CHAPTER 19 - GOVERNMENTAL ACCOUNTING PRINCIPLES
PURPOSE
The purpose of this section is to introduce the user to basic accounting concepts and
principles as they relate to governmental accounting in general and to Rusk County in
particular. Rusk County is independently audited each year and as such, is required to
follow generally accepted accounting principles, which are discussed briefly in this
section. For a more detailed discussion of generally accepted accounting principles,
refer to the publication GOVERNMENTAL ACCOUNTING, AUDITING, AND
FINANCIAL REPORTING (GAAFR), which is available in the County Finance
Department.
FUND ACCOUNTING
One of the integral parts of governmental accounting is the use of funds to account for
its activities. Rusk Count utilizes fund accounting. A fund is defined as "an independent
fiscal and accounting entity with a self balancing set of accounts recording cash and
other financial resources, together with all related liabilities and residual equities, and
changes therein, which are segregated for the purpose of carrying on specific activities
or attaining certain objectives in accordance with regulations, restrictions, or limitations."
Each fund operates independently under normal "double entry" accounting rules
TYPES OF FUNDS
The following is a description of each major category of funds or account groups used in
Rusk County.
A. GOVERNMENTAL FUNDS
General Fund. The General Fund is the general operating fund of Rusk
County. It is used to account for all financial resources except for those
required to be accounted for in another fund. These start with the number
100-xx-xxxxx.
Special Revenue Fund. The Special Revenue Funds are used to account for
the proceeds of specific revenue sources (other than major capital projects)
that are legally restricted to expenditures for specified purposes. These start
with the numbers 2xx-xx-xxxxx.
Debt Service Fund. The Debt Service Funds are used to account for the
accumulation of resources for, and the payment of, general long-term debt
principal, interest, and related costs. These start with the numbers 300-xxxxxxx.
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Capital Projects Fund. The Capital Project Funds are used to account for the
purchase or construction of major capital facilities which are not financed by
proprietary funds, Special Assessment Funds, or Trust Funds. These start
with the number 400-xx-xxxxx.
B. PROPRIETARY FUNDS
Enterprise Funds. The Enterprise Funds are used to account for operations (a) that
are financed and operated in a manner similar to private business enterprises where
the intent of the County is that the costs (expenses, including depreciation) of
providing goods or services to the general public on a continuing basis be financed
or recovered primarily through user charges, or (b) where the County has decided
that periodic determination of revenues earned, expenses incurred, and/or net
income is appropriated for capital maintenance, public policy, management control,
accountability, or other purposes. An example of this fund is the Hospital/Nursing
Home. These funds start with the numbers 50x-xx-xxxxx.
C. FIDUCIARY FUNDS
Trust and Agency Funds. The Trust and Agency Funds are used to account for
assets held by the County in a fiduciary capacity as trustee, custodian or agent for
individuals, other governmental units and non-public organizations. Examples of this
would be amounts collected for the state for the DNR, traffic fines, licenses and for
other governments for special assessments. These funds start with the numbers
7xx-xx-xxxxx. (In 2003, these funds were moved to the general fund, fund 100.)
D. FIXED ASSETS AND LONG-TERM LIABILITIES ACCOUNT GROUPS
Fixed Assets. Fixed assets used in governmental fund type operations are
accounted for in the General Fixed Assets Account Group, rather than in the
governmental funds. All fixed assets are valued at historical cost or estimated
historical cost if actual historical cost is not available. Donated fixed assets are
valued at their estimated fair value on the date donated. A listing of the fixed assets
is kept by the Industrial Appraisal group and updated by departments yearly.
Long Term Liabilities. Long term liabilities expected to be financed from
governmental funds are accounted for in the General Long Term Debt Account
Group, not in the governmental funds. Examples of this are the bond issues for
construction and the unfunded pension liability with the state pension board.
The two account groups are not "funds." They are concerned only with the
measurement of results or operations.
BASIS OF ACCOUNTING
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The modified accrual basis of accounting is followed by the governmental funds,
expendable trust funds, and agency funds. Under the modified accrual basis of
accounting, revenues and other governmental fund financial resources are recognized
in the accounting period in which they become both measurable and available to
finance expenditures of the fiscal period. Available means collectible within the current
period or soon enough thereafter to be used to pay liabilities of the current period.
Expenditures other than interest on general long-term debt are recorded as liabilities
when they are incurred.
BUDGET
The budget is the primary tool of local government for monitoring financial resources.
Contained in the budget are decisions regarding its operation. When the budget is
adopted, it represents the financial plan for operating the government in the coming
year. See Chapter 10.
The major difference between a government and a business budget is the government
is adopted into law and therefore legally binding. Expenditure budgets or appropriations
represent the upper limit for government spending in a given year. Because the budget
is legally binding, budgetary control is essential.
Like other governments, Rusk County adopts a budget. Each year budgets are
developed for all county departments. Budgets are reviewed by liaison committees and
the Finance committee before forwarding the recommended budget to the County
Board of Supervisors. The County Board considers the Finance Committee's proposed
budget and adopts a budget in November of each year. The adopted budget sets both
revenue and appropriation levels along with the amount of taxes that are to be levied in
the county and apportioned to its municipalities.
BUDGETARY ACCOUNTING
Budgetary accounting and control is essential because of the legal aspects of the
budget. In the county, appropriation accounts are maintained to control expenditures in
accordance with the adopted budget. The department must obtain a transfer if a
purchase will cause an account to become overdrawn. The Finance Department
monitors overdrawn expense accounts and informs the Finance Committee.
Approved by the County Board, January 27, 2004
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