9-c
Total fund balances 801,091$
Capital assets used in governmental activities are not 19,299,826
financial resources and therefore are not reported in
in the funds
City of Smithville
Reconciliation of the Governmental Funds Balance Sheet
to the Government-Wide Statement of Net Position
As of December 31, 2017
9-c
assets is allocated over their estimated useful lives as
depreciation expense. This includes $2,335,330 reported
as construction expenditures in the capital project fund
and $32,340 of equipment purchased by the General
Fund and reported as expenditures
Repayment of bond principal is an expenditure in the
governmental funds, but the repayment reduces long-
term liabilities in the statement of net position. There was
no repayment of bond principal during the year but new
bonds were issued in this amount (including unamortized
was reported in the statement of activities in the
amount of: (40,000)
Some expenditures reported use current financial resources
but are reported as current assets and therefore are not
reported as expenses in the statement of activities. There
For the Year Ended December 31, 2017
City of Smithville
Reconciliation of the Statement of Revenues, Expenditures,
and Changes in Fund Balances of Governmental Funds
to the Government-wide Statement of Activities
9-c
Governmental
Enterprise Funds Activities—
Solid Waste Internal
Disposal Totals Service Funds
Assets
Current assets:
Cash 402,221$
Noncurrent assets:
Capital assets:
Land 600,000
Liabilities
Current Liabilities:
Vouchers payable 40,080
Business-type Activities—
9-c
Governmental
Enterprise Funds Activities—
Solid Internal
Waste Service
Disposal Totals Funds
Operating Revenue:
Charges for services (net of $3,060 provision for 2,246,572$
doubtful accounts)
Operating Expenses:
Payroll and fringe benefits expense 1,221,057
Nonoperating Expenses:
Business-type Activities—
City of Smithville
Statement of Revenues, Expenses, and Changes in Fund Net Position
Proprietary Funds
For Year Ended December 31, 2017
Governmental
Activities—
Solid Internal
Waste Service
Disposal Totals Funds
Cash flows from operating activities:
Cash received from customers 2,234,545$
Cash paid to employees (1,221,724)
Cash paid to suppliers (790,600)
Net cash used by operating activities 222,221
Cash flows from capital and related
financing activities:
Reconciliation of Operating Income to
Net Cash Used by Operating Activities
Operating income 76,745$
Business-type Activities—
Enterprise Funds
City of Smithville
Statement of Cash Flows
Proprietary Funds
For Year Ended December 31, 2017
Indicator (Ill 10-3) Formula Source Values Calculation
Revenue Measures:
General Fund intergovt revenues General fund financial statements 275,000$
Total General Fund revenues General fund financial statements 5,282,873$
Operating revenues GF financial statements 5,310,873$
Interest payment on debt Debt service fund financial statements 40,000$
General Fund operating revenue General fund financial statements 5,282,873$
Unrestricted net position
GW financial statements 640,671$
GW financial statements 5,792,873$
GW financial statements 2,337,892$
GW financial statements 20,359,144$
GW financial statements 1,059,318$
GW financial statements 298,227$
GW financial statements 5,792,873$
Total governmental activities expenses
GW financial statements 5,976,422$
GW financial statements 2,039,665$
GW financial statements 2,039,665$
Legal debt limit Calculated in chapter 6 of problem 23,178,182$
GO = general obligation
GW = government-wide
7)
8)
14)
9)
10)
11)
12)
13)
Chapter 10 – Ratio Analysis
1)
0.115
Intergovernmental revenues
0.052
3.552
0.969
81.587
0.088
0.049
0.008
0.111
Interperiod equity
Bonded debt per capita
Available legal debt limit
Current liabilities
Debt service
Debt to assets
Current ratio
Interpretation of Ratios
(Note to Instructor – It is not expected that your students would need to prepare all of the
following ratios. Ratios that were redundant were not calculated, for example the liquidity ratio
and the quick ratio were not both calculated.)
1) At 5.2% of total revenues, it does not appear that intergovernmental revenues constitute a
2) This ratio, while slightly greater than one (1.018), is considered to be about average (1.0).
6) With a ratio of .006, Smithville’s long-term debt ratio is well below the ratio of .10 that
7) Smithville is at the margin with a current liabilities ratio of .049. A ratio of .05 is considered
a warning sign. As a result, this is a ratio Smithville will want to watch.
11) The current ratio for Smithville is 3.552, indicating a strong financial position ratio.
12) The interperiod equity ratio of .969 is less than one, indicating that not all of the expenses are
13) The bonded debt per capita is $81.59. Without additional information about the population
demographics, such as unemployment, average salaries, overlapping debt and taxes per
14) At a ratio of .088, only a small percentage of the available legal debt limit has been used.
Overall the City of Smithville seems to be in an acceptable financial position. The ratios indicate
Chapter 11
The auditor’s report for the City of Smithville should follow the wording of Illustration 11-1.
An unmodified report, similar to that shown in Illustration 11-1 appears to be appropriate for the
year ended December 31, 2017. If a student issued a “qualified” opinion for some reason it
should use the wording specified in the audit guide, and as summarized in Illustration 11-2. If
the wording specified by the audit guide is not used it will provide you with an opportunity to
explain to the student why the specified report wording is critical to an auditor.
An unmodified report would appear as follows:
The Honorable Mayor, City Council, and City Manager, City of Smithville
We have audited the accompanying financial statements of the governmental activities, the business–type
activities, each major fund, and the aggregate remaining fund information of the City of Smithville, (State), as
of and for the year ended December 31, 2017, and the related notes to the financial statements, which
collectively comprise the City’s basic financial statements as listed in the table of contents.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s
discussion and analysis and budgetary comparison information be presented to supplement the basic financial
statements. Such information, although not a part of the basic financial statements, is required by the
Other Information
them.