.–  EarlyApplica=onisencouraged.

89

ItemstobeReportedasDeferredOuVlows

•  Transac=onsinwhichtheresul=ngitemshouldbeclassifiedasadeferredoullowofresources:–  Resourcesadvancedtoanothergovernmentinrela=ontoagovernmentmandatednonexchangetransac=onoravoluntarynonexchangetransac=onwhen=merequirementsaretheonlyeligibilityrequirementsthathavenotbeenmetbytheothergovernment(paragraph19ofStatementNo.33,Accoun)ngandFinancialRepor)ngforNonexchangeTransac)ons).

90

ItemstobeReportedasDeferredOuVlows

•  Transac=onsinwhichtheresul=ngitemshouldbeclassifiedasadeferredoullowofresources:–  Deferredlossresul=ngfromsale-leasebacktransac=ons(paragraph242ofStatement62).

–  Netbalance(debit)ofdirectloanorigina=oncosts,includinganypor=onrelatedtopoints,formortgageloansheldforresalepriortothepointofsale(paragraph467ofStatement62).

–  Feespaidtopermanentinvestorstoensuretheul=matesaleofloanspriortothepointofsale(paragraph469ofStatement62).

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91

ItemstobeReportedasanOuVlowofResources•  Transac=onsinwhichtheresul=ngitemshouldberecognizedasanoullowofresources:–  Acquisi=oncostsforinsuranceen==esandpublicen=tyriskpools(paragraphs28–30ofStatementNo.10,Accoun)ngandFinancialRepor)ngforRiskFinancingandRelatedInsuranceIssues,andparagraphs412–414ofStatement62).

–  Ini=aldirectcostsincurredbythelessorforopera=ngleases(paragraph227ofStatement62).

–  Debtissuancecosts(paragraph12ofStatementNo.7,AdvanceRefundingsResul)nginDefeasanceofDebt,andparagraph187ofStatement62).

92

ItemstobeReportedasanOuVlowofResources•  Transac=onsinwhichtheresul=ngitemshouldberecognizedasanoullowofresources:–  Netbalance(debit)ofdirectloanorigina=oncosts,includinganypor=onrelatedtopoints,relatedtolendingac=vi=es(paragraph45ofStatement10andparagraph434ofStatement62).

–  Feespaidrelatedtoapurchasedloanoragroupofloans(paragraph442ofStatement62).

–  Netbalance(debit)ofdirectloanorigina=oncosts,includinganypor=onrelatedtopoints,formortgageloansheldforinvestment(paragraph467ofStatement62).

93

ItemstobeReportedasanOuVlowofResources•  Transac=onsinwhichtheresul=ngitemshouldberecognizedasanoullowofresources:–  Netbalance(debit)ofdirectloanorigina=oncosts,includinganypor=onrelatedtopoints,relatedtolendingac=vi=es(paragraph45ofStatement10andparagraph434ofStatement62).

–  Feespaidrelatedtoapurchasedloanoragroupofloans(paragraph442ofStatement62).

–  Netbalance(debit)ofdirectloanorigina=oncosts,includinganypor=onrelatedtopoints,formortgageloansheldforinvestment(paragraph467ofStatement62).

–  Feespaidtopermanentinvestorstoensuretheul=matesaleofloansa+ertheul=matesaleoccurs(paragraph469ofStatement62).

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94

ItemstobeReportedasDeferredInflows

•  Transac=onsinwhichtheresul=ngitemshouldbeclassifiedasadeferredinflowofresources:–  Resourcesreceivedinadvanceinrela=ontoanimposednonexchangetransac=on(paragraph18ofStatement33).

–  Resourcesreceivedinadvanceinrela=ontoagovernment-mandatednonexchangetransac=onoravoluntarynonexchangetransac=onwhen=merequirementsaretheonlyeligibilityrequirementsthathavenotbeenmetbythereceivinggovernment(paragraph19ofStatement33).

–  Deferredcreditamountsresul=ngfromtherefundingofdebt(paragraph5ofStatement23,andparagraph221ofStatement62).

95


•  Transac=onsinwhichtheresul=ngitemshouldbeclassifiedasadeferredinflowofresources:–  Proceedsfromthesaleoffuturerevenues(paragraphs13–16ofStatement48).

–  Unavailablerevenuerelatedtotheapplica=onofmodifiedaccrualaccoun=ng(StatementNo.6,Accoun)ngandFinancialRepor)ngforSpecialAssessments,andStatement33).

–  Deferredgainresul=ngfromsale-leasebacktransac=ons(paragraph242ofStatement62).

–  Netbalance(credit)ofloanorigina=onfees,excludinganypor=onrelatedtopoints,formortgageloansheldforresalepriortothepointofsale(paragraph467ofStatement62).

96


•  Transac=onsinwhichtheresul=ngitemshouldbereportedasadeferredinflowofresources:–  Netbalance(credit)ofloanorigina=onfeesrelatedtopointsforlendingac=vi=esandmortgageloansheldforinvestment(paragraph45ofStatement10andparagraphs434and467ofStatement62).

–  Resourcesgeneratedbycurrentratesintendedtorecovercoststhatareexpectedtobeincurredinthefuture(paragraph482ofStatement62).

–  Gainsorotherreduc=onsofnetallowablecostsintendedtoreduceratesoverfutureperiods(paragraph482ofStatement62).

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97

ItemsreportedasInflowofResources

•  Transac=onsinwhichtheresul=ngitemshouldberecognizedasaninflowofresources:–  Netbalance(credit)ofloanorigina=onfees,excludinganypor=onrelatedtopoints,relatedtolendingac=vi=es(paragraph45ofStatement10andparagraph434ofStatement62).

–  Commitmentfeesrealizeduponexerciseorexpira=onofthecommitment(paragraphs437and438ofStatement62).

–  Commitmentfeeschargedforenteringintoanagreementthatobligatesthegovernmenttomakeoracquirealoanortosa=sfyanobliga=onoftheotherpartyunderaspecifiedcondi=onwhenexerciseisconsideredremote(paragraphs437and438ofStatement62).

98


•  Transac=onsinwhichtheresul=ngitemshouldberecognizedasaninflowofresources:–  Feesreceivedrelatedtoapurchasedloanoragroupofloans(paragraph442ofStatement62).

–  Netbalance(credit)ofloanorigina=onfees,excludinganypor=onrelatedtopoints,formortgageloansheldforinvestment(paragraph467ofStatement62)

–  Netbalance(credit)ofloanorigina=onfees,includinganypor=onrelatedtopoints,formortgageloansheldforresalea+erthesaleoccurs(paragraph467ofStatement62)

99


•  Transac=onsinwhichtheresul=ngitemshouldberecognizedasaninflowofresources:–  Feesthatarerealizeda+erthefundingofmortgageloanshasoccurredora+erthecommitmenttoguaranteethefundingofmortgageloansexpires(paragraph469ofStatement62)

–  Feesrealizedwhenacommitmentisarrangeddirectlybetweenapermanentinvestorandaborrower(paragraph470ofStatement62)

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100

RevenueRecogniKoninGovernmentalFunds

•  Revenuesandothergovernmentalfundfinancialresourcesshouldberecognizedintheaccoun=ngperiodinwhichtheybecomebothmeasurableandavailable(NCGAStatement1,paragraph62).

•  Whenanassetisrecordedingovernmentalfundfinancialstatementsbuttherevenueisnotavailable,thegovernmentshouldreportadeferredinflowofresourcesunKlsuchKmeastherevenuebecomesavailable.

101

OtherAreasAddressedbyGASB65

•  Useofthetermdeferredshouldbelimitedtodeferredinflowsanddeferredoullowsofresources

•  Majorfundcalcula=onguidancewillbeamended:–  Useaggregateassets/deferredoullowsandaggregateliabili=es/deferredinflowsinthecalcula=on

102

GASB67and68

•  Accoun=ngandFinancialRepor=ngforPensions–anamendmenttoGASB27–  Changestotheseagentemployerswouldbeasfollows:

◊  Recognizeanetpensionliability(accrualbasis)◊  Netpensionliability=employer’stotalpensionliabilitylesstheamountofplannetposi=onrestrictedforpensions(plannetposi=on),asoftheendoftheemployer’srepor=ngperiod.

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103

GASB67and68

•  Accoun=ngandFinancialRepor=ngforPensions–anamendmenttoGASB27(con=nued)–  Disclosurerequirements:

◊  Forthecurrentyear,changesinthenetpensionliability◊  Significantassump=onsusedtocalculatethetotalpensionliability,includingassump=onsusedincalcula=onthediscountamount

◊  Thedateoftheunderlyingactuarialvalua=on,informa=onaboutchangesofassump=onsandbenefitterms

◊  Thebasisfordeterminingtheemployercontribu=onstotheplan◊  Theindividualcomponentsofthecurrent-periodpensionexpense

104

GASB67and68

•  Accoun=ngandFinancialRepor=ngforPensions–anamendmenttoGASB27(con=nued)–  Disclosurerequirements(con=nued):

◊  Explana=onsofchangesinthedeferredoullowsofresourcesanddeferredinflowsofresourcesrelatedtopensionsduringthecurrentperiod

◊  Descrip=onoftheplan◊  Numberofgovernmentspar=cipa=ngintheplan◊  Classesofemployeescovered◊  Numberofre=redemployeesreceivingbenefits◊  Numberofinac=veemployeesen=tledbutnotyetreceivingbenefits

◊  Numberofac=veemployees

105

GASB67and68

•  Accoun=ngandFinancialRepor=ngforPensions–anamendmenttoGASB27(con=nued)–  RequiredSupplementaryInforma=on:

◊  Changesinthenetpensionliability◊  Informa=onaboutthecomponentsofthenetpensionliabilityandrelatedra=osasoftheemployer’syear-end•  Totalpensionliability•  Amountofplannetposi=on•  Netpensionliability•  Plannetposi=onas%ofthetotalpensionliability•  Amountofcovered-employeepayroll•  Netpensionliabilityasa%ofcovered-employeepayroll

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106

StatementNo.69

•  GovernmentCombina.onsandDisposalsofGovernmentOpera.onsEffec=veDate:TheprovisionsofStatement69areeffec=veforgovernmentcombina=onsanddisposalsofgovernmentopera=onsoccurringinfinancialrepor=ngperiodsbeginninga+erDecember15,2013,andshouldbeappliedonaprospec=vebasis.

107

Statement70

Accoun.ngandFinancialRepor.ngforNonexchangeFinancialGuaranteesEffec=veDate:TheprovisionsofStatement70areeffec=veforfinancialstatementsforrepor=ngbeginninga+erJune15,2013.

108

StatementNo.71•  PensionTransi.onforContribu.onsMadeSubsequenttotheMeasurementDate—anamendmentofGASBStatementNo.68Effec=veDate:TheprovisionsofthisStatementshouldbeappliedsimultaneouslywiththeprovisionsofStatement68.

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109

StatementNo.72

FairValueMeasurementandApplica.onEffec=veDate:TherequirementsofthisStatementareeffec=veforfinancialstatementsforrepor=ngperiodsbeginninga+erJune15,2015.

110

StatementNo.73•  Accoun.ngandFinancialRepor.ngforPensionsandRelatedAssetsThatAreNotwithintheScopeofGASBStatement68,andAmendmentstoCertainProvisionsofGASBStatements67and68Effec=veDate:TheprovisionsinStatement73areeffec=veforfiscalyearsbeginninga+erJune15,2015—exceptthoseprovisionsthataddressemployersandgovernmentalnonemployercontribu=ngen==esforpensionsthatarenotwithinthescopeofStatement68,whichareeffec=veforfiscalyearsbeginninga+erJune15,2016.Earlierapplica=onisencouraged.

111

Statements74and75

•  StatementNo.74FinancialRepor.ngforPostemploymentBenefitPlansOtherThanPensionPlansEffec=veDate:TheprovisionsinStatement74areeffec=veforfiscalyearsbeginninga+erJune15,2016.Earlierapplica=onisencouraged.

•  StatementNo.75Accoun.ngandFinancialRepor.ngforPostemploymentBenefitsOtherThanPensionsEffec=veDate:TheprovisionsinStatement75areeffec=veforfiscalyearsbeginninga+erJune15,2017.Earlierapplica=onisencouraged.

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112

Statements76and77

•  GASBStatementNo.76,TheHierarchyofGenerallyAcceptedAccoun.ngPrinciplesforStateandLocalGovernmentsEffec=veDate:TheprovisionsinStatement76areeffec=veforrepor=ngperiodsbeginninga+erJune15,2015.Earlierapplica=onisencouraged.

•  GASBStatementNo.77,TaxAbatementDisclosuresEffec=veDate:TherequirementsofthisStatementareeffec=veforrepor=ngperiodsbeginninga+erDecember15,2015.Earlierapplica=onisencouraged.

113

Statements78and79

•  GASBStatementNo.78,PensionsProvidedthroughCertainMul.ple-EmployerDefinedBenefitPensionPlansEffec=veDate:TherequirementsofthisStatementareeffec=veforrepor=ngperiodsbeginninga+erDecember15,2015.

•  GASBStatementNo.79,CertainExternalInvestmentPoolsandPoolPar.cipantsEffec=veDate:TherequirementsofthisStatementareeffec=veforrepor=ngperiodsbeginninga+erJune15,2015,exceptfortheprovisionsinparagraphs18,19,23–26,and40,whichareeffec=veforrepor=ngperiodsbeginninga+erDecember15,2015..

114

Statements80and81

•  GASBStatementNo.80,BlendingRequirementsforCertainComponentUnits—anamendmentofGASBStatementNo.14Effec=veDate:TherequirementsofthisStatementareeffec=veforrepor=ngperiodsbeginninga+erJune15,2016.Earlierapplica=onisencouraged.

•  GASBStatementNo.81,IrrevocableSplit-InterestAgreementsEffec=veDate:TherequirementsofthisStatementareeffec=veforperiodsbeginninga+erDecember15,2016.Earlierapplica=onisencouraged.

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115

GASBStatementNo.82,

PensionIssues—anamendmentofGASBStatementsNo.67,No.68,andNo.73Effec=veDate:TherequirementsofthisStatementareeffec=veforrepor=ngperiodsbeginninga+erJune15,2016,exceptfortherequirementsofparagraph7inacircumstanceinwhichanemployer’spensionliabilityismeasuredasofadateotherthantheemployer’smostrecentfiscalyear-end.Inthatcircumstance,therequirementsofparagraph7areeffec=veforthatemployerinthefirstrepor=ngperiodinwhichthemeasurementdateofthepensionliabilityisonora+erJune15,2017.Earlierapplica=onisencouraged.

116

IssuesUniquetoColoradoGovernments

•  BudgetRepor=ngRequirements•  TABOR

117

BudgetReporKngRequirements

•  CRS92-1-103requireseachlocalgovernmenttoadoptanannualbudget.Totheextentthatthefinancialac=vi=esofanylocalgovernmentarefullyreportedinthebudgetorbudgetsofaparentlocalgovernmentorgovernments,aseparatebudgetisnotrequired.Suchbudgetshallpresentacompletefinancialplanbyfundandbyspendingagencywithineachfundforthebudgetyear.

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118

TABOR

•  TheTABORamendmentwasapprovedbyColoradovotersin1992.TABORplaceslimitsonrevenue,spending,anddebtwhichmaybeweakenedonlybytheapprovalofthevoters.

119

TABOR

•  TABORrequirestheestablishmentof“emergencyreserves…tousefordeclaredemergenciesonly”,amoun=ngto“3%ormoreofitsfiscalyearspendingexcludingbondeddebtservice”.[TABOR(5)]

120

TABOR

•  “Fiscalyearspendingmeansalldistrictexpendituresandreserveincreasesexcept,astoboth,refundsmadeinthecurrentornextfiscalyearorthosefromgi+s,federalfunds,collec=onsforanothergovernment,pensioncontribu=onsbyemployeesandpensionfundearnings,reservetransfersorexpenditures,damageawards,orpropertysales”.[TABOR(2)(e)]

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121

TABOR

•  Theterm“reserve”inthedefini=onoffiscalyearspendingreferstofundbalances,and“reservetransfersorexpenditures”meansmoneyswhicharepassedfromonefundofcashorassetsheldasareservetoanothersuchfundormoneyswhicharedisbursedfromsuchfund.[C.R.S.24-77-102(12-14)]

122

ManagementProcess

•  To-Do’sforManagers–  Plan–  Perform–  Evaluate–  Communicate

123

ManagementProcessOverviewofthePlanningFramework

•  Goal/Vision:Toincreasethevalueofstakeholders’interestintheorganiza=on

•  Mission:Fundamentalwayinwhichtheen=tywillachievethegoalofincreasingstakeholders’value

•  StrategicObjecKves:Broad,long-termgoalsthatdeterminethefundamentalnatureanddirec=onofthebusinessandthatserveasaguidefordecisionmaking

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124

ManagementProcessOverviewofthePlanningFramework

•  TacKcalObjecKves:Mid-termgoalsforposi=oningtheorganiza=ontoachieveitslong-termstrategies.

•  OperaKngObjecKves:Short-termgoalsthatoutlineexpecta=onsforperformanceofday-to-dayopera=ons

•  BusinessPlan:Acomprehensivestatementofhowtheorganiza=onwillachieveitsobjec=ves

•  Budgets:Expressionsofthebusinessplaninfinancialterms.

125

ManagementCycle

Plan

Perform

Evaluate

Communicate

126

ManagerialReporKng

•  ManagementorManagerialAccoun=ngcanuseinnova=veanalysesandpresenta=ontechniquestoenhancetheusefulnessofinforma=ontopeoplewithinthegovernmenten=ty.

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127

ManagementVs.FinancialAccounKng

ManagementAccounKng FinancialAccounKng

PrimaryUsers Managers,employees Lenders,governmental agencies,public

ReportFormat Flexible,drivenbyuser's BasedonGAAP

needs

PurposeofReports Provideinforma=onfor Reportonpast planning,control, performance

performancemeasurement &decisionmaking

128

ManagementVs.FinancialAccounKngManagementAccounting FinancialAccounting

Natureof Objectiveandverifiablefor ObjectiveandInformation decisionmaking;more verifiable

subjectiveforplanning(reliesonestimates)

UnitsofMeasure Monetaryathistoricalor Monetaryathistoricalcurrentmarketor andcurrentmarketprojectedvalues;physical valuesmeasuresoftimeornumberofobjects

Frequencyof Preparedasneeded;mayor PreparedonaperiodicReports maynotbeonaperiodic basis

basis

129

AnalysisforDecisionMaking

•  Short-runDecisionAnalysisisthesystema=cexamina=onofanymanagementdecisionwhoseeffectswillbefeltoverthecourseofthenextyear.–  Planning:

◊  Discovertheproblemorneed◊  Iden=fyallreasonablecoursesofac=onthatcansolvetheproblemormeettheneed

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ConKnue:Short-RunDecisionAnalysis

–  Planning◊  Prepareathoroughanalysisofeachpossiblesolu=onandiden=fyitstotalcosts,savings,otherfinancialeffects,andanyqualita=vefactors.

◊  Selectthebestcourseofac=on

◊  Con=nuethroughthemanagementcycle.

131

IncrementalAnalysisforShort-RunDecisions

•  IrrelevantCostsandRevenuesarethosethatwillnotdifferbetweenthealterna=ves.

•  DifferenKalCostsandRevenues(incrementalcosts)arethosethatchangebetweenalterna=ves.

•  Firststepinincrementalanalysisistoeliminateanyirrelevantrevenuesorcosts.

132


•  OpportunityCostsarethebenefitsthatareforfeitedorlostwhenonealterna=veischosenoveranother.

•  Outsourcingistheuseofsuppliersoutsidetheorganiza=ontoperformservicesorproducegoodsthatcouldbeperformedorproducedinternally.

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•  KeeporDropunprofitable(unproduc=ve,under-achieving)segments,divisions,orservices.

•  SellorProcess-Furtherisadecisionaboutwhethertosellajointproductatthesplit-offpointorsellita+erfurtherprocessing.Ingovernment,thisisnotsomuchasselling,butprovidingtheservice.


134

CapitalInvestmentAnalysis

•  Processofmakingdecisionsaboutcapitalinvestments.Consistsofiden=fyingtheneed,analyzingcoursesofac=ontomeetthatneed,preparingreportsformanagers,choosingthebestalterna=ve,andalloca=ngfundsamongcompe=ngneeds.

135

MeasuresUsedinCapitalInvestmentAnalysis

•  NetIncomeandNetCashInflowsareameanstomeasurethebenefitifinvolvescashreceipts.

•  CostSavingsmeasurethebenefits,suchasreducedcosts,fromproposedcapitalinvestments.

•  TimeValueofMoneyshouldbeusedindecisionmaking(PresentValueandFutureValue)

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MeasuresUsedinCapitalInvestmentAnalysis

•  PaybackPeriodMethoddeterminestheminimum=meitwilltaketorecovertheini=alinvestment.

–  Paybackperiod=CostofInvestment

–  AnnualNetCashInflows

137

HelpfulWebsites

•  GovernmentalAccoun=ngStandardsBoardhcp://gasb.org/

•  GovernmentFinanceOfficersAssocia=on hcp://www.gfoa.org/

•  ColoradoGovernmentFinanceOfficerAssocia=onhcp://www.cgfoa.org/

[email protected]

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