Presented by
Leanne T. Cross, CPA
lcross@mjcpa.com
Governmental Acronyms
 FASB – Financial Accounting Standards Board
 GAAP – Generally Accepted Accounting Principles
 GASB – Governmental Accounting Standards Board
 RSI – Required Supplementary Information
 SLG – State and Local Government
Characteristics of Government
 Absence of profit motive
 Owned by constituents – no stock
 Contributors of resources do not receive proportional
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share of benefits
Decisions made – directly or indirectly – by voters
Popular election of governing board
Meetings where decisions are made open to the public
Power to enact and enforce a tax levy
Ability to issue tax-exempt debt
Similarities to the Private Sector
 Operate in same economy and compete for same
resources: financial, capital, and human
 Acquire and convert resources into goods and services
 Use of accounting and other information systems
 Need to operate economically, effectively, and
efficiently
Differences from Private Sector
 Organizational objectives
 Private Sector – maximize income from resources
 Government Sector – maximize services from resources
 Sources of financial resources
 Private Sector – raise resources from sales, capital stock,
and debt transactions
 Government sector – raise resources from taxes, state
appropriations, grants, and fees
 Methods of evaluating performance and operating
results
Differences from Private Sector (cont’d)
 Methods of evaluating performance and operating
results
 Private Sector – continuing a product or service is
determined by success in the marketplace
 Government Sector –
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Profit is not a motive
Services are usually not found elsewhere so there is no
competition
Face rules and regulations not found in private sector
Typical Activities of SLG
 Governmental Activities – unique to SLGs
 Police and fire protection
 Education
 Social services
 Courts
 Business-type Activities – similar to private sector
 Utilities
 Golf courses
 Airports
Governmental Activities
 Purpose is to provide goods and services that all
constituents need regardless of ability to pay for goods
and services.
 Sources of Financial Resources
 Taxes – property, sales, and income
 Intergovernmental revenues – grants, revenue sharing
 Licenses and permits
 Fines and forfeitures
 Debt proceeds (typically not used for operations)
Business-type Activities
 Purpose is to provide same types of services found in
private sector.
 Source of Financial Resources
 Charge fee for services received
 Separate, self-sufficient operations
Financial Report Users
 Citizens
 Legislative and oversight bodies
 Investors and creditors
Financial Report Uses
 Comparing results with legally adopted budgets
 Assessing financial condition and results of operations
 Assisting in determining compliance with finance-
related laws, rules, and regulations
 Assisting in evaluating efficiency and effectiveness
Fundamentals of SLG Accounting and
Financial Reporting
 GAAP and legal compliance
 Fund accounting
 Fund categories
 Types of funds
 Comparative financial statement formats among
governments
 Annual financial reporting
GAAP Reporting and Legal Compliance
 Ensures that all financial reports of all SLGs contain
the same types of financial statements and disclosures
for the same types of funds and activities
 Trying to assure comparability among and between
governments
 Requires “full” disclosure
 Maintaining budgetary accounting control during the
year.
SLG GAAP Hierarchy
 GASB Statements and Interpretations, which are
periodically incorporated into the Codification
 GASB Technical Bulletins and AICPA Audit Guides
and SOPs if made applicable to SLG’s and cleared by
GASB
 AICPA Practice Bulletins if made applicable to SLGs
and cleared by GASB
 GASB staff Implementation Guides (Q&As)
Fund Accounting
 Must understand fund structure, fund model, and
interrelationships between funds
 Use of fund accounting allows for
 Proper accounting controls
 Demonstrating compliance
Definition of a Fund
 Independent accounting entity with a self-balancing
set of accounts
 A fund captures all reported attributes of a portion of
the government’s activities and resources accounted
for in that fund
Fund Categories
 Proprietary funds
 Governmental funds
 Fiduciary funds
Proprietary Funds
 Similar to accounting for businesses
 Accounting measures net position, changes in net
position, and cash flows
Types of Proprietary Funds
 Enterprise Funds – used to report activity for which a
fee is charged to external users for goods and services.
Customers are usually the general public, as well as
businesses and other entities besides the government’s
own department or agencies
 Activities required to reported in an enterprise fund if
any one of the criteria on the following page are met:
Types of Proprietary Funds (cont’d)
 Activity is financed with debt that is secured solely by a
pledge of the net revenues from fees and charges of the
activity.
 Laws or regulations that the activity’s costs of providing
services, including capital costs, be recovered with fees
and charges
 The pricing policies of the activity establish fees and
charges designed to recover its costs, including capital
costs.
Types of Proprietary Funds (cont’d)
 Internal Service Funds – used to report any activity
that provides goods or services to other funds,
departments, or agencies of the primary government
and its component units, or to other governments, on a
cost-reimbursement basis. These funds should be used
only if the reporting government is the predominant
participant in the activity.
 Facilitate greater economy, efficiency, and effectiveness.
 Facilitate the equitable sharing of costs among
departments.
Proprietary Funds
 Measurement Focus
 Economic resources
 Financial statement recognition of all assets (current
and noncurrent) and all liabilities (current and
noncurrent)
 Basis of Accounting
 Accrual
 Recognize revenues when earned and expenses when
incurred, regardless of the timing of related cash flows
Proprietary Funds –
Accounting Equation
 Current assets +
 Noncurrent assets +
 Deferred outflows
Minus
 Current liabilities
 Long-term liabilities
 Deferred inflows
 Equals Net Position
Statement of Revenue, Expenses, and
Changes in Fund Net Position
Operating revenues, net of uncollectible amounts
Operating expenses
=
Operating income (loss)
+ or – Nonoperating revenues and expenses
=
Income (loss) before other rev, exp, and transfers
+
Capital contributions
+
Additions to permanent and term endowments
+ or - Special items
+ or - Extraordinary items
+ or - Transfers
=
Net increase (decrease) in fund net position
+
Fund net position – beginning of period
=
Fund net position – end of period
Statement of Cash Flows
 Several differences from private sector
 Direct method required (FASB allows either method)
 Report all cash flows and balances – restricted and
unrestricted cash and cash equivalents
 Noncash transactions reported on face of statement
(FASB allows it to be reported in notes)
 Cash flows from operating activities
 Reflects only activities affecting operating income (FASB
includes all transactions affecting net income)
 Excludes interest revenue and expense
Statement of Cash Flows (cont’d)
 Cash Flows from Noncapital Financing Activities
 Debt issued to finance operations
 Transfers not related to capital acquisitions
 Cash Flows from Capital and Related Financing
Activities
 Acquisition and sale of capital assets
 Issuance and repayment of debt, including interest,
issued to acquire capital assets
 Transfers from other funds related to capital asset
acquisitions
Statement of Cash Flows (cont’d)
 Cash Flows from Investing Activities
 Acquisition and sale of investments
 Interest and dividends received
 Making and collecting loans (except operating loans)
 Noncash transactions
 Signing a capital lease
 Donated capital assets
 Unrealized gains/losses on investments
Governmental Funds
 Used to account for sources, uses, and balances of
general government resources
Types of Governmental Funds
 General Fund – used to account and report all
financial resources not accounted for and reported in
other funds. Only fund for a general-purpose
government.
 Special Revenue Funds – used to account for the
proceeds of specific revenue sources that are restricted
or committed to expenditures for specified purposes.
 Debt Service Funds – used to account for and report
financial resources that are restricted, committed, or
assigned to expenditure for principal and interest.
Types of Governmental Funds (cont’d)
 Capital Projects Funds – used to account for and report
financial resources that are restricted, committed, or
assigned to expenditure for capital outlays, including
the acquisition or construction of capital facilities or
other capital assets
 Permanent Funds – used to account for resources that
are legally restricted to the extent that only earnings,
and not principal, may be used for purposes that
support the reporting government’s programs – that is
for the benefit of the government or its citizens.
Governmental Funds
 Measurement Focus
 Current financial resources
 Financial statement recognition of current assets and
current liabilities
 Basis of Accounting
 Modified accrual basis
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Revenues earned during or levied for the period, and are both
measurable and available (usually within 60 days)
Expenditures generally are recorded when a liability is
incurred, as under accrual accounting, except for debt service
expenditures, compensated absences, and claims and
judgments which are recorded when due.
Governmental Funds
Accounting Equation
 Current assets+
 Deferred outflows
Minus
 Current liabilities
 Deferred inflows
 Equals fund balance
Statement of Revenues, Expenditures, and
Changes in Fund Balance
Revenues
Expenditures
=
Excess (deficiency) of revenues over (under)
expenditures
+
Other financing sources (uses)
+ or - Special and extraordinary items
=
Net change in fund balance
+
Fund balance – beginning of period
=
Fund balance – end of period
Fiduciary Funds
 Accounts for assets held by a government in a trustee
or agency capacity for others
 Used to report assets that are not being held for the
government’s own use
Types of Fiduciary Funds
 Pension (and other employee benefit) Trust Funds –
established to account for resources that are required
to be held in trust for the members and beneficiaries
of defined benefit pension plans, defined contribution
plans, other post-employment benefit plans, etc.
 Investment Trust Funds – used to account for the
external portion of investment pools held by the
sponsoring government.
Types of Fiduciary Funds (cont’d)
 Private-Purpose Trust Funds – used to account for all
other trust arrangements under which principal
and/or income benefit individuals or groups outside
the government.
 Agency Funds – established to account for resources
held in a purely custodial capacity for others.
 Only has assets and liabilities
 No additions or deductions
Fiduciary Fund
 Measurement Focus
 Economic resources
 Financial statement recognition of all assets (current
and noncurrent) and all liabilities (current and
noncurrent)
 Basis of Accounting
 Accrual
 Recognize additions (not revenues) when earned and
deductions (not expenses) when incurred, regardless of
the timing of related cash flows
Fiduciary Fund
Accounting Equation
 Assets+
 Deferred outflows
Minus
 Liabilities
 Deferred inflows
 Equals net position
Statement of Fiduciary Net Position
=
+
=
Additions
Deductions
Change in net position
Net position – beginning of year
Net position – end of year
Questions
In accounting for state and local governments, the
modified accrual basis is required for:
A. Proprietary and fiduciary funds.
B. Governmental funds only.
C. Proprietary funds only.
D. All funds.
Questions
Which of the following funds is a governmental fundtype?
A. Private-purpose trust fund.
B. Internal service fund.
C. Permanent fund.
D. Enterprise fund.
Questions
Which of the following is a fiduciary fund?
A. Investment trust fund.
B. Special revenue fund.
C. Debt service fund.
D. Enterprise fund.
Questions
Which of the following funds would be most appropriate
for accounting for an activity that provides goods or
services to the public for a fee that is intended to make
the activity self-supporting?
A. Investment trust fund.
B. Enterprise fund.
C. Internal service fund.
D. Special revenue fund.
Questions
Which of the following funds would be used to account
for an activity that provides centralized purchasing and
sales of goods or services to other departments or
agencies of the governmental, or to other governments,
on a cost-reimbursement basis?
A. Enterprise fund.
B. Fiduciary fund.
C. Internal service fund.
D. Permanent fund.
Governmental
Financial
Reporting
Basic Financial Statements
 GASB Statement 34 – Basis for Financial Reporting
 Issued in 1999 – marked a major change in financial
reporting.
 Created dual perspective reporting
 Fund financial statements – detailed presentation
 Government-wide financial statements – consolidated
overview
Basic Government Financial
Statements Overview
Fund Financial Statements
Government-wide Financial Statements
---------- Reconciliations - ---------Linked
--Worksheets
Governmental
Funds
Proprietary
Funds
Fiduciary
Funds
Governmental
Activities
Notes to the Financial Statements
Business-type
Activities
Total Primary
Government
Annual Financial Reporting
Annual Financial Reporting (cont’d)
 Minimum Reporting Requirements
 Management’s Discussion and Analysis
 Basic Financial Statements
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Government-wide financial statements
Fund financial statements
Notes to the financial statements
 Required Supplementary Information other than MD&A
Annual Financial Reporting (cont’d)
 Primary Government
 Component Units
 Organizations for which the PG is financially
accountable
 Other organizations whose omission would cause
financial statements to be misleading.
Annual Financial Reporting (cont’d)
 Government-wide Financial Statements
 Includes separate columns for governmental activities,
business-type activities, total column for primary
government, and discretely presented component units
 Fund Financial Statements
 Includes major funds individually and nonmajor funds
in the aggregate
Annual Financial Reporting (cont’d)
 Government-wide Financial Statements
 Statement of Net Position
 Statement of Activities
Annual Financial Reporting (cont’d)
 Governmental Fund Statements
 Balance Sheet
 Statement of Revenues, Expenditures, and Changes in
Fund Balance
 Statement of Revenues, Expenditures, and Changes in
Fund Balance – Budget to Actual (may be either basic
financial statement or RSI) If RSI, it is called a schedule,
not a statement.

Required for General Fund and major special revenues funds
with a legally adopted budget.
Annual Financial Reporting (cont’d)
 Proprietary Fund Financial Statements
 Statement of Net Position
 Statement of Revenues, Expenses, and Changes in Net
Position
 Statement of Cash Flows
Annual Financial Reporting (cont’d)
 Fiduciary Fund Statements
 Statement of Fiduciary Fund Net Position
 Statement of Changes in Fiduciary Fund Net Position
Measurement Focus and
Basis of Accounting
Measurement
Basis of
Focus
Accounting
Government-wide
Economic
Accrual
statements
resources
Governmental fund
Current financial
statements
resources
Proprietary fund
Economic
statements
resources
Fiduciary fund
Economic
statements
resources
Modified accrual
Accrual
Accrual
Major Fund Reporting
 Governmental Funds
 Separate column for
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General Fund – always a major fund
Each major fund
Aggregate column for all nonmajor funds
 Total column required
 Reconciliations required (see sample)
Major Fund Reporting (cont’d)
 Proprietary Funds
 Separate column for
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Each major Enterprise Fund
Aggregate column for all nonmajor Enterprise Funds
Enterprise Funds total column
Single column for all Internal Service Funds – no major fund
calculation for these type funds.
Major Fund Reporting (cont’d)
 There is no major fund calculation for fiduciary funds.
 Fiduciary funds are reported in the aggregate by type
(pension trust, investment trust, private-purpose trust,
agency).
 Example – government has three pension trust funds
and two private-purpose trust funds.

There are only two columns in the basic financial statements –
one column for pension trust funds, one column for privatepurpose trust funds, and a total column.
Major Fund Determination
 All funds meeting the following criteria in the
governmental and enterprise funds must be reported as a
major fund (see sample)
 Total assets + deferred outflows or liabilities + deferred
inflows or revenues or expenditures/expenses are at least 10%
of the corresponding total for all funds of that category or
type
 The same element that met the 10% test above is at least 5%
of the corresponding element total for all governmental and
enterprise funds combined.
 Other funds not passing the test can be reported as major
funds at the option of the government (specific interest)
Typical
Government
Transactions
Expenditure/Expense Comparison
Expenditures
(net financial assets expended)
Expenses
(cost of goods or services used)
Operating
Salaries, supplies, utilities, etc.
Salaries, supplies, utilities, etc.
Capital outlay
Acquisition
Depreciation
Debt service
Principal and interest
Interest
Reporting Capital Assets
 Distinguish general capital assets from proprietary and
fiduciary capital assets
 General capital assets

Reported only in governmental activities of government-wide
financial statements
 Proprietary capital assets

Reported in both proprietary fund financial statements and
government-wide financial statements
 Fiduciary capital assets

Reported in fiduciary fund financial statements
Reporting Capital Assets
 Valuation of Capital Assets
 Historical cost if purchased
 Estimated fair value for donated assets
 Depreciated over estimated useful lives
 Land
 Construction in progress
 Certain collections
 Infrastructure reported using the modified approach
Reporting Capital Assets
 Recording capital assets
 Modified accrual
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
Debit capital expenditures
Credit cash/AP
 Accrual
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Debit property, plant, and equipment
Credit cash/AP
Debit depreciation expense
Credit accumulated depreciation
Reporting Capital Assets
 Sale of capital assets
 Modified accrual
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
Debit cash
Credit other financing source – proceeds from sale of capital
assets
 Full accrual
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Debit cash
Debit accumulated depreciation
Credit capital asset
Debit (Loss) or Credit (Gain) on sale of capital assets
Recording Long-term Debt
 Issuance of debt
 Modified accrual
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
Debit cash
Debit bond issue costs (expenditure)
Debit (other financing use – discount on issuance of debt) or
credit (other financing source – premium on issuance of debt)
Credit other financing sources – debt issued
 Accrual
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

Debit cash
Debit bond issue costs (expense) (post GASB 65)
Credit long-term debt payable (liability)
Recording Long-term Debt
 Recording long-term debt payments
 Modified accrual
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
Debit principal expenditures
Debit interest expenditures
Credit cash
 Accrual
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
Debit debt payable
Debit interest expense
Credit cash
Modified Accrual Revenue Recognition
 Recognize only revenues susceptible to accrual –
others on a cash basis.
 Requirements for susceptible to accrual
 Objectively measurable
 Available – collected in current period or soon enough
thereafter to be used to pay liabilities of the current
period.
 Legally usable to finance current period expenditures
Establishing Legal Claim to Revenues
 Charges for services – performing the service
 Taxes – levy establishes claims to resources
 Sales taxes – business making a taxable sale
 Income taxes – taxpayer earning taxable wages
Revenue Recognition Issue
 Asset recorded before meeting criteria to recognize
revenue – must report either:
 Liability for unearned revenue
 Deferred inflow of resources



Not available – not collected by year-end or soon enough
thereafter.
An imposed tax revenue levied (or otherwise imposed) to
finance operations of a future year
Collected in advance, and there is no performance obligation
to earn the revenue.
Nonexchange Transactions
 Derived tax revenues – Income and sales taxes
 Assets recognized when transaction occurs or resources are
received, whichever is first
 Accrual – revenue recognized when the underlying exchange
transaction occurs
 Modified accrual – same as above, but also when resources are
available
 Imposed nonexchange revenues - Property taxes and fines and
penalties
 Assets recognized when government has an enforceable legal claim
or resources are received, whichever is first
 Accrual – in the period when use is required or first permitted by
time requirements.
 Modified accrual – same as above, but also when resources are
available.
Nonexchange Transactions
 Government-mandated nonexchange transactions-
services funded by higher level government
 Voluntary nonexchange transactions grants/entitlements from higher level government &
certain private donations
 Assets – when all applicable eligibility requirements are
met or resources are received, whichever is first
 Accrual – when all applicable eligibility requirements
are met.
 Modified accrual – same as above, but when resources
are available.
Nonexchange Transactions
 Timing requirements - specify the period when
resources are required to be used or when use may
begin – affect when revenue is recognized.
 Purpose requirements – specify purpose for which
resources are required to be used – do not affect
timing of recognition
 “Reimbursement-type” and “expenditure-driven”
grants are eligibility requirements – affects timing of
recognition. There is no award until the recipient has
met the requirements by incurring costs in accordance
with provider’s program.
Grant Received Before Earned
 Grant received
 Debit cash
 Credit unearned revenue
 Qualifying expenditures
 Expenditures
 Cash/AP
 Recognize revenue (for amount expended)
 Debit unearned revenue
 Credit revenue
Grant Earned Before Received
Before Earned
 Qualifying Expenditures
 Debit expenditures
 Credit Cash/AP
 Recognize revenue (equal to amount expended)
 Debit due from grantor
 Credit revenues
Fund Balance Classifications
Governmental Funds
 Nonspendable
 Restricted
 Committed
 Assigned
 Unassigned
Nonspendable Fund Balance
 Represents amounts that cannot be spent
 Not in spendable form



Inventory and prepaid items
Long-term receivables and loans
Property acquired for sale
 Legally or contractually required to be maintained intact
– as in the principal of a Permanent Fund
 Amount in this classification should be determined
before other classifications – may limit reporting in
other classifications
Restricted Fund Balance
 Constraints placed on the use of amounts are either:
 Externally imposed by creditors such as through debt
covenants, grantors, contributors, or laws or regulations
of other governments
 Imposed by law through constitutional provisions or
enabling legislation
Committed Fund Balance
 Amounts that can only be used for specific purposes
pursuant to constraints imposed by formal action of
the government’s highest level of decision-making
authority should be reported as committed fund
balance.
 Funds cannot be used for any other purpose unless the
government removes or changes the commitment by
taking the same action it employed to impose the
commitment.
Assigned Fund Balance
 Amounts that are intended by the government to be
used for a particular purpose, but are neither restricted
nor committed, should be reported as assigned fund
balance.
 Intent should be expressed by governing body or a
high-level body or official possessing the authority to
assign resources to be used for specific purposes in
accordance with policy established by the governing
body.
Assigned Fund Balance (cont’d)
 Residual category of fund balance for classification for
any governmental fund other than the General Fund.
 Use in the General Fund indicates intent to use
resources in manner that is narrower than general
purpose of the government – cannot cause a deficit in
the unassigned category.
Unassigned Fund Balance
 Residual classification of the General Fund
 Only fund to report positive amounts is the General
Fund.
 Negative amounts can be reported in other funds, but
only after assigned amounts have been eliminated
Fund Balance Classifications
In General Fund, Unassigned may only be negative if Assigned is first eliminated.
Net Position Classifications
 Net investment in capital assets
 Consists of capital assets, net of accumulated depreciation,
reduced by the outstanding balances of any borrowings used
for the acquisition, construction, or improvement of those
assets.
 Excludes unspent debt proceeds.
 Restricted Net Position
 When there are limitations imposed on use of funds either
through enabling legislation or through external restrictions
imposed by creditors, grantors, laws, or regulations.
 Unrestricted Net Position – everything else
Other Financing Sources/Uses
 Other Financing Sources
 Debt issued
 Premiums on debt issued
 Interfund transfers
 Sale of capital assets
 Insurance recoveries
 Other Financing Uses
 Interfund transfers
 Payments to refunding bond escrow agent
 Discounts on debt issued
Other Financing Sources (cont’d)
 Interfund transfers
 Transferring fund


Debit other financing use – transfer out
Credit cash
 Receiving fund


Debit cash
Credit other financing source – transfer in
Other Financing Sources (cont’d)
 Insurance recoveries
 Modified accrual


Debit cash
Credit other financing source insurance recoveries
 Accrual


Debit cash
Credit insurance recovery revenue
Interfund Activity
 Nonreciprocal transactions
 Interfund reimbursements
 Interfund transfers
 Reciprocal transactions
 Interfund services provided and used
 Interfund loans
Interfund Reimbursements
 Underlying event:
 Transaction initially recorded in one fund
 Should have been accounted for and reported in a
different fund
 May also be used to distribute costs from one to others
 Accounting
 Remove expenditure/expense from the accounts of the
fund in which it was initially recorded and record
expenditure/expense in the reimbursing fund.
Interfund Transfers
 Usually involves moving assets from one fund to
another fund
 No expectation of repayment
 Accounting
 Record transfer in in one fund and record transfer out in
another fund
Interfund Services
 Sales and purchases of goods and services between
funds for a price approximating fair value
 Accounting
 Seller fund sells goods or services (recognizes revenues)
 Buyer fund purchases goods or services (recognizes
expenditures/expenses)
Interfund Loan
 One fund loans cash to another fund
 Transaction does not change fund balance/net
position.
 Accounting
 Lender recognizes a receivable
 Receiving fund recognizes a liability
Interfund Loans (cont’d)
 Lender Fund
 Short-term loan – Due from other fund
 Long-term loan – Advance to other fund (will require
separate reporting in fund balance)
 Receiving Fund
 Short-term loan – Due to other fund
 Long-term loan – Advance from other fund
Extraordinary and Special Items
 Extraordinary Item
 Used by FASB and GASB
 Event is not under control of management and is both
(1) unusual in nature and (2) infrequent in occurrence
 Special Item
 Unique to GASB
 Event is under control of management and is either
unusual or infrequent
Characteristics of Special Assessments
 Capital improvement financed by local government
 Sometimes long-term debt is issued to finance
construction
 Special assessment pay principal and interest on bond
issue
 Debt service funds used only if government is obligated
in some manner on the debt
 If not obligated, government serves as conduit for
payment, debt is not on government’s books, and
Agency Fund is used for collection and subsequent
payments
Characteristics of Special Assessments
(cont’d)
 Government plays two roles:
 General contractor to over see project
 Financing agent to provide interim financing for project
and make collections for repayment of debt
 Most of receivables are noncurrent – come due in
annual installments
 Levy is only for benefitted properties for special
assessment work
Characteristics of Special Assessments
(cont’d)
 Revenue accounting follows same principles as fund
levying assessment
 Proprietary fund – accrue receivable and revenue when
final assessment is made
 Governmental fund – accrue receivable and deferred
inflow
 As payments are made –
 Proprietary fund – debit cash/credit receivable
 Governmental fund – debit cash/credit receivable and
debit deferred inflow/credit revenue
Retiring Bonds
 Callable bonds
 Provision in outstanding bonds to retire them early
 Typically pay a premium to call bonds in addition to
accrued interest and principal
 Refunding – using new bonds to substitute for old
bonds
Reasons for Advance Refunding
 Lower effective interest rates
 Extend maturity dates
 Revise payment schedules
 Remove or modify restrictions
GASB Defines “Refunding”
 Issuing new debt whose proceeds are used to repay
previously issued (“old”) debt
 Current refunding – new debt proceeds used to repay
old debt immediately
 Advance refunding – new debt proceeds placed with
escrow agent in an irrevocable trust and invested until
used to pay old debt principal and interest in the future
 Defeased debt is removed from the government’s
accounts and records and is no longer reported in the
financial statements
Defeasance - Transactions
 Modified Accrual
 Record refunding debt issue
 Record payment to refunded bond escrow agent


Debit other financing use – payment to refunded bond escrow
agent
Credit cash
 Accrual
 Debit debt payable
 Debit (deferred outflow) or credit (deferred inflow) on
refunding debt.
 Credit cash
Proprietary
Fund
Transactions
Intergovernmental Grants
 Capital grants restricted to construction, acquisition,
or improvement of capital assets
 Reported on operating statement as capital
contributions.
 Reported on cash flow as capital and related financing
activities
 Operating grants are all other grants
 Reported on operating statement as nonoperating
revenues.
 Reported on cash flow as noncapital financing activities
Donations from Developers
 Occurs when a developer contributes infrastructure
such as streets, water/sewer lines, etc.
 Accounting Transaction
 Debit Capital Asset
 Credit Capital Contributions
Unbilled Revenues
 Represents revenues earned but not billed as part of
the normal billing process – electricity sold, water
used, etc.
 Accounting transactions
 Debit unbilled accounts receivable
 Credit operating revenues
Bad Debts
 Bad debt expense is not recorded in proprietary funds.
 Accounting Transaction
 Debit operating revenue
 Credit allowance for uncollectible accounts
Internal Service Funds - Billings
 Accounting transactions
 In the Internal Service Fund



Debit due from General Fund
Debit due from Enterprise Fund
Credit revenues – billings to departments
 In the General Fund
 Debit operating expenditure
 Credit due to Internal Service Fund
 In the Enterprise Fund
 Debit operating expense
 Credit due to Internal Service Fund
Internal Service Fund
 Net activity at year-end can be closed into
governmental activities and/or business-type
activities.
Self Insurance Funds
 Governments have three options for reporting risk
financing activities
 General Fund
 Special Revenue Fund
 Internal Service Fund
Risk Financing Reported in General Fund or
Special Revenue Fund
 All claims and judgments recorded in General
Fund/Special Revenue Fund when due.
 Remainder of claims reported in government-wide
statements.
 Amounts charged to other funds recorded as reduction
of expenditures – reimbursements, not revenues
Risk Financing Reported in
Internal Service Funds
 All claims and judgments recorded in Internal Service
Fund when incurred – may be current or long-term
liability
 Amounts charged to other funds recorded as revenues
 Charges should be reasonable and equitable –
preferably actuarially based – so that revenues and
expenses are approximately equal.
Budgets
Budgets
 TRIM guidelines must be followed
 Usually approved by ordinance or resolution – refer to
charter and/or code.
 Must be a balanced budget – beginning fund balance +
estimated revenues + other financing sources –
appropriations – other financing uses should be
greater than or equal to $0.
 Per Florida Statute, expenditures should not exceed
appropriations.
 Not required for all funds – statutory requirements.
Budgets
 Should be tied to strategic plan
 Different types
 Operating
 Capital
 Capital improvement plan
 Cash
 Budget document serves as a financial plan, policy
document, operations guide, and communication
device.
Budgets
 Level of budgetary control
 Legal level of budgetary control (fund, department,
object)
 Administrative level of budgetary control
 Budgetary basis of accounting
 Expenditures only
 Expenditures and encumbrances
 Expenditures, encumbrances, and other basis
Budgets
 Encumbrances
 Budgetary tool to control spending
 Purchase commitments
 Lapse vs. re-appropriation
Budget Transactions
Date
Reference
Vendor
Description
10/1/2012 2013 Budget
12/1/2012 P.O. # 425
12/29/2012 P.O. #535
1/5/2013 Invoice 1025
1/15/2013 Invoice 50
3/31/2013 Budget Amendment
Appropriations Encumbrances Expenditures
1,000,000
Office Depot
Office Furniture
Available
1,000,000
5,000
995,000
Dell Computer Computer Equipment
2,000
993,000
Dell Computer Computer Equipment
(2,000)
2,000
993,000
Office Depot
(5,000)
4,500
993,500
Office Furniture
(500,000)
493,500