MAJOR FUNDS
DETERMINATION
1
MAJ0R FUNDS CONCEPT
• A COMPROMISE BETWEEN
THE MINIMUM SCOPE AUDIT
AND THE FULL SCOPE AUDIT!
2
MAJOR FUNDS CONCEPT
• MAJOR FUNDS MUST BE REPORTED
SEPARATELY
• NONMAJOR FUNDS REPORTED IN THE
AGGREGATE IN A SINGLE
COLUMN
• A BALANCE SHEET TEST OR AN
OPERATING STATEMENT TEST
3
IDENTIFYING MAJOR FUNDS
•THE GENERAL FUND
•THIS FUND IS ALWAYS MAJOR
•OTHER
OTHER FUNDS (BALANCE SHEET
TEST OR OPERATING
STATEMENT TEST):
4
IDENTIFYING
MAJOR FUNDS – CON’T.
•
A FUND NEED ONLY EXCEED 10% OF
ASSETS OR LIABILITIES OR 10%
REVENUES OR EXPENDITURE/EXPENSES
•
A FUND MUST PASS THE 10% TEST
BEFORE THE 5% TEST IS NECESSARY
•
A FUND IS MAJOR IF THE 10% AND 5%
CRITERIA ARE MET FOR A SINGLE
ELEMENT
5
IDENTIFYING
MAJOR FUNDS – CON’T.
IF ONLY GOVERNMENTAL OR ENTERPRISE
FUNDS EXIST, THE 5% TEST IS NOT USED
AND THE ENTITY NEED ONLY APPLY THE
10% TEST
DATA TO BE USED FOR THE TESTS ARE THE
GAAP AMOUNTS REPORTED IN THE FUND
FINANCIAL STATEMENTS AFTER AUDIT
ADJUSTMENTS
6
IDENTIFYING
MAJOR FUNDS – CON’T.
A GOVERNMENT MAY OPT TO REPORT A
NON-MAJOR FUND AS A MAJOR FUND IF THE
GOVERNMENT BELIEVES THE FUND IS OF
PARTICULAR IMPORTANCE TO THE FINANCIAL
STATEMENT USERS.
USERS
•
PUBLIC INTEREST
•
LONG TERM DEBT
7
IDENTIFYING
MAJOR FUNDS – CON’T.
TOTAL REVENUES MEANS ALL REVENUES
NET OF ALLOWANCES, (BOTH OPERATING
AND NONOPERATING OR ENTERPRISE)
EXCLUDING OTHER FINANCING SOURCES,
TRANSFERS IN, AND GAINS FROM
EXTRAORDINARY ITEMS (GOVERNMENTAL
FUNDS)
8
IDENTIFYING
MAJOR FUNDS – CON’T.
TOTAL EXPENDITURES/EXPENSES MEANS
ALL EXPENDITURES OR EXPENSES (BOTH
OPERATING AND NON-OPERATING FOR
ENTERPRISE) EXCLUDING OTHER
FINANCING USES, TRANSFERS OUT AND
LOSES ARISING FROM EXTRAORDINARY
ITEMS (GOVERNMENTAL FUNDS)
9
IDENTIFYING
MAJOR FUNDS – CON
CON’TT.
BALANCE SHEET TEST:
ASSETS OR LIABILITIES OF A FUND = 10% OR
MORE OF TOTAL ASSETS OR LIABILITIES FOR THE
GOVERNMENTAL FUND CATEGORY OR
ENTERPRISE FUNDS AND ASSETS OR LIABILITIES
OF A FUND = 5% OR MORE OF TOTAL ASSETS OR
LIABILITIES FOR THE TOTAL OF THE
GOVERNMENTAL CATEGORY AND ENTERPRISE
FUNDS
10
MAJOR FUND THRESHOLD
EXAMPLE – BALANCE SHEET
TEST
FUND
ASSETS
LIABILITIES
GENERAL
$6,000,000 $4,000,000
LAW ENFORCEMENT
1 000 000
1,000,000
LIBRARY
TOTAL GOVERNMENTAL
WATER
500 000
500,000
50,000
8,000
7,050,000
4,580,000
$ 2,000,000 $ 1,500,000
SEWER
1,500,000
750,000
TOTAL ENTERPRISE
3,500,000
2,250,000
GRAND TOTAL
$10,550,000 $ 6,830,000
11
MAJOR FUND THRESHOLD
EXAMPLE – BALANCE SHEET
TEST – CON’T.
ASSETS:
•
10% OF $7,050,000 = $ 705,000
•
10% OF $3,500,000 = $ 350,000
•
5% OF $10
$10,550,000
550 000 = $527
$527,500
500
12
MAJOR FUND THRESHOLD
EXAMPLE – BALANCE SHEET
TEST – CON’T.
LIABILITIES:
•
10% OF $4,580,000 = $ 458,000
•
10% OF $2,250,000 = $ 225,000
•
5% OF $ 6,830,000 = $341,500
•
THE MAJOR FUNDS WOULD INCLUDE:
INCLUDE
GENERAL, LAW ENFORCEMENT, WATER
AND SEWER
13
IDENTIFYING
MAJOR FUNDS – CON’T.
CON’T
THE OPERATING STATEMENT TEST:
REVENUES OR EXPENDITURES.EXPENSES = 10% OR
MORE OF TOTAL REVENUES OR
EXPENDITURES/EXPENSES FOR THE TOTAL OF
GOVERNMENTAL CATEGORY OR THE ENTERPRISE
FUNDS AND REVENUES OR EXPENDITURES/EXPENSES
= 5% OR MORE OF TOTALREVENUES OR
EXPENDITURES/EXPENSES FOR THE TOTAL OF
GOVERNMENTAL CATEGORY AND THE ENTERPRISE
FUNDS
14
MAJOR FUND THRESHOLD
EXAMPLE – OPERATING
STATEMENT TEST
FUND
REVENUES
EXPENDITURES
EXPENSES
GENERAL
$2,000,000 $1,800,000
LAW ENFORCEMENT
700,000
LIBRARY
TOTAL GOVERNMENTAL
WATER
690,000
10,000
9,000
2,710,000
2,499,000
$ 1,500,000
1 500 000 $ 1,390,000
1 390 000
SEWER
1,000,000
850,000
TOTAL ENTERPRISE
2,500,000
2,240,000
GRAND TOTAL
$ 5,210,000 $ 4,739,000
15
MAJOR FUND THRESHOLD
EXAMPLE – OPERATING
STATEMENT TEST – CON’T.
REVENUES:
•
10% OF $2,710,000 = $ 271,000
•
10% OF $2,500,000
$2 500 000 = $ 250
250,000
000
•
5% OF $5,210,000 = $ 260,500
16
MAJOR FUND THRESHOLD
EXAMPLE – OPERATING
STATEMENT TEST – CON’T.
EXPENDITURES (EXPENSES):
•
10% OF $2,499,000
$2 499 000 = $ 249
249,900
900
•
10% OF $2,240,000 = $ 224,000
•
5% OF $ 4,739,000 = $ 236,950
•
THE MAJOR FUNDS WOULD INCLUDE:
GENERAL, LAW ENFORCEMENT, WATER
AND SEWER
17
IDENTIFYING
MAJOR FUNDS
18