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2) A number of items are shown in order to reconcile the net changes in fund
balances for the governmental funds and the changes in net position. Here is the
reconciliation for the City of Phoenix for the year ended June 30, 2012 (all
numbers in thousands).
Net change in fund balances - total governmental funds $ (16,109)
Amounts reported for governmental activities in the statement
of activities are different because:
---Governmental funds report capital outlays as expenditures.
However, in the statement of activities, the cost of those assets
is allocated over their estimated useful lives as depreciation
---Bond proceeds provide current financial resources to
governmental funds, but issuing debt increases long-term
liabilities in the statement of net assets. Repayment of bond
---Some expenses reported in the statement of activities do not
require the use of current financial resources and therefore are
not reported as expenditures in governmental funds
Compensated absences (3,651)
Insurance claims 11,641
3) The largest sources of general revenues for many cities are property taxes
and sales taxes. However, a wide variety of revenue sources are possible.
4) The amount of expenditures will vary widely based on the size of government.
Classifications usually include public safety, sanitation, and the like. For the
5) The General Fund primarily shows current financial resources as its assets:
cash and investments, various receivables, and amounts due from other
funds. Although not current financial resources, prepaid items and an
6) Most governments will indicate in a note to their financial statements that
payables and receivables are viewed as available if collected within 60 days of
7) This question focuses on interperiod equity: Is the government spending
more than it takes in so that future generations may have to suffer? Or, is the
Communication Case 1
Students need to continue updating their knowledge throughout their careers.
One method for doing this is to become familiar with the information available on
the GASB website. This assignment directs the students to look at any Current
Projects being studied by the GASB for the possibility of impacting generally
accepted accounting. By looking at this site on a regular basis, an accountant
can keep up with all issues studied by the Board as well as the authoritative
evolution of accounting pronouncements as new standards are produced.
Communication Case 2
Most accountants and accounting students understand that the GASB sets
official standards for the accounting and financial reporting to be carried out by
state and local governments. Probably only a small portion of either of these
groups truly knows what the established goals and mission of GASB actually are.
The following information comes from the GASB website under “About GASB”
and then “Mission, Vision, and Core Values.”
“Vision
“Greater accountability and well-informed decision making through excellence in
public-sector financial reporting.
“Mission
“Objectivity: Impartial decisions informed by credible research and thorough
deliberations, including due consideration of the views of constituents and the
work of other standards setters.
“Transparency: An open process that encourages and values public
participation.”
Communication Case 3
Students do not always appreciate the amount of discussion, debate, and
compromise that FASB and GASB usually must go through to arrive at an official
accounting pronouncement. Because of their inexperience, students sometimes
see the creation of accounting standards as a quest for the one true and correct
path. One way of accounting is right for each situation and all other ways are
necessarily wrong.
In practice, though, many possible "right" ways usually exist as potential
solutions to any accounting problem. Because of the public debate created by
many of these issues, authoritative bodies often receive numerous
However, the Board does help to explain its standards by presenting extensive
background information. This assignment is designed to give students the
the financial reporting of a state or local government.
The paragraphs assigned here present a number of different approaches that
were suggested by members of the public and considered by the GASB. In all
financial statements and fund financial statements mandated by GASB 34.
Many respondents preferred a single set of financial statements rather than
the dual approach finally chosen. However, GASB found that there was no
consensus that any one set of statements was preferable or provided the
needed information by itself.
The suggestion was also made that fund financial statements for
governmental funds not be based on measuring and reporting current
financial resources. Rather, each government would use the basis of
accounting utilized for budgetary purposes (such as a cash system or a
modified cash system). This argument held that fund financial statements
are created to provide control and financial accountability which is
established by the budgetary process and should, therefore, reconcile with
Communication Case 4
One of the truly significant additions to state and local government
accounting in recent years has been the requirement of the Management’s
Discussion and Analysis (MD&A). The MD&A is meant to be a discussion of
the financial information reported by the government in a verbal rather than
purely quantitative fashion. Students often do not understand the range of
information that can be uncovered within an MD&A. Here, the student can
read the MD&A for an actual city. The information that is provided is quite
extensive and often covers a wide range of subjects such as the following:
An explanation of fund financial statements.
An explanation of government-wide financial statements.
An explanation of governmental funds, proprietary funds, and fiduciary
funds.
Information about proprietary operations.
Excel Case 1
Creation of this type of spreadsheet would appear to be very helpful in budget
planning because city officials could plug in various increase and decrease rates
and see the impact on the fund balance over time. There are a number of different
ways that a spreadsheet could be created to solve this particular problem. Here
is one possible approach:
Create Column Headings:
In Cell A4, enter label text "Year"
In Cell B4, enter label text "Revenue Change"
In Cell C4, enter label text "Revenues"
Click and drag across Cells A4 to H4. Select Format, Cells, Alignment, and click
the "Wrap Text" box. Click OK. If needed, place the cursor on the line between the
Column Letters and drag the boundary on the right side of the column headings
until the columns are the width you want.
Perform Calculations:
In Cell B6, enter formula to calculate Revenue Change (Revenue times Projected
Revenue Change): =+C5*$G$5. Note here that adding the $ symbol to Column and
Row addresses creates an "absolute" reference which will remain static
throughout the spreadsheet.
=+E5+D6
In Cell F6, enter formula to calculate the new ending Fund Balance (initial Fund
Balance plus Revenue minus Expenditures): =+F5+C6-E6
Copy formulas to adjacent rows: Click and drag across Cells A6 through F6 and
release. Place cursor on Fill Handle (small black box in lower right corner of
selection box) and click and drag down through Row 8.
