Chapter Thirteen Lecture Notes Unique Aspects of Accounting for State and Local Governments – Part II: Reporting Financial Results
Keep government accountable. • Compare actual results to budgets. • Ensure compliance with laws. • Monitor inter-period equity. • Provide information for decision making. • Allow analysis of the financial condition of the government. Focus of Government Reporting
Management Discussion and Analysis • Presented before the financial statements. • Provides an objective and easily understandable analysis. • Compares this year to last year and explains changes. • Provides an analysis of the overall condition of the government. • Discusses material events and their potential impact on financial condition.
Prepared using Accrual Accounting • The Financial Statements - Statement of Net Assets - Statement of Activities • Both statements include a breakdown of: - Primary-Government units with columns for: • Governmental Activities • Business-type Activities • Total - Component units (legally separate entities) Government-Wide Financial Statements
Shows Columns for: - Primary Government (Governmental and Business Units) - Component Units • Assets and Liabilities are in order of Relative Liquidity - Encouraged, but not required • Capital Assets - Normally presented net of accumulated depreciation - Network Infrastructure may be presented at cost if it is maintained at some predetermined level • Net Assets - Invested in capital assets, net of related debt - Restricted by creditors, grantors, donors, law, or regulation - Unrestricted Statement of Net Assets
A Line Item Functions/Programs C Program Revenues by Function B Expenses by Function D Net (Expenses)/ Revenues by Program F Net Assets Reconciliation E General Revenues, Unrestricted Contributions, Transfers & Changes in NA Statement of Activities (see text example)
Governmental Fund Statements • Required Statements - Balance Sheet - Statement of Revenues, Expenditures, and Changes in Fund Balances • Statements Show - The general fund - Other major funds (separate column for each) - Smaller funds may be aggregated in an other-funds column - Total of all Governmental Funds
Governmental Funds Balance Sheet • Under Modified Accrual Accounting there are no long-term assets or long-term liabilities. • Fund Balances are divided into reserved and unreserved amounts. • Reasons for reserves are shown. • Unreserved funds are specified by type of governmental fund.
Statement of Revenues, Expenditures, and Changes in Fund Balances • Interest, principal, and capital outlays are all shown as expenditures. • Proceeds from long-term debt are shown as a source of funds. • No depreciation.
Prepared on an Accrual Basis • Statements (activities in columns) - Statement of Net Assets - Statement of Revenues, Expenses, and Changes in Fund Net Assets - Statement of Cash Flows • Uses Direct Method • Statement structure includes cash flows from: • Operating activities • Non-capital financing activities • Capital and related financing activities • Investing activities Proprietary Fund Statements (see text example)
Financial Statements of Fiduciary Funds (see text example) • Financial Statements - Statement of Fiduciary Net Assets - Statement of Changes in Fiduciary Net Assets • Prepared on an accrual basis.
Budgetary Comparison - Line Items show: • resource inflows by source of funds and • resource outflows by activity. - Columns show: • original budget, • final budget - including legal changes authorized over the year, • actual amounts expended on a budgetary basis, and • variance from final budget (optional). - Prepared on the same basis as the budget which varies by governmental unit. Other Required Supplemental Information (see text example)