Chapter 3 Flashcards
(25 cards)
What is an acceleration provision?
Provision in a bond that requires issuer to pay back entirety of principal upon default.
Which two statements focus on government-wide finances?
Statement of net assets and statement of activities.
What are the two different types of multiple-employer pension plans?
Agency - All invested together, but remain in separate accounts
Cost-sharing - all contributions are pooled together and can be used to pay any employee of any employer.
What is the TPL discount rate?
Discount rate is used to determine the present value of future benefits. This is found by a combination of the expected investment return rate and a tax-exempt municipal G.O. bond yield.
What is the UAAL and how do you calculate it?
UAAL is the unfunded actuarial accrued liability.
UAAL = Actuarial Accrued Liability (AAL) - Actuarial Value of the Assets (AVA)
Basically this is the gap between the present value of benefits for current and former employees (the AAL) and the value of your assets that could pay them (the AVA).
What is the difference between governmental activities and business-type activities?
Governmental activities are tax-supported, while business-type activities are supported by fees and other charges.
What is the role of the creditors committee?
1) Investigate the activities of the municipality, including examining its financial information
2) Help form the bankruptcy plan
3) take other actions that will help the creditors it represents.
Committee is generally comprised of the 7 largest unsecured creditors
What are the eight major fund statements?
1) Balance sheet
2) Statement of revenue, expenditures, and changes in fund balance
3) Budget-to-actual comparison
4) Statement of Net Assets
5) Statement of revenues, expenses, and changes in net fund assets
6) Statement of cash flows
7) Statement of fiduciary net assets
8) Statement of changes in fiduciary net assets
Where in a CAFR is information on derivatives listed?
What information must be included?
Must be listed in the notes section of the financial statements.
Must include the notional amount and any changes in value during the year.
If it is being used as a hedge, then it may be listed as a deferred inflow or outflow. and include:
1) The reasons for acquiring the derivative
2) Amount paid to acquire
3) Net cash flows created by the derivative
4) Risk associated with the derivative.
What is discharge and what needs to happen to receive it?
Discharge prevents anyone from taking actions against the municipality designed to recover debt payments outside of the plan.
In order to receive a discharge:
1) The court must approve the plan
2) Municipality must make deposit of money with disbursing agent of the court
3) Court must determine that the deposit is valid (esp. if with securities)
Court has 180 days from confirmation to revoke the confirmation if it determines that it was obtained by fraud.
What is the trustee not allowed to do under Chapter 9?
1) Does not examine the debtor
2) Not allowed to convert the proceeding to another chapter of bankruptcy
3) Does not supervise the proceeding
4) Does not supervise the financial activities of the municipality
5) Does not review the fees paid to professionals
What is the “fair value” of a derivative listed in the CAFR?
Fair value means the amount of money the derivative could bring in if sold today or,
The present value of future cash flows associated with the derivative.
What information will be contained in the financial section of a CAFR?
1) Independent auditor’s report
2) MD&A
3) Financial statements the municipality chooses to include
4) Notes to those financial statements
5) All RSI
What is net overall debt?
Net overall debt = Net direct debt + Overlapping debt
Net Direct Debt = Short and Long-term G.O. Debt - Cash and Cash Equivalents
What are distressed securities?
Distressed bonds are bonds that have dropped greatly in price.
Bonds that are in default may be distressed, but not all distressed bonds are in default.
What is an additional bonds covenant?
The Additional Bonds covenant stipulates whether the issuer may sell additional bonds that share equal claims to the issuer’s pledged revenue.
An open-end indenture allows them, a closed-end indenture does not.
What are the priorities of funds from revenue pledges?
1) Sinking cost fund
2) Debt Service Reserve fund
3) Renewal and Replacement Fund
4) Reserve Maintenance Fund
5) Surplus Fund
Under what circumstances may an objection to the bankruptcy petition be filed?
1) If the objector claims the negotiation or petition for the plan wasn’t made in good faith
or
If the claim was not authorized by the state.
The court must hold a hearing on all objections.
What is the Total Pension Liability and how is it used?
TPL is the money that would be needed to pay all employees what they are owed during retirement.
TPL - Plan Net position = Net pension liability
How long must the bankruptcy notice be circulated?
Notice must appear at least once a week for three successive weeks in at least one newspaper of general circulation.
What information is contained in the intro section of the CAFR?
1) Letter of transmittal
2) Org chart
3) Miscellaneous information about the government and the future of its finances.
Not audited by the auditor.
What does the statement of activities show?
Change in government’s net assets over the course of a year.
Will show each program/activity’s difference between expenses and revenues.
What are the requirements for a fund to be designated a “major fund”?
1) assets, liabilities, revenues, or expenditures for the fund comprise at least 10% of the value of all assets, liabilities, revenues, or expenditures for funds of its type (i.e. governmental, fiduciary, proprietary).
2) Fund constitutes at least 5% of total assets, liabilities, revenues, or expenditure of all three types of governmental funds combined.
What are the seven requirements in order for the bankruptcy plan to be confirmed by the court??
1) Met requirements of certain sections of chapter 11
2) All requirements of chapter 9
3) Court approves of fees paid for professionals to assist with the case
4) Plan does not conflict with any laws
5) Provides for claimholders to be paid a determined amount for their claims
6) Any approval required outside the court has been received
7) Plan is both feasible and in the best interest of claimholders
