Governmental & Not-For-Profit

Question 1

Government Wide Reporting uses what measurement and basis of accounting?
Governmental Fund?
Proprietary Fund?
Fiduciary Fund?

Answer 1

Economic Resource Measurement and Accrual Basis are used by Government Wide, Proprietary Funds and Fiduciary Funds.
Governmental Funds use Current Financial Resource measurement and Modified Accrual Basis.

Modified Accrual basis: Revenues recorded only if they are MEASURABLE & AVAILABLE for paying CURRENT period debts. Expenditures recorded only when obligation that will be paid from CURRENT financial resources has been INCURRED.

Question 2

Objectives of Government financial reporting:

Answer 2

Government has management’s duty to be accountable for funds used, to citizens, creditors, and oversight boards.

• Budgetary integrity
• Operation performance
• Assess effectiveness & efficiency, compliance with laws, regulations, and rules
• Compare actual results with legally adopted budget

Question 3

1. The Authority for standards established for all units of state and local Government, and governmental NFPs.
2. The Authority for accounting standards for For Profit Organizations and non-Governmental NFO orgs.
3. The Authority for accounting standards for Federal governmental, agencies, and departments.

Answer 3

1. Governmental Accounting Standards Board GASB
2. Financial Accounting Standards Board FASB
3. Federal Accounting Standards Advisory Board FASAB

Question 4

AICPA designates GASB, FASB, and FASAB as the authoritative bodies to establish GAAP for state, local, federal governments, businesses and NFP non governmental organizations.

Governing bodies of FASB, GASB, FASAB?

Answer 4

FASB & GASB fall under Financial Accounting Foundation

FASAB falls under the Office of Management and Budget, which is directed by Comptroller General.

Question 5

Statements required for

1. Government - Wide?
2. Governmental Funds?
3. Proprietary Funds?
4. Fiduciary Funds?
5. General Purpose Governments?

Answer 5

1. Statement of Activities (ie Operating Stmnt) & Statement of Net Position (ie Stmnt of Net Assets aka Balance Sheet)
2. Balance Sheet & Statement of Revenues, Expenditures, and Change in Fund Balance
3. Statement of Fiduciary Net Position & Statement of Change in Fiduciary Net Position
4. Must have Management’s Discussion & Analysis (MDA), all Government-wide statements, fund statements, Notes to Financial Statements, and Required Supplemental Information

Question 6

Required Supplemental Information includes:

Answer 6

Budgetary comparison schedules, MDA, Pension schedules, information on infrastructure assets, and claims development information.

Question 7

Deferred Inflows and Deferred outflows?

Where are they reported in Statement of Net Position?

Answer 7

Deferred Inflows are acquisitions of new assets applicable to future reporting periods. Report below Assets section

Deferred Outflows are the consumption of net assets by the government that is applicable to future reporting periods. Report below Liabilities section

Question 8

What is Inter-period equity?

Answer 8

Current year revenue must be sufficient to pay for services provided that year and whether future taxpayers will assume burden for services previously provided.

Question 9

Is Comprehensive Annual Financial Reporting CAFR required for state and local governments?

Includes what items?
- Which are required at minimum?

Answer 9

NO, but these governments use CAFR.

Introduction with title page
Letter of transmittal
Description of Government
Financial section with Auditor’s report, MD&A, basic financial statement, RSI and any other supplemental information.
Statistical section with tables/charts on economic data and trends.

Required at minimum are MD&A, RSI, and basic Financial Statement

Question 10

What criteria must all be met to be consideration a Primary Government?

Otherwise, is a unit of a Primary Government. Report discrete presentation unless?

Answer 10

Has a separately elected governing body
It is legally separate
It is fiscally independent of other state and local governments

Discrete presentation unless substantially the same governing body, provides almost entirely all of services for Primary Government, or if its debt is to be repaid with resources provided by Primary Government.

Question 11

THE reporting entity in governmental accounting?

Definition of governmental organization?

Answer 11

Primary Government

A Governmental organization has status as bodies corporate and politic and with power to enact and enforce a tax levy.

Question 12

What types of governmental reporting are there?

Answer 12

Two types:
Government wide (reports as a whole on operating accountability)
Fund level (focus on short term flow)

Question 13

Major Fund Criteria

Major funds: Governmental, Proprietary, and Fiduciary

Answer 13

Within each fund, the total of the elements (Expenditures, Revenue, Total Assets, and Total Liabilities) must be at least 10% of total fund type (Governmental, Enterprise, Fiduciary)

The elements individually must be at least 5% of total governmental and enterprise element type.

Question 14

Governmental funds include:

Answer 14

General fund (every state and local government has only ONE, it is main operating fund for general purpose, city managers, finance, etc)

Special Reserve Fund (tax or grant revenues or private gifts restricted by EXTERNAL resource providers or committed by legislation; fewest needed) also called Special Revenue

Debt Service Fund (accounts for financial resources segregated for making PRINCIPAL & INTEREST payments on general LT Debt)

Capital Projects Fund (Accounts for tax/grant revenues or bond proceeds for capital projects)

Permanent Fund (Accounts for permanent endowments created when donor stipulates principal be invested and PRESERVED, but earnings may be used for PUBLIC purpose)

Question 15

A Fund is a separate fiscal entity with its own resources, liabilities, and operating activity for fiscal period.
Are short term or long term assets allowed in fund accounting?

Answer 15

Short term assets belong in Fund accounting.

No Long Term assets are recorded in Funds accounting, these belong in Government Wide statement of Net Position.

Question 16

The Statement of Net Position includes what items?

What is the calculation for Net Position?

Answer 16

Either Restricted or Unrestricted:

• Capital Assets net of related debt (General LT Liabilities)
• Def. Outflows and Def. Inflows

(Assets + Def Outflow) - (Liabilities + Def Inflows) = Net Position

Question 17

The Statement of Activities includes what items?

Answer 17

Each program or function is listed with their respective revenues and Net expenses.
Separated by governmental, business-type, and component units.

Question 18

General Fund :
Revenue
Other Financing Sources
Expenditures
Other Financing Uses

Answer 18

Revenues are from sources OTHER THAN proceeds from issuance of DEBT and InterFUND transfers. (so taxes are revenue)

OFS are non-revenue increases in fund Net Position (interfund transfers, sales of general capital assets, bond issue proceeds)

Expenditures are Increases in fund liabilities or decreases in fund assets. Include only current operating expenditures, capital outlays, and repayment of general LT liability PRINCIPAL only.

OFU are non expenditure decreases in Fund Net Position (interfund transfers out to other funds)

Question 19

Budgetary Accounts include:

Answer 19

Estimated Revenues
Appropriations (Expenditures)
Encumbrances

Question 20

Estimated Revenues can include:

Answer 20

taxes, licenses, permits, special assessment issue if government responsible, penalty and interest, intergovernmental revenue, fines, forfeits, and charges for services.

Question 21

Appropriations (Expenditures) are:

Answer 21

Legal authorization to expend Financial resources for specified purposes. Reduces fund balances.

Question 22

Encumbrances:

Answer 22

Record changes of Goods and Services against Appropriations for budgetary control purposes. Estimated cost of G/S recorded temporarily in this account.

Question 23

Disbursement cycle in fund:

Answer 23

Appropriations -> Encumbrances -> Expenditures -> Payment

Question 24

Journal Entries for recording budget.

Max amount able to spend =

Answer 24

DR Est.Revenue
DR or CR Budget Fund Balance = plug
CR Appropriations

Max able to spend = Appropriations less Encumbrances and Expenditures

Question 25

Journal entries for invoice for acquisition and when items received.

Answer 25

DR Encumbrances CR Encumbrances Outstanding-year # Reverse entirely when items received for the invoiced amount. Balances in Encumbrances are removed at year end.

Question 26

Journal Entries for future payment of invoice for received acquisition. Journal entries for payment of vouchers

Answer 26

DR Expenditures CR Voucher Payable CR Due to.. (if applicable) DR V/P CR Cash Expense goes to Governmental Activities

Question 27

Expenditures under modified accrual basis are recorded when? What are the 5 classifications of expenditures?

Answer 27

Record when incurred except unmatured interest & principal of General LT debt, which is expensed. 1. Function or Program (Economic Development?) 2. Organizational Unit (Fire Department? City Clerk) 3. Activity (waste collection?) 4. Character (current expenditure, intergovernmental use, etc) 5. Object (what was acquired, services? wages?)

Question 28

Prior year Expenditures are equal to? Current Year total Expenditures?

Answer 28

Current Liabilities balance at beginning of current year. Claims paid currently will first liquid that balance. The remainder of claims paid + new balance at year end are current total expenditures.

Question 29

What are the 5 Fund Balance types?

Answer 29

Nonspendable - resources not in cash or A/R, legally required to remain intact. Certain resources of governmental funds are not monetary in nature and will not lead to a collection of monetary resources in the future. These assets, usually prepaid items and inventories, are considered nonspendable. Restricted - external constraints by creditors or grantors Committed - Can only be used by formal action of highest level of government authority Assigned - Intent to be used for specific purposes. Is the remaining fund balance in excess of Encumbrances and Liabilities. Unassigned - Residual of General Fund Balance. Only allowed in GENERAL FUND.

Question 30

Reclassification of Fund balance Purchase 12 vehicles for $264,000 but only received half this year. Started with $132,000 fund balance. What balances at year end would appear on Balance Sheet? Do J/Es

Answer 30

DR Encumbrances 264,000 CR Enc. Oustd 264,000 DR Enc. Outstd 132,000 CR Enc. Oustd 132,000 Balance in Encumbrances 132,00 Dr Expenditures 264,000 C V/P 264,000 DR V/P 132,0000 CR Cash 132,000 DR Fund Balance 264,000 CR Expenditures 264,000 Left Fund balance with Debit balance 132,000 Report both the encumbrance balances and the fund balance as: DR Fund Balance - Unassigned 132,000 CR Fund Balance - Committed 132,000

Question 31

Enterprise Funds (proprietary fund type)

Answer 31

Enterprise funds are used to report any activities for which a fee is charged as primary revenue source. Fee can be charged to internal departments and agencies. If activity financed with debt, secured by pledge of net revenue from fees and charges, must use an Enterprise Fund. If required by law to have costs covered by fees and charges must used Enterprise Fund.

Question 32

Internal Service Funds (Proprietary Fund Type)

Answer 32

Created to improve management of resources, provide goods and services to departments and agencies within same or other governments on cost reimbursement basis. Liquidates after mission completed, funds moved to other funds or governments.

Question 33

Where are depreciation and capital assets recorded?

Answer 33

ONLY recorded in Internal Service Fund

Question 34

What is a Fiduciary Fund? Fiduciary Fund has 4 main types, what are they?

Answer 34

Accounts for resources that government is managing as an AGENT or TRUSTEE for EXTERNAL party. Types: Agency Fund - holds cash on custodial basis (taxes collected for other government). Total Assets = Total Liabilities Pension Fund - employee benefit holds assets in trust to provide retirement benefits Investment Trust Fund - Equity of external participants in a sponsoring government's investment pool. Private Purpose Trust Fund - Benefit private individuals (scholarships)

Question 35

Property Tax Levy calculation

Answer 35

End Receivables Less: Collections w/in 60 days of year End Less: Ending Allowance for Uncollectible ----------------------------------------------------------------- =Deferred Revenue

Question 36

Property Taxes Estimated Revenue = ? Current Year Revenues=?

Answer 36

Estimated Revenue from taxes is the NET of Gross Levy (ie Taxes Receivable) and % uncollectible. (est Rev/1-%)=tax levy Current year revenues are amounts collected in current year and those collected w/n 60 days of year end. - Def. Rev = more than 60 days expected to collect

Question 37

Tax levy JEs Reclassifying Delinquent Taxes JEs

Answer 37

DR Taxes/R CR Est Uncoll - Current CR Revenues Collection: DR Cash CR Taxes/R ``` Delinquent taxes: DR Taxes/R- Delinquent DR Est Uncoll-Current CR Taxes/R-Current CR Est Uncoll-Delinquent ```

Question 38

Debt and Bonds where are they recorded? Payments of these are recorded where?

Answer 38

LT Liabilities are record in Capital Assets of government wide statements. Debt Service Fund used to record PAYMENTS of PRINCIPAL and INTEREST of general government ST/LT debt. Expense issue cost and debt insurance as they are current period (per GASB)

Question 39

Fund Balance classification Is it the General Fund? If NO, cannot use unassigned Are the assets NONCASH? If Yes, they are nonspendable Are there Outstanding Encumbrances? If Yes, that amount is committed

Answer 39

Total Equity of Assets = Assets less Liabilities | Excess of Equity over encumbrances reserved are Unassigned in the General Fund ONLY.

Question 40

What is the minimum budgetary information required to be reported in the City of Newbury's budgetary comparison schedules? A. A schedule of unfavorable variances at the functional level B. A schedule showing the final appropriations budget and actual expenditures on a budgetary basis C. A schedule showing the original budget, the final appropriations budget, and actual inflows, outflows, and balances on a budgetary basis D. A schedule showing the proposed budget, the approved budget, the final amended budget, actual inflows and outflows on a budgetary basis, and variances between budget and actual

Answer 40

C. The budgetary comparison schedule should present both (a) the original and (b) the final appropriated budgets for the reporting period as well as (c) actual inflows, outflows, and balances, stated on the government's budgetary basis. A separate column to report the variance between the final budget and actual amounts is encouraged, but not required. (GASB 2400.102)

Question 41

What accounts are closed out at year end?

Answer 41

Operating Statement Accounts, i.e. nominal accounts, are closed out, as are Budgetary Accounts. Both are Temporary. Revenue, Expenditures, OFS and OFU are operating Est. Revenue, Appropriations, Encumbrances, Reserve for Encumbrances, Est OFS, Est. OFU are budgetary. EXCEPT, if there are outstanding Encumbrances not received, these are balance sheet items that will be moved to Fund Balance either Committed or Assigned.

Question 42

What counts as Program Revenue?

Answer 42

business licenses/permits/fines, special assessments, forfeitures, services, intergovernmental revenues, operating grants and contributions, capital grants and contributions.

Question 43

What counts as General Revenue?

Answer 43

ALL Taxes are reported as General Revenue. | Any revenue not directly linked to any specific function/program.

Question 44

Depreciation Expense

Answer 44

Report as a Direct Expense of the function/program if the capital asset expense is identifiable.

Question 45

Record receipt of bond or LT dept proceeds

Answer 45

DR Cash | CR Other Financing Sources - Proceeds Bonds

Question 46

Record the transaction of short-term financing received from a bank, secured by the city's taxing power

Answer 46

DR Cash CR Tax Anticipation N/P The loan represents establishment of a fund liability (not an increase in “other financing sources” as is the case when the General Fund accounts for the proceeds from long-term borrowing).

Question 47

The orientation of accounting and reporting for all proprietary funds of governmental units is

Answer 47

income determination

Question 48

The measurement focus of governmental type funds is on

Answer 48

both flow of financial resources and financial position

Question 49

“Other financing sources and uses” is not an appropriate category for proprietary funds

Answer 49

In governmental funds, interfund transfers should be reported as “other financing uses” in the fund making the transfer and as “other financing sources” in the fund receiving the transfer. In proprietary funds, which use full accrual accounting, transfers should be reported separately after nonoperating revenues and expenses.

Question 50

Inflows of assets from other funds without a requirement for repayment are considered interfund transfers.

Answer 50

An interfund transfer to/from a governmental fund should be reported as “other financing sources or uses” in the governmental fund.

Question 51

GASB N50.104 groups nonexchange revenues into four different categories: derived tax revenues, imposed nonexchange revenues, government-mandated nonexchange transactions, and voluntary nonexchange transactions.

Answer 51

Property taxes are an imposed nonexchange revenue because they are levied or imposed by government on nongovernmental entities and they are not assessments on exchange transactions. Income and sales taxes are derived tax revenues as they are assessments imposed on exchange transactions. A federal grant would be either a voluntary or mandated nonexchange transaction depending on the terms of the grant.

Question 52

The service efforts and accomplishments (SEA) performance of governmental entities is primarily measured by output, outcome, and efficiency measures. These measures report what services the entity has provided, whether those services have achieved the objectives established, and what effects they have had upon the recipients and others.

Answer 52

SEA performance information measures should meet the characteristics of relevance, understandability, comparability, timeliness, consistency, and reliability. All of these measures, except for understandability and relevance, can be objectively examined. Understandability and relevance will be subject to the user's own interpretation

Question 53

Special Purpose governments are Park districts, tollway, school district, sanitation district.

Answer 53

Can be governmental, business type fiduciary and both governmental/business type activities.

Question 54

Public institutions that report as special-purpose governments either engaged only in governmental activities or engaged in both governmental and business-type activities should report infrastructure using the provisions of GASB Statement 34 codified as GASB Sp20.104. These provisions include the reporting of capital assets that are defined in GASB 1400.103 to include infrastructure.

Answer 54

Governmental NFP components belong after Primary Government on F/S Govt Wide. Discretely present components. Follows full governmental model if special purpose.

Question 55

Public Universities recognize revenue on what basis and under what eligibility criteria being met?

Answer 55

Accrual Basis when available and earned All eligibility criteria must be met in order to recognize. - Contributions with purpose restriction only are recognized as revenue and reported as restricted Net Position (same as pledges)

Question 56

Public Universities recognize revenue on what basis and under what eligibility criteria being met?

Answer 56

Accrual Basis when available and earned All eligibility criteria must be met in order to recognize. - Contributions with purpose restriction only are recognized as revenue and reported as restricted Net Position (same as pledges). If pledged contribution not received until next year but is restricted, count as revenue.

Question 57

GASB 1300.109.c states that enterprise funds should be employed when the pricing policies of the activity establish fees and charges to external users designed to cover its costs, including capital costs.

Answer 57

GASB Ho5.102 notes that accounting for government-operated hospitals financed in whole or in part by fees charged are usually reported in an enterprise fund. Note: Governmental hospitals may also be component units.

Question 58

Public NFP required statements include:

Answer 58

State of Net Position (A + DCF - L - DIF) in classified format Net Position -> Net Investment (expendable or nonexpendable for scholarships/endowments) Statement of Rev,Exp, chg NP -> All inclusive to reconcile to ending total NP. State appropriations are Nonoperating Revenue. Statement of Cash Flows ->Direct Method only.

Question 59

Statement of Cash Flows for Public NFP includes what headings and what goes into each:

Answer 59

Operating: Receipts from customers, sales to other funds, payments to suppliers, payments to employees. Noncapital financing: Proceeds from Debt not clearly attributable to acquisition, construction, or improvement of capital assets; grants/subsidies, other taxes. Capital & related financing: Debt proceeds from Special assessments and taxes for capital asset construction, acquisition, or improvements; receipt of capital grants, sale of capital assets, insurance proceeds on capital assets Investing: Collections of loans, interest and dividends on loans, debt instruments of other entities, equity security, sales of debt or equity, disbursement of loans.

Question 60

What are the classifications required for reporting of expenses by all not-for-profit entities?

Answer 60

FASB Accounting Standards Codification requires expenses to be reported by functional classification (i.e., program services, management, fundraising, etc.). Only those not-for-profits that are voluntary health and welfare entities must augment the functional classification of expenses that appears in the statement of activities with a natural classification of expenses, displayed in a matrix format, that is shown in a separate document, a statement of functional expenses.

Question 61

What financial categories are used in a nongovernmental not-for-profit entity's statement of financial position?

Answer 61

Assets, liabilities, and net assets

Question 62

Private NFPs classify Net Assets using which three categories?

Answer 62

Permanently Restricted - (such as art, endowments, land) Temporarily Restricted - unexpended resources to be used in future Restricted - by donors/grantors ONLY. Not Board of Directors, managers, trusts, etc. Presume resources are unrestricted unless other evidence exists. Unrestricted is still internally designated.

Question 63

Private NFP financial statements include?

Answer 63

Statement of Financial Position (ie Balance Sheet): Assets - Liabilities = Net Assets Net assets is not a term required by FASB, can subdivide unrestricted component units. Net assets are Equity. Statement of Activities reports the changes in net assets for the period (Rev, Gains, Exp, Losses, ) Statement of Cash Flows

Question 64

How are all expenses reported for NFPs?

Answer 64

According to the FASB Accounting Standards Codification, all expenses in the statement of activities are classified as changes in unrestricted net assets and therefore decrease unrestricted net assets.

Question 65

Plant and related equipment are either temporarily restricted or unrestricted. Do depreciate?

Answer 65

Yes, depreciate and charge for exhaustible fixed assets.

Question 66

Are collections capitalized for NFPs?

Answer 66

If does not meet all of criteria and therefore, not capitalized, NO revenues/contributions are recognized. Capitalize if all of following met: Held for public exhibition, education, research Protected, kept encumbered, care for, preserved Subject to organizational policy requiring the proceeds from sales of collections used to acquire other items for collections.

Question 67

NFPs - | Unconditional Contributions are recorded as?

Answer 67

Assets to Contribution Receivable and Liability to Contribution Revenue. If there are conditions, no recognition of revenue. CR Refundable Advance instead of revenue.

Question 68

FASB ASC 958-605-25-2 provides that “contributions received shall be recognized as revenues or gains in the period received and as assets, decreases of liabilities, or expenses depending on the form of the benefits received.”

Answer 68

FASB ASC 958-605-25-16 provides that contributions of services “shall be recognized if the services received (a) create or enhance nonfinancial assets or (b) require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation.”

Question 69

Patient service and ancillary service revenues pertain to the core mission of patient care in a hospital

Answer 69

Cafeterias are operated as a convenience to staff and guests to support the core mission of patient care. Thus, the revenues from a hospital cafeteria are classified as other revenues.

Question 70

NFP Natural expense classification is a method of grouping expenses according to the kinds of economic benefits received in incurring those expenses. Examples of natural expense classifications include salaries and wages, employee benefits, supplies, rent, and utilities. Functional Expense: those related to either the program or mission of the oroganization or management/general/fundraising expenses or object of expense.

Answer 70

A statement of functional expenses is required for voluntary health and welfare entities. o FASB requires not for profit organizations (private universities) to disclose functional classifications of expenses in notes

Question 71

Program services expenses are incurred in carrying out the primary mission of an organization.

Answer 71

Supporting services (management, general, or fundraising).

Question 72

Under what condition will Forkin be allowed to use “operating profit” and to segregate its recurring items from its nonrecurring items in its statement of activities?

Answer 72

The organization reports the change in unrestricted net assets for the period. . Amounts required are changes in net assets for each of the three classes (unrestricted, temporarily restricted, and permanently restricted) and totals for revenues, expenses, gains, losses and the amounts of assets released from restriction

Question 73

In the government-wide financial statements, what is the correct revenue classification of fines and forfeitures?

Answer 73

Charges for services

Question 74

Vulnerability to concentrations refers to risk due to a lack of diversification. Disclosure of such risk must be made if, based on management's information, the following criteria are met:

Answer 74

The concentration exists at the date of the financial statements. The concentration makes the entity vulnerable to the risk of a near-term severe impact. It is at least reasonably possible that the events that could cause the severe impact will occur in the near term.