Chapter 02 – Overview of Financial Reporting for State and Local Governments
2-1
CHAPTER 2 Overview of Financial Reporting for State and Local Governments
2-1. THE SOLUTION TO THIS AND THE FIRST EXERCISE OF CHAPTERS 1 AND 3 THROUGH 9
2-2.
A. A FINANCIAL REPORTING ENTITY IS A PRIMARY GOVERNMENT,
ORGANIZATIONS FOR WHICH THE PRIMARY GOVERNMENT IS FINANCIALLY
ACCOUNTABLE, AND OTHER ORGANIZATIONS FOR WHICH THE NATURE AND
SIGNIFICANCE OF THEIR RELATIONSHIP WITH THE PRIMARY GOVERNMENT
ARE SUCH THAT EXCLUSION WOULD CAUSE THE REPORTING ENTITY‘S
ACCOUNTABLE. IN ADDITION, A COMPONENT UNIT CAN BE ANOTHER
ORGANIZATION FOR WHICH THE NATURE AND SIGNIFICANCE OF ITS
RELATIONSHIP WITH A PRIMARY GOVERNMENT ARE SUCH THAT EXCLUSION
WOULD CAUSE THE REPORTING ENTITY‘S FINANCIAL STATEMENTS TO BE
MISLEADING OR INCOMPLETE. AN EXAMPLE MIGHT BE A LIBRARY WITH A
Chapter 02 – Overview of Financial Reporting for State and Local Governments
2-2
2-3.
A. THE THREE MAJOR SECTIONS OF THE COMPREHENSIVE ANNUAL FINANCIAL REPORT
ARE THE INTRODUCTORY, FINANCIAL, AND STATISTICAL SECTIONS.
B. THE GOVERNMENT-WIDE FINANCIAL STATEMENTS ARE THE STATEMENT OF NET
POSITION AND THE STATEMENT OF ACTIVITIES. GOVERNMENT-WIDE STATEMENTS
ARE PRESENTED USING THE ECONOMIC RESOURCES MEASUREMENT FOCUS AND THE
Chapter 02 – Overview of Financial Reporting for State and Local Governments
2.4 THE GENERAL FUND IS ALWAYS CONSIDERED A MAJOR FUND. OTHER
GOVERNMENTAL FUNDS ARE CONSIDERED MAJOR WHEN BOTH OF THE FOLLOWING
CONDITIONS EXIST: (A) TOTAL ASSETS, LIABILITIES, REVENUES, OR EXPENDITURES
OF THAT INDIVIDUAL GOVERNMENTAL FUND CONSTITUTE 10 PERCENT OF THE
• OPERATING ACTIVITIES ARE THOSE ASSOCIATED WITH OPERATING INCOME.
AS A RESULT, CASH FLOWS FROM INTEREST EXPENSE, INTEREST REVENUE
2-5 SEVERAL DIFFERENCES EXIST BETWEEN THE GASB FORMAT CASH FLOW
STATEMENT AND THE FASB FORMAT REQUIRED OF COMMERCIAL BUSINESSES:
1) GASB REQUIRES GOVERNMENTS TO PREPARE CASH FLOWS FROM OPERATING
ACTIVITIES ON THE DIRECT METHOD.
2) THE RECONCILIATION OF INCOME TO CASH FLOWS FROM OPERATING
ACTIVITIES OF THE PROPRIETARY FUND, WHICH APPEARS IN THE BOTTOM
SECTION OF THE STATEMENT, BEGINS WITH OPERATING INCOME, NOT NET
INCOME (OR TOTAL CHANGE IN NET POSITION).
3) THE STATEMENT HAS FOUR SECTIONS, RATHER THAN THE THREE OBSERVED
IN FASB FORMAT STATEMENTS. THESE INCLUDE:
• NONCAPITAL RELATED FINANCING ACTIVITIES INVOLVE THE BORROWING
AND PAYMENT (INCLUDING INTEREST) OF LOANS FOR PURPOSES OTHER THAN
FINANCING CAPITAL ADDITIONS – CHIEFLY, BORROWING FOR OPERATIONS.
• CAPITAL AND RELATED FINANCING INCLUDE GRANTS AND DEBT
TRANSACTIONS (INCLUDING INTEREST) USED TO FINANCE CAPITAL
ADDITIONS.
INVESTMENTS AS WELL AS CASH RECEIVED FROM INVESTMENT INCOME.
Chapter 02 – Overview of Financial Reporting for State and Local Governments
2-4
2-6. THE DIFFERENCE BETWEEN ASSETS AND LIABILITIES IS CALLED NET POSITION AND IS
REPORTED IN THREE CATEGORIES:
▪ NET INVESTMENT IN CAPITAL ASSETS IS COMPUTED BY TAKING THE CAPITAL
ASSETS, LESS ACCUMULATED DEPRECIATION, AND DEDUCTING OUTSTANDING DEBT
Chapter 02 – Overview of Financial Reporting for State and Local Governments
2-7. CITY OF SOUTHERN SPRINGS
STATEMENT OF NET POSITION
APRIL 30, 2015
GOVERNMENTAL
ACTIVITIES
BUSINESS-TYPE
ACTIVITIES
TOTAL
ASSETS:
CASH AND CASH EQUIVALENTS
RECEIVABLES
INVENTORIES
CAPITAL ASSETS, NET
TOTAL ASSETS
$3,880,000
750,000
10,500,000
15,130,000
$ 850,000
1,330,000
520,000
11,350,000
14,050,000
LIABILITIES:
ACCOUNTS PAYABLE
NONCURRENT LIABILITIES
TOTAL LIABILITIES
650,000
5,350,000
6,000,000
659,000
3,210,000
3,869,000
NET POSITION:
NET INVESTMENT IN CAPITAL
ASSETS
RESTRICTED FOR DEBT SERVICE
UNRESTRICTED
TOTAL NET POSITION
5,150,000
754,000
3,226,000
$9,130,000
8,140,000
223,000
1,818,000
$10,181,000
Chapter 02 – Overview of Financial Reporting for State and Local Governments
2-8. CITY OF NORTHERN PINES
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2015
PROGRAM REVENUES
NET(EXPENSE)REVENUE AND CHANGE IN NET POSITION
FUNCTIONS/PROGRAMS
EXPENSES
CHARGES FOR
SERVICES
OPERATING
GRANTS
GOVERNMENTAL
ACTIVITIES
BUSINESS-TYPE
ACTIVITIES
TOTAL
GOVERNMENTAL ACTIVITIES:
GENERAL GOVERNMENT
PUBLIC SAFETY
PUBLIC WORKS
HEALTH AND SANITATION
CULTURE AND RECREATION
INTEREST ON LONG-TERM DEBT
TOTAL GOVERNMENTAL ACTIVITIES
$10,100,000
22,900,000
11,890,000
6,210,000
4,198,000
1,021,000
56,319,000
$1,110,000
1,210,000
2,555,000
2,198,000
________
7,073,000
$ 698,000
1,210,000
________
1,908,000
$(8,990,000)
(20,992,000)
(11,890,000)
(2,445,000)
(2,000,000)
( 1,021,000)
(47,338,000)
$
$(8,990,000)
(20,992,000)
(11,890,000)
(2,445,000)
(2,000,000)
(1,021,000)
(47,338,000)
BUSINESS-TYPE ACTIVITIES:
WATER AND SEWER SYSTEM
PARKING SYSTEM
TOTAL BUSINESS-TYPE ACTIVITIES
11,550,000
419,000
11,969,000
12,578,000
398,000
12,976,000
—-
—-
—-
—-
—-
—-
1,028,000
(21,000)
1,007,000
1,028,000
21,000
1,007,000
TOTAL – PRIMARY GOVERNMENT
$68,288,000
$20,049,000
$1,908,000
(47,338,000)
1,007,000
(46,331,000)
GENERAL REVENUES:
PROPERTY TAXES
SALES TAXES
INVESTMENT EARNINGS
SPECIAL ITEM-GAIN ON SALE OF LAND
TRANSFERS
TOTAL GENERAL REVENUES,
SPECIAL ITEMS, AND TRANSFERS
27,112,000
20,698,000
1,250,000
(688,000)
48,372,000
319,000
688,000
1,007,000
27,112,000
20,698,000
319,000
1,250,000
–
49,379,000
Chapter 02 – Overview of Financial Reporting for State and Local Governments
2-7
2-9 CITY OF EASTERN SHORES
GENERAL FUND STATEMENTS OF REVENUES,
EXPENDITURES, AND CHANGES IN FUND BALANCE
FOR THE YEAR ENDED SEPTEMBER 30, 2015
REVENUES:
PROPERTY TAXES
$28,120,000
SALES TAXES
13,216,000
FEES AND FINES
1,124,000
LICENSES AND PERMITS
1,921,000
INTERGOVERNMENTAL REVENUES
1,368,000
INVESTMENT EARNINGS
654,000
TOTAL REVENUES
46,403,000
EXPENDITURES:
CURRENT:
GENERAL GOVERNMENT
$ 10,252,000
PUBLIC SAFETY
24,444,000
PUBLIC WORKS
6,211,000
HEALTH AND SANITATION
1,163,000
CULTURE AND RECREATION
2,154,000
DEBT SERVICE:
PRINCIPAL
652,000
INTEREST
821,000
TOTAL EXPENDITURES
45,697,000
EXCESS OF REVENUES OVER EXPENDITURES
706,000
OTHER FINANCING SOURCES (USES):
PROCEEDS OF LONG-TERM, CAPITAL RELATED DEBT
2,210,000
TRANSFER TO SPECIAL REVENUE FUND
(1,119,000)
TOTAL OTHER FINANCING SOURCES (USES)
1,091,000
SPECIAL ITEM: PROCEEDS FROM SALE OF LAND
821,000
NET CHANGE IN FUND BALANCE
2,618,000
FUND BALANCE, BEGINNING OF YEAR
1,812,000
FUND BALANCE, END OF YEAR
$4,430,000
Chapter 02 – Overview of Financial Reporting for State and Local Governments
2-10. CITY OF WESTERN SANDS
WATER AND SEWER FUND
STATEMENT OF REVENUES, EXPENSES,
AND CHANGES IN FUND NET POSITION
YEAR ENDED DECEMBER 31, 2015
OPERATING REVENUES:
CHARGES FOR SERVICES
$17,687,000
OPERATING EXPENSES:
PERSONNEL SERVICES
$ 6,977,000
CONTRACTUAL SERVICES
2,195,000
UTILITIES
888,000
REPAIRS AND MAINTENANCE
1,992,000
DEPRECIATION
5,422,000
TOTAL OPERATING EXPENSES
17,474,000
OPERATING INCOME
213,000
NONOPERATING REVENUES (EXPENSES):
INTEREST REVENUE
STATE AID
129,000
100,000
INTEREST EXPENSE
(534,000)
TOTAL NONOPERATING REVENUES AND EXPENSES
(305,000)
INCOME (LOSS) BEFORE CONTRIBUTIONS AND
TRANSFERS
(92,000)
CAPITAL CONTRIBUTIONS
1,632,000
TRANSFER TO GENERAL FUND
(965,000)
CHANGE IN NET POSITION
575,000
NET POSITION, BEGINNING OF YEAR
4,500,000
NET POSITION, END OF YEAR
$5,075,000
Chapter 02 – Overview of Financial Reporting for State and Local Governments
2-11.
#
INFORMATION ITEM
STATEMENT
$ AMOUNT
A.
TOTAL CAPITAL OUTLAY FOR THE
COURTHOUSE RENOVATION
STATEMENT OF REVENUES
EXPENDITURES & CHANGES IN FUND
BALANCE – GOVERNMENTAL FUNDS
$ 10,924,818
B.
TOTAL CASH PAID FOR CAPITAL ADDITIONS
FOR THE SOLID WASTE FUND
STATEMENT OF CASH FLOWS–
PROPRIETARY FUNDS
$ 456,179
C.
INTEREST PAID (NOT EXPENSE) ON
GENERAL LONG–TERM DEBT
STATEMENT OF REVENUES
EXPENDITURES & CHANGES IN FUND
BALANCE – GOVERNMENTAL FUNDS
$ 924,818
D.
INTEREST PAID (NOT EXPENSE) ON WATER
DEPARTMENT DEBT
STATEMENT OF CASH FLOWS–
PROPRIETARY FUNDS
$ 535,567
E.
CAPITAL ASSET (NET) FOR THE
GOVERNMENT’S COMPONENT UNITS
STATEMENT OF NET POSITION
(GOVERNMENT–WIDE)
$ 11,197,985
F.
CONTRIBUTIONS RECEIVED FOR USE BY THE
PRIVATE PURPOSE TRUST
STATEMENT OF CHANGES IN FIDUCIARY
NET POSITION
$ 100,000
G.
NONCURRENT LIABILITIES ASSOCIATED
WITH GOVERNMENTAL ACTIVITIES THAT
ARE DUE IN MORE THAN ONE YEAR.
STATEMENT OF NET POSITION
(GOVERNMENT–WIDE)
$ 39,834,882
H.
NONCASH CONTRIBUTIONS OF CAPITAL
ASSETS FOR THE WATER DEPARTMENT.
STATEMENT OF CASH FLOWS–
PROPRIETARY FUNDS
$ 3,085,946
2-12.
#
INFORMATION ITEM
STATEMENTS
$ AMOUNT
A.
TOTAL FUND BALANCE OF THE
SPECIAL REVENUE FUND
STATEMENT OF REVENUES
EXPENDITURES & CHANGES
IN FUND BALANCE –
GOVERNMENTAL FUNDS
BALANCE SHEET –
GOVERNMENTAL
FUNDS
$ 572,014
B.
NET POSITION AVAILABLE FOR
EMPLOYEE PENSIONS
STATEMENT OF CHANGES IN
FIDUCIARY NET POSITION
STATEMENT OF
FIDUCIARY NET
POSITION
$ 10,983,590
C.
OPERATING INCOME FOR THE
INTERNAL SERVICE FUNDS
STATEMENT OF REVENUES,
EXPENSES, AND CHANGES IN
FUND NET POSITION –
PROPRIETARY FUNDS
STATEMENT OF
CASH FLOWS–
PROPRIETARY
FUNDS
$ 23,822
D.
NET POSITION OF THE PRIMARY
GOVERNMENT
STATEMENT OF NET
POSITION (GOVERNMENT–
WIDE)
STATEMENT OF
ACTIVITIES
(GOVERNMENT–
WIDE)
$ 86,285,455