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The solution to this and the first exercise of Chapters 1 and 3 through 9 will differ from student to student assuming each has a different CAFR. 1. 2. 3. 4. 5. 1. 2. 3. 4. 5. C. D. A. D. C. B. C. B. B. D. 6. B. 7. D. 8. B. 9. B. 10. D. 6. A. 7. D. 8. C. 9. D. 10. D
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 financial statements to be misleading or incomplete. A primary government is a state government or general purpose local government. It is also a special-purpose government that has a separately elected governing body, is legally separate, and is fiscally independent of other state or local governments. An example of a primary government would be any state, municipality, or county (general purpose governments) and any specialpurpose local government that meets the above criteria. In Illinois, school disricts are generally primary governments as the governing boards are independently elected, levy their own taxes, and are financially independent. A component unit is a legally separate organization for which the elected officials of the primary government are financially 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 separate board appointed by a city council and in which the city council must approve its budget and make up its deficits. The two primary methods for reporting component units in the financial statements of a primary government are blending and discrete presentation. Blending reports the component unit as one of the funds of the primary government, which then results in including the component unit as part of the basic financial statements. Blending is used only when component units are "so intertwined with the primary government that they are, in substance, the same as the primary government.” Discrete presentation involves reporting the component unit in a column to the right of the primary government in the government-wide financial statements of the reporting entity. GASB intended that most component units would be discretely presented. 2-1
2-5. A. B.
The three major sections of the Comprehensive Annual Financial Report are the introductory, financial, and statistical sections. The Government-Wide Financial Statements are the Statement of Net Assets and the Statement of Activities. Government-Wide Statements are presented using the economic resources measurement focus and the accrual basis of accounting. The Governmental Fund Statements are the Balance Sheet and the Statement of Revenues, Expenditures, and Changes in Fund Balances. Governmental Fund Statements are presented using the current financial resources measurement focus and modified accrual basis of accounting. The Proprietary Fund Statements are the Statement of Net Assets (or Balance Sheet), Statement of Revenues, Expenses, and Changes in Fund Net Assets, and the Statement of Cash Flows. The Proprietary Fund Statements are prepared using the economic resources measurement focus and the accrual basis of accounting. The Fiduciary Fund Statements are the Statement of Fiduciary Net Assets and the Statement of Changes in Fiduciary Net Assets. Fiduciary Fund Statements are prepared using the economic resources measurement focus and the accrual basis of accounting. Management's Discussion and Analysis (MD&A) is considered to be Required Supplementary Information (RSI) and is presented in the financial section after the auditor's report. The remainder of RSI is generally presented after the notes to the financial statements and includes (a) a schedule of funding progress and a schedule of employer contributions for pension plans included in the report, (b) budgetary comparison schedules, (c) information regarding infrastructure assets when using the modified approach, and (d) information required for risk financing pools.
2-6. A. Applying the 10% test: HUD Programs Fund Assets (Illustration 2-5) Liabilities (Illustration 2-5) Revenues (Illustration 2-6) 7,504,765 6,428,389 2,731,473 Total Governmental Funds 51,705,690 16,812,584 97,482,467 Percentage 14.5* 38.2* 2.8 2.4
Expenditures (Illustration 2-6) 2,954,389 21,332,470 * Exceeds the 10% cut-off; to be considered for the 5% test.
2-6 B. Applying the 5% test: (a) Hud Programs Fund (Ill. 2-5) Assets Liabilities 7,504,765 6,428,389 (b) Total Governmental Funds (Ill. 2-5) 51,705,690 16,812,584 (c) Total enterprise Funds (Ill. 2-8) 165,404,18 3 79,834,98 9 (d) Total Governmental and Enterprise Funds 217,109,873 96,647,573 (a/d)
Percentage 3.5 6.7**
**Exceeds the 5% cut-off. Therefore, the HUD Programs Fund must be considered a major fund. 2-7. CITY OF SOUTHERN SPRINGS STATEMENT OF NET ASSETS APRIL 30, 2007 Governmental Activities Assets: Cash and Cash Equivalents Receivables Inventories Capital Assets, Net Total Assets Liabilities: Accounts Payable Noncurrent Liabilities Total Liabilities Net Assets: Invested in Capital Assets, Net of Related Debt Restricted for Debt Service Unrestricted Total Net Assets $1,880,000 459,000 12,500,000 14,839,000 650,000 5,350,000 6,000,000 Business-Type Activities $ 850,000 1,330,000 520,000 10,340,000 13,040,000 559,000 3,210,000 3,769,000 Total $2,730,000 1,789,000 520,000 22,840,000 27,879,000 1,209,000 8,560,000 9,769,000
8,123,000 654,000 62,000 $8,839,000
7,159,000 323,000 1,789,000 $9,271,000
15,282,000 977,000 1,851,000 $18,110,000
Functions/Programs Governmental Activities: General Government Public Safety Public Works Health and Sanitation Culture and Recreation Interest on Long-Term Debt Total Governmental Activities Business-Type Activities: Water and Sewer System Parking System Total Business-Type Activities Total
Expenses $10,300,000 23,900,000 11,290,000 6,210,000 4,198,000 621,000 56,519,000 11,550,000 419,000
CITY OF NORTHERN PINES STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2007 Program Revenues Net(Expense)Revenue and Change in Net Assets Charges for Operating Governmental Business-Type Services Grants Activities Activities Total $1,110,000 210,000 2,555,000 2,198,000 ________ 6,073,000 11,578,000 398,000 $ 698,000 1,210,000 ________ 1,908,000 ---------$1,908,000 $(9,190,000) (22,992,000) (11,290,000) (2,445,000) (2,000,000) ( 621,000) (48,538,000) ---------(48,538,000) 27,112,000 20,698,000 319,000 1,250,000 (688,000) 48,372,000 ( 166,000) 13,222,000 $13,056,000 688,000 1,007,000 1,014,000 22,333,000 $23,347,000 28,000 21,000 7,000 7,000 $ $(9,190,000) (22,992,000) (11,290,000) (2,445,000) (2,000,000) ( 621,000) (48,538,000) 28,000 21,000 7,000 (48,531,000) 27,112,000 20,698,000 319,000 1,250,000 49,379,000 848,000 35,555,000 $36,403,000
11,969,000 11,976,000 $68,488,000 $18,049,000
General Revenues: Property Taxes Sales Taxes Investment Earnings Special Item-Gain on Sale of Land Transfers Total General Revenues, Special Items, and Transfers Change in Net Assets Net Assets, July 1, 2006 Net Assets, June 30, 2007
2-9. CITY OF EASTERN SHORES GENERAL FUND STATEMENTS OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES YEAR ENDED SEPTEMBER 30, 2007 Revenues: Property Taxes Sales Taxes Fees and Fines Licenses and Permits Intergovernmental Revenues Investment Earnings Total Revenues Expenditures: Current: General Government Public Safety Public Works Health and Sanitation Culture and Recreation Debt Service: Principal Interest Total Expenditures Excess of Revenues Over Expenditures Other Financing Sources (Uses): Proceeds of Long-Term, Capital Related Debt Transfer to Special Revenue Fund Total Other Financing Sources (Uses) Special Item: Proceeds From Sale of Land Net Change in Fund Balance Fund Balance, October 1, 2006 Fund Balance, September 30, 2007 1,210,000 (1,119,000) 91,000 821,000 1,028,000 13,211,000 $14,239,000 $16,000,000 23,216,000 1,124,000 1,921,000 868,000 654,000 43,783,000
$ 8,192,000 24,444,000 6,211,000 1,193,000 2,154,000 652,000 821,000 43,667,000 116,000
2-10. CITY OF WESTERN SANDS WATER AND SEWER FUND STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS YEAR ENDED DECEMBER 31, 2007 Operating Revenues: Charges for Services Operating Expenses: Personal Services Contractual Services Utilities Repairs and Maintenance Depreciation Total Operating Expenses Operating Income Nonoperating Revenues (Expenses): Interest Revenue Interest Expense Total Nonoperating Revenues and Expenses Income Before Contributions and Transfers Capital Contributions Transfer to General Fund Change in Net Assets Net Assets, January 1, 2007 Net Assets, December 31, 2007 129,000 (934,000) (805,000) 108,000 1,632,000 (1,965,000) (225,000) 13,219,000 $12,994,000 $ 6,977,000 2,195,000 888,000 1,492,000 5,922,000 17,474,000 913,000 $18,387,000
2-11. A. The Certificate of Achievement for Excellence in Financial Reporting Program, established in 1945, is designed to recognize and encourage in financial reporting by state and local governments. Participation in the program reflects a significant portion of larger general purpose programs in the United States. Over 68 percent of all cities and 46 percent of all counties in the United States in excess of 50,000 population participate in the program. 42 states participate. 3100 2000 CAFR’s were submitted. Three municipalities from Illinois include Chicago, Evanston, and DeKalb. Students from other states will have different answers, and students from Illinois may pick different governments. Three reviewers from Illinois include Gerald Brighton, University of Illinois, John Engstrom, Northern Illinois University, and Linda Abernethy, McGladrey & Pullen. Students from other states will have different answers, and students from Illinois may pick different individuals. The reports required for basic financial statements listed in Question 5.1 agree with the statements listed in the text. (It is not permissable to list these in this manual due to copyright restrictions.) Remember that adobe acrobat is required to read this file.
2-C. SEE SOLUTION TO CONTINUOUS PROBLEM 4-C