©surgent Professional Education

VIDEO LECTURE NOTES—SIMULATION:
GOVERNMENTAL ACCOUNTING AND REPORTING— GENERAL FUND
SIMULATION
Solutions to the simulation can be found at the end of the Video Lecture Notes.
Required: In the space provided below, complete the journal entries for Cooper City using the
following information:
1. On the first day of the fiscal year, Cooper City adopted the following budget:
 Estimated Tax Revenues: $100,000
 Legislative Authority to spend: $97,000
 Estimated Permanent Transfer to Debt Service Fund: $2,000
 Estimated Permanent Transfer from Capital Projects Fund: $7,000
2. Cooper City levies real estate taxes of $108,000 ($8,000 estimated to be uncollectible)
3. Cooper City collects $106,000 in real estate taxes; two entries required (Note: collections
were greater than budget)
4. Cooper City collects $11,000 from parking meters (recorded on the cash basis when
collected)
5. Cooper City approves purchase orders for goods, services, and supplies estimated to cost
$82,000 (includes a copy machine estimated to cost $6,000)
6. Cooper City billed $75,000 for goods, services, and supplies estimated to cost $71,000
(two entries are required here)
7. Invoices for $75,000 were approved for payment by Cooper City
8. Cooper City was billed $6,500 for a copy machine (two entries required)
9. Inventory of supplies based on physical count $1,000; Cooper City uses the Purchase
Method
10. The General Fund makes a temporary transfer of $3,000 to the Special Revenue Fund (SRF);
record the entry for the General Fund and the Special Revenue Fund
11. The General Fund receives a permanent transfer of $7,000 from the Capital Projects Fund
(CPF) (Note: permanent transfers use Other Financing Sources or Other Financing Uses);
record the entry for the General Fund and the Capital Projects Fund
12. The General Fund makes a permanent transfer of $2,000 to the Debt Service Fund (DSF);
record the entry for the General Fund and the Debt Service Fund
13. Record the three closing entries
©Surgent Professional Education 1

Simulation: General Fund
SIMULATION SOLUTIONS
#1: Record the Budget

Estimated Revenues Control 100,000
Estimated Other Financing Sources 7,000
Appropriations Control 97,000
Appropriations—Other Financing Uses 2,000
Budgetary Fund Balance 8,000
#2: Record the entry to levy taxes
Taxes Receivable—Current 108,000
Estimated Uncollectible Taxes 8,000
Revenues Control (actual) 100,000
#3: Record the entries to collect taxes
Cash 106,000
Taxes Receivable Current 106,000
Estimated Uncollectible Taxes 6,000
Revenues Control 6,000
#4: Record the entry to collect meter revenues
Cash 11,000
#5: Record the entry for approved purchase orders
Encumbrance Control 82,000
Budgetary FB Reserve—Encumbrances 82,000
#6: Record the entries for receipt of invoices
Expenditures Control 75,000
Vouchers Payable 75,000
#7: Record the entry for payment of Invoices
Cash 75,000
#8: Record the entry for copy machine payment
#9: Record the entry for the Supplies Inventory
Supplies Inventory 1,000
Nonspendable Fund Balance 1,000
#10: Record the Temporary Transfer to the SRF
General Fund:
Due from Special Revenue Fund 3,000
Cash 3,000
Special Revenue Fund:

Cash 3,000
2
Simulation: General Fund
Due to General Fund 3,000

#11: Record the Permanent Transfer from the CPF
Cash 7,000
Other Financing Source 7,000
Capital Projects Fund:

Other Financing Use 7,000
Cash 7,000
#12: Record the Permanent Transfer to the DSF
Other Financing Use 2,000
Cash 2,000
Debt Service Fund:

Cash 2,000
Other Financing Source 2,000
Closing Entries:
#1: Close the Budget – Reverse the Original Entry
Appropriations Control 97,000
Appropriations—Other Financing Uses 2,000
Budgetary Fund Balance 8,000
Estimated Revenues Control 100,000
Estimated Other Financing Sources 7,000
#2: Close Actual Accounts
Other Financing Sources Control 7,000
Other Financing Uses Control 2,000
Unassigned Fund Balance 40,500
#3: Close the Encumbrances (two entries)
Unassigned Fund Balance 5,000

Committed Fund Balance 5,000
3
Government‐Wide Financial Statements
VIDEO LECTURE NOTES—

CONCEPTUAL FRAMEWORK
GASB Defined
The Governmental Accounting Standards Board (GASB) establishes accounting and financial
reporting standards for U.S. state and local governments. GASB was formed because:
1. Government entities are fundamentally different than for‐profit businesses.
2. Informational needs of users are different than the needs of users of public company infor‐
mation.
Differences Between Businesses and Governments
Private Sector (Business) Public Sector (Government)

Ownership Interests Shareholders None
Profit Motive Yes No
Linkage Between Revenues Yes No
and Expenses
Budgets Internal External/The Law
Capital Investments Growth Infrastructure
Resource Restrictions No Yes
GASB Concepts Statements

Statement # Statement
Title
1 Objectives of Financial Reporting
2 Service Efforts and Accomplishments Reporting—as amended by GASB Concepts
Statements No. 3 and 5
3 Communication Methods in General Purpose External Financial Reports That
Contain Basic Financial Statements
4 Elements of Financial Statements
5 SEA Reporting—an amendment of GASB Concepts Statement No. 2
6 Measurement of Elements of Financial Statements
Conceptual Framework
Accountability
1. Most governmental entities rely upon taxation to fund their activities.
2. The entities are accountable to the public; they must justify how public resources are:
a. Raised
b. Managed
c. Safeguarded
©Surgent CPA Review, LLC 4

VIDEO LECTURE NOTES— MEASUREMENT

FOCUS AND BASIS OF ACCOUNTING
Levels of Reporting
The Comprehensive Annual Financial Report (GASB No. 34) requires two levels of reporting for all
state and local government units
1. Government‐Wide Financial Statements
a. Demonstrates operational efficiency (i.e., how effectively the organization has
been using its resources); uses accrual accounting
2. Fund‐Based Financial Statements
a. Demonstrates fiscal accountability of the management of each fund; uses modi‐
fied accrual accounting

1. Use the accrual basis of accounting, like the private sector and nonprofits
2. Focus on the flow of economic resources
3. Global perspective of efficiency and effectiveness of the government meeting service
perspective
Fund Financial Statements

1. Use the modified accrual basis of accounting
2. Focus on the flow of financial resources
3. Local perspective of inflows and outflows of resources within a self‐balancing fund
Unique Features of Modified Accounting

1. Special financial statement elements
a. Deferred Inflows and Outflows
b. Fund Balances
c. Interfund Loans/Transfers
2. Revenues follow a different recognition criteria
3. Encumbrance accounting
Measurement Focus and Basis of
Accounting
Modified Accrual Accounting
1. The governmental funds use the modified accrual basis of accounting
a. Revenue is recorded in the accounting period in which it is both measurable and
available to finance expenditures made during the current fiscal period
b. Expenditures are recognized in the period in which the liabilities are both
measurable and incurred and are payable out of current financial resources
c. Interfund Loans/Transfers
2. Measurable means that the amount of the revenue or expenditure can be objectively
determined
3. Available means due or past due and receivable within the current period and collected
within the current period or expected to be collected soon enough thereafter
a. A period not more than 60 days after the end of the current fiscal period
Reconciliations
1. Since the government‐wide statements use normal accrual methods and the fund
financial statements use modified accrual, two reconciliations are required
a. Government Fund Balance Sheet to Statement of Net Position
b. Net Change in Fund Balance to Change in Government‐Wide Net Position

PURPOSE OF FUNDS
Fund Accounting
Government accounts are divided into funds
1. Governments exist to perform services for the community
a. They establish different funds for different services
b. Think of a fund as a checking account
2. Fund accounting helps to maintain legal compliance and meet legal restrictions on public
resources
Types of Funds
1. Governmental Funds: Activities do not resemble commercial activities
2. Proprietary Funds: Activities resemble commercial activities; profit oriented
3. Fiduciary Funds: Holding and managing assets owned by other; cost‐recovery oriented
Governmental Proprietary Fiducia

ry
Funds 1. General Fund* 1. Internal Service Fund 1. Agency Fund
2. Special Revenue 2. Enterprise Fund 2. Private‐Purpose
Fund Trust Fund
3. Capital Projects Fund 3. Investment Trust
4. Permanent Fund Fund
5. Debt Service Fund 4. Pension Trust Fund
Basis of Accounting Modified Accrual Accrual Accrual
Budgets Yes Yes
Encumbrances Yes
* There can be only one fund

General Fund
1. The General Fund accounts for all financial resources except for those accounted for in
another fund
a. Includes most routine operations of the entity
2. General Fund revenues consist primarily of:
a. Taxes
b. Licenses
c. Fines
d. Interest
Special Revenue Fund (SRFs)
1. SRFs are used to account for revenue sources that are restricted to a specific purpose other
than debt service or capital good acquisition
a. Build highways
b. Maintain public parks
c. Operate public schools
2. Revenue usually comes from special tax levies or grants
Capital Projects Funds (CPFs)
1. CPFs account for financial resources that are specified for acquisition or construction of
major capital facilities for general government (not for enterprise or fiduciary fund purposes)
a. Libraries
b. Civic Centers
c. Fire stations
d. Courthouses
2. Revenues come from grants, proceeds of bond issues, or transfers
Debt Service Funds (DSFs)
1. DSFs account for the account for the accumulation and use of resources for the payment of
long‐term debt principal and interest
a. Interest payable is not accrued; record as a liability when it comes due and is payable
2. Revenues come from special tax levies and from transfers
Permanent Funds
1. Fund principal must be preserved (i.e., permanently retained), but the income can be used for
specified programs and services
a. Most common form of a permanent fund is an endowment fund

Proprietary Funds
1. The funds finance and account for a government’s self‐supporting business‐type activities
2. Two types
a. Enterprise funds
b. Internal service funds
Fiduciary Funds
Fiduciary funds are used to account for resources held for individuals or entities outside the
reporting government (i.e., they do not support the government’s programs). The four types of
fiduciary funds are:
1. Pension Trust
2. Private‐Purpose Trust
3. Investment Trust
4. Custodial
ANNUAL COMPREHENSIVEFINANCIAL REPORT (ACFR)

ACFR
1. Governmental entities use the reporting model established under Governmental Accounting
Standards Board (GASB) Statement 34, as amended by GASB 63.
2. The Annual Comprehensive Financial Report (ACFR) has three sections:
a. Introductory
b. Financial
c. Statistical
ACFR—Section 1
Section 1: Introductory
1. Letter of Transmittal
2. Organizational Chart
3. Roster of Officials
4. Consultants, Independent Auditors, and Advisors
ACFR—Section 2
Section 2: Financial
1. Independent Auditors’ Report
2. Required Supplementary Information—Part 1
 Includes Management’s Discussion and Analysis (MD&A)
 Budgetary Comparison Schedules
 Pension plan information

3. Basic Financial Statements

a. Government‐Wide Financial Statements
b. Fund‐Based Financial Statements
4. Notes to the Financial Statements
5. Combining and Individual Financial Statements for nonmajor funds and component units
a. Components are aggregated and reported in a separate column
b.
The internal service fund and the fiduciary funds are exempt from major and nonmajor
designations
Annual Comprehensive Financial Report
(ACFR)
ACFR—Section 2 Major Funds
Section 2: Financial—Major Funds
1. The General Fund is always major.
2. Report only major funds, not necessarily all five governmental funds
3. If funds are nonmajor, they are aggregated and reported in a single column as other govern‐
mental funds.
4. Major Fund Tests—must meet both the 10% test and the 5% test
a. 10% test: Total assets and deferred outflows, liabilities and deferred inflows, revenues, or
expenditures/expenses of that individual government or enterprise fund are at least 10%
of the corresponding total (assets/deferred outflows, liabilities/deferred inflows,
revenues, or other expenditures/expenses) for all other funds of that category or type
(governmental funds or total enterprise funds).
b. 5% Test: The same element that met the 10% criterion above is at least 5% of the corre‐
sponding element total for all funds combined.
5. Judgment: Individual governmental funds deemed important by management may be treated
as major funds per management’s judgment even if the criteria are not met.
6. Combining statement(s): must be presented in the ACFR to support the “other governmental
funds” column
 This statement is not part of the basic financial statements.
ACFR—Section 3
Section 3: Statistical
Presents detailed information, typically in 10‐year trends, to assist users in understanding the basic
financial statements, notes to basic financial statements, and required supplementary information.
Statistical information includes:
1. Financial trends information
2. Revenue information
3. Debt capacity information
4. Demographic and economic information
5. Operating information


GOVERNMENT‐WIDE FINANCIAL STATEMENTS
Levels of Reporting
The Comprehensive Annual Financial Report (Governmental Accounting Standards Board (GASB)
Statement No. 34) requires two levels of reporting for all state and local governmental units.
1. Government‐Wide (GW) Financial Statements
 Demonstrates operational efficiency (i.e., how effectively the organization has been
using its resources); uses accrual accounting
2. Fund‐Based Financial Statements*
 Demonstrates fiscal accountability of the management of each fund; uses modified
accrual accounting
* Material covered in separate lecture.
GW Financial Statements
1. Financial statements include:
a. Government‐Wide Statement of Net Position
b. Government‐Wide Statement of Activities
2. Financial statements report on:
a. Governmental activities
b. Business‐type activities
c. The primary government totals
d. Discretely presented component units
3. Fiduciary funds and fiduciary component units are not included in these statements.
Government‐Wide Statement of Net Position Format
Component
Primary Units (that
Governmen Business‐ Governme are not
tal Type nt (Total) Fiduciary in
Activities Activities nature)
Assets
Deferred outflows of
resources Liabilities:
Current liabilities
Noncurrent liabilities
Total liabilities
Deferred inflows of
resources
Net position:
0
Investment in capital
assets Restricted net
position Unrestricted
net position
Total net position
Government‐Wide Statement of Activities Format:
Component Units
1. Component units: legal separate organization for which the elected officials of a primary
government are financially accountable.
2. Reported in separate column (discrete presentation)
3. Component units may be blended with the primary government figures if:
a. The governing body of the component unit is substantially the same as that of the
primary government.
b. There is a financial benefit or burden relationship.

1
VIDEO LECTURE NOTES— GOVERNMENTAL
FUNDS: FINANCIAL STATEMENTS
Required Financial Statements

Required fund financial statements include:
1. Fund Balance Sheet
2. Statement of Revenues, Expenditures, and Changes in Fund Balances
 General fund and major special revenue funds statement of revenues, expenditures, and
changes in fund balances—budget and actual
 The budget comparisons may be presented as required supplementary information.
Balance Sheet Presentation

Governmental Funds: Financial Statements
Fund Balance
Fund Classification
Fund Balance Classifications (GASB No. 54)
1. Nonspendable – amounts cannot be spent; either not in spendable form or are legally re‐
quired to maintain intact
2. Restricted – to specific purposes (externally imposed by creditors, contributors, laws),
imposed by law
3. Committed – amounts can only be used for specific purposes due to constraints imposed by
formal action of government
4. Assigned – amounts constrained by government’s intent to be used for specific purposes but
are neither restricted nor committed
5. Unassigned – residual classification for the general fund, not assigned to other funds, not
restricted, committed, or assigned

Notes to Financial Statements
Statement of Revenues, Expenditures, and Changes in Fund Balance

PROPRIETARY FUNDS
Types of Funds
The operations of government entities are classified into three categories of funds:
1. Governmental Funds: activities do not resemble commercial activities*
2. Proprietary Funds: activities resemble commercial activities; profit‐oriented
3. Fiduciary Funds: holding and managing assets owned by others; cost‐recovery oriented*
* Material is covered in separate lecture.

Proprietary Funds
1. Carry long‐term assets and long‐term liabilities.
2. Depreciate their own fixed assets.
3. Service their own long‐term debt and carry the related interest expense.
4. Use the accrual basis of accounting and the economic resources measurement focus.
Proprietary Funds
1. These funds finance and account for a government’s self‐supporting, business‐type activi‐
ties.
2. Two types:
a. Enterprise funds
b. Internal service funds
3. Enterprise funds: account for governmental, business‐type operations, similar to a private
entity (i.e., sports arenas, municipal transportation)
a. Operates on a profit‐making focus
b. May have some reliance on subsidies
c. Most government‐owned utilities are enterprise funds.
4. Must be used:
a. When debt is backed solely by fees and charges
b. When a legal requirement exists that the cost of providing services for an activity,
including capital costs, be recovered through fees or charges.
c. When a government has a policy to establish fees and charges to cover the cost of
providing services for an activity.
5. Internal service funds: account for in‐house business activities (i.e., services provided to
other governmental entities such as print shops, motor pools, central purchasing operations)
 Operates on a cost‐reimbursement basis
5. Required financial statements include:
a. Statement of Net Position
(1) Net investment in capital assets
(2) Restricted net position
(3) Unrestricted net position
b. Statement of Revenues, Expenses, and Changes in Fund Net Position
c. Statement of Cash Flows (direct method required)
6. Reminder: these funds use:
a. Accrual accounting
b. Economic resource measurement focus

Statement of Net Position
All Assets
Plus: Deferred Outflows of
Resources Less: All Liabilities
Deferred Inflows of Resources
= Net Position
Statement of Revenues, Expenses, and Changes in Fund Net Position
Operating Revenue
Less: Operating Expenses
Plus: Nonoperating Revenue
Less: Nonoperating
Expenses
Statement of Cash Flows

1. Only the direct method is acceptable, and a reconciliation is required.
 Reconcile Operating Income to Net Cash Flow, not from Net Income
2. GASB (Governmental Accounting Standards Board) has four categories:
a. Operating
b. Capital and Related Financing Activities
c. Noncapital Financing
d. Investing
3. Key differences between the FASB (Financial Accounting Standards Board) and GASB Cash
Flow formats include:
a. Cash receipts from interest are classified as investing, not operating activities.
b. Cash payments for interest are classified as financing (either capital or noncapital), not
operating activities.
c. Purchases of capital assets are considered financing, not investing activities.
4. Statement of Cash Flows
a. Cash Flows from Operating Activities
‐ Operating Revenues less Operating Expenses
b. Net cash provided (used) by Operating Activities
c. Cash Flows from Capital and Related Activities
‐ Buy or sell property, plant, and equipment
‐ Borrow or repay principal to acquire construct or improve capital assets
‐ Interest paid
d. Net cash provided (used) by Capital and Related Financing Activities

e. Cash Flows from Noncapital Financing Activities

‐ Borrowing or repaying principal for purposes other than to acquire, construct, or
improve capital assets
‐ State subsidies
‐ Interest paid
f. Net cash provided (used) from Noncapital Financing Activities
g. Cash Flows from Investing Activities
‐ Buy or sell investments
‐ Interest and dividend income
h. Net cash provided (used) in Investing Activities

FIDUCIARY FUNDS
Types of Funds
The operations of government entities are classified into three categories of funds:
1. Governmental Funds: activities do not resemble commercial activities*
2. Proprietary Funds: activities resemble commercial activities; profit‐oriented*
3. Fiduciary Funds: holding and managing assets owned by others; cost‐recovery oriented
* Material is covered in separate lecture.
Fiduciary Funds
1. Fiduciary funds are used to account for resources held for individuals or entities outside the
reporting government (i.e., they do not support the government’s programs). The four types of
fiduciary funds are:
a. Pension Trust
b. Private‐Purpose Trust
c. Investment Trust
d. Custodial
2. Required financial statements include:
a. Statement of Net Position (Assets – Liabilities = Net position)
b. Statement of Changes in Net Position: additions and deductions, not revenues and expenses,
are reported in the Statement of Changes in Net Position
3. Fiduciary funds and fiduciary component units are reported only in the fund‐based
statements; they are not reported in the government‐wide statements
Custodial Funds
1. Report fiduciary activities that are not governed by formal trust arrangements
2. Common applications

a. Tax Agency Fund

b. Grant Pass‐through Programs
Fiduciary Funds
Private‐Purpose Trust Funds
1. Used when the government is in a fiduciary relationship governed by a formal trust agree‐
ment other than those reported in a pension or investment trust fund.
2. In some cases, the principal is held intact.
a. These are called endowments or nonexpendable funds
3. In other cases, both the principal and income can be spent (expended) for specific purposes.
Investment Trust Funds

1. Exists when the government is the sponsor of a multi‐government investment pool. Used to
report the external portion of investment pools that are governed by a trust agreement.
2. To improve management of investments, funds may pool their investments with an invest‐
ment manager, such as a treasurer or external professional investment manager
a. These investment pools may be either internal investment pools or external investment
pools
Pension Trust Funds

1. Used to report pension and other employee benefit plans that are held in a trust in which the
reporting government is the trustee.
2. Defined contribution plans
3. Defined benefit plans:
a. The employer must pay a guaranteed level of benefit, computed using a formula.
b. The risk of additional future liability is on the employer.
4. Financial Statements:
a. Statement of Fiduciary Net Position
b. Statement of Changes in Fiduciary Net Position
c. Required Supplementary Information
Investments in Trust Funds

1. General Rule:
a. Investments are carried at fair value – usually measured by a quoted market price.
b. Holding gains and losses are reported as “Net increase (decrease) in fair value of invest‐
ments”.
VIDEO LECTURE NOTES— NOTES

TO FINANCIAL STATEMENTS


The purpose of this section of the report is twofold:
1. Disclosure: disclose the detailed assumptions made by accountants when preparing the
organization’s government-wide and fund financial statements.
2. Depth: offer greater detail about how figures were calculated, rules applied, or methods
used.
The notes are essential to fully understanding the financial statements.
Key Elements
Any event significant to the understanding and interpreting the financial statements should be
described in the notes.
1. Summary of significant accounting policies
2. Cash
3. Investments
4. Contingent liabilities
5. Encumbrances outstanding
6. Effects of subsequent events
7. Annual pension cost
8. Debt service requirements
9. Leases
10. Long-term liabilities
11. Deficit fund balance
12. Interfund receivables and payables
13. Disclosures about donor-restricted endowments
Summary of Significant Accounting Policies

Source: ACFR City and County of Denver (p. 54)

Pensions
Deficit Fund Equity


0
Management’s Discussion & Analysis

MANAGEMENT’S DISCUSSION & ANALYSIS
Management’s Discussion & Analysis (MD&A)

The purpose of this section of the report is twofold:
1. Plain language: opportunity for financial officials to highlight financial conditions in a way
that the average citizen can understand.
2. Required Supplemental Information: enhances the reader’s understanding of the financial
statements and statistical section.
The MD&A contains insufficient information to replace the financial statements.
MD&A Key Elements

1. A brief discussion of the financial statements
2. Government‐wide financial statements items for discussion
3. An assessment of the government’s overall financial position
4. An analysis of balances and transactions of individual funds
5. Variations between original and final budget amounts
6. A description of significant capital assets and long‐term debt
7. Discussion of the modified approach, if applicable
8. Known facts, decisions, or conditions that would have significant effect
Financial Highlights

1
Management’s Discussion & Analysis

Government‐wide Financial Analysis
Bonded Debt

2
Budgetary Comparison Schedule

BUDGETARY COMPARISON SCHEDULE
Budgeting
In the public sector, the budget becomes a matter of law.
1. Annual budgets must be adopted
2. Budget often is NOT prepared on a GAAP‐basis (aka Budgetary Basis)
3. Budgets, accounts, and financial statements should be comparable
4. Accounting system should support budgetary control

Per GASB standards, there are specific Required Supplementary Information (RSI) reporting
requirements associated with the budget:
1. Budgetary comparison schedule(s) should be presented for the General Fund and each major
special revenue fund that has a legally adopted budget.
2. The budgetary comparison schedule can also be included with the financial statements.
3. Budgetary basis should be used, which may be the cash basis, modified accrual, or some
hybrid basis.
The Format
1. Title, fiscal year
2. Revenues, expenditures, or other financing sources/uses
3. Fund balances, beginning and ending
4. Three required columns: original, final, and actual
5. An original and final adjusted budget must be presented
Optional: Appropriations should be compared to actual expenditures by adding a fourth variance column
(budget vs. actuals).

3

The actual column should use the basis of accounting assumed in the budget, which may differ from GAAP.
1. If the government elects to use a budgetary basis, a separate schedule should be prepared to
reconcile this “budgetary basis” to GAAP

4
Financial Reporting Entity
VIDEO LECTURE NOTES— REQUIRED

SUPPLEMENTARY INFORMATION
Required Supplementary Information (RSI)

According to GASB, the RSI is “essential for placing basic financial statements and notes to basic financial
statements in an appropriate operational, economic, or historical context.”
1. Presented with, but not as a part of, the basic financial statements.
2. Consists of schedules, statistical data, and other information that enhances the financial
statements. Supplementary information consists of two sections: MD&A and Other RSI
a. Budgetary comparison schedule*
b. Information about infrastructure condition
c. Pension schedules
* Topic of another lecture.
Infrastructure Asset Information

If the government elects not to depreciate infrastructure assets, an asset management systems and
condition assessments must be performed. The government must highlight the assessed condition
of these assets and prepare schedules within the RSI, such as:
1. 5‐year comparison of the estimated expenses with actual expenses needed to maintain assets at
established levels.
Pension and Other Employee Benefits

1. 10‐year schedule highlighting changes in net pension liability versus funded status, including:
a. total pension liability,
b. pension plan fiduciary net position, and
c. net pension liability.
2. 10‐year schedule highlighting contributions with amounts that should have been contributed,
including:
a. actuarially determined conditions,
b. contributions recognized by the pension plan, and
c. covered employee payroll.
Pension Schedules

5


FINANCIAL REPORTING ENTITY
The Government Reporting Entity
General
Purpose Special Purpose Entities Other Entities
Government
 State governments  Public colleges and  Not‐for‐profit
 Municipalities universities entities
 Cities  Public hospitals  For profit entities
 Towns  Fire districts  Nonprimary
 Villages  Park districts governments, such as
 Utility districts semi‐autonomous boards,
 Public authorities commissions, and
agencies.
Local Governments within the USA
Type of Local Government How many?

Counties 3,033
6
Municipalities (mainly cities and towns) 19,492

Townships (less extensive powers) 16,519
Special districts (such as water supply, fire protection,
libraries, etc.) 27,381
School districts 13,051
TOTAL 89,476
Financial Accountability
1. The governmental financial reporting should report on all governments and organizations
for which elected officials are Financially Accountable if:
a. The primary government appoints a voting majority of the organization’s governing board
AND
b. Able to impose its will on the organization OR
c. There is a potential for the organization to provide specific financial benefits to, or impose
specific financial burdens on, the primary government
Component Units
Component units are included as a part of the reporting entity.
Blending the Component Unit

1. Reported as though the component unit were one of the funds of the primary government.
2. Basically, the component unit is so intertwined with the primary government that it is in
substance the same entity. Examples might include:
a. Same governing board or majority controlled
b. Primary government has operational responsibility or responsibility of debt
AND
b. Able to impose its will on the organization OR
c. There is a potential for the organization to provide specific financial benefits to, or impose specific
financial burdens on, the primary government
Discrete Presentation of the Component Unit

7
1. Reported as a separate column on the government‐wide financial statements:

a. Independent of the primary government
b. Not included in the totals reported for the primary government
2. Legally separate entities will be excluded and presented as a stand‐alone financial entity or
possibly presented as a fiduciary fund
Component Units


8

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VIDEO LECTURE NOTES—SIMULATION:

GOVERNMENTAL ACCOUNTING AND REPORTING— GENERAL FUND

©Surgent Professional Education 1

#1: Record the Budget

Special Revenue Fund:

Due to General Fund 3,000

Capital Projects Fund:

Debt Service Fund:

Unassigned Fund Balance 5,000

VIDEO LECTURE NOTES—

Differences Between Businesses and Governments

Private Sector (Business) Public Sector (Government)

GASB Concepts Statements

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Government‐Wide Financial Statements

Fund Financial Statements

Unique Features of Modified Accounting

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Governmental Proprietary Fiducia

* There can be only one fund

Special Revenue Fund (SRFs)

Capital Projects Funds (CPFs)

Debt Service Funds (DSFs)

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ANNUAL COMPREHENSIVEFINANCIAL REPORT (ACFR)

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3. Basic Financial Statements

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Government‐Wide Statement of Net Position Format

Government‐Wide Statement of Activities Format:

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Required Financial Statements

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Statement of Revenues, Expenditures, and Changes in Fund Balance

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Statement of Net Position

Statement of Revenues, Expenses, and Changes in Fund Net Position

Statement of Cash Flows

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e. Cash Flows from Noncapital Financing Activities

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a. Tax Agency Fund

Investment Trust Funds

Pension Trust Funds

Investments in Trust Funds

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Notes to Financial Statements

Summary of Significant Accounting Policies

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Source: ACFR City and County of Denver (p. 54)

Source: ACFR City and County of Denver (p. 61)

Deficit Fund Equity

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Source: ACFR City and County of Denver (p. 63)

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