Governmental Fund Financial Statements Quiz

Pre-Closing Trial Balance

• Prepared to supply necessary information for Governmental Activities in government-wide financial statements.
• All temporary accounts must be closed prior to finalizing the balance.
• Reclassification entries are created and recorded for net position accounts.

Fund Financial Statements

• Required for all governmental and proprietary funds.
• Governmental fund statements include:
  • Balance sheet for governmental funds
  • Statement of revenues, expenditures, and changes in fund balances for governmental funds
• Fund balances classified into categories: nonspendable, restricted, committed, assigned, unassigned.

Required Reconciliations

• Capital outlays reported as expenditures in governmental funds while classified as capital assets at the government-wide level.
• Disposition of capital assets noted as other financing sources in funds; categorized as reductions of assets at the government-wide level.
• Depreciation on capital assets not shown in governmental funds.
• Issuance and retirement of long-term debt reported differently across levels.
• Certain revenues not providing financial resources are excluded from governmental funds.
• Government-wide level applies accrual basis for reporting expenses.
• Interfund transfers between governmental funds are not reflected at the government-wide level.

Suggested Interim Reports

• Schedule of actual vs. budgeted revenue for General Fund and special revenue funds.
• Schedule of actual vs. budgeted expenditures.
• Comparative schedule of revenue and expenses for each enterprise and internal service fund.
• Combined schedule of cash receipts, disbursements, and balances across all funds.

Comprehensive Annual Financial Report (CAFR)

• Official annual report serving as public record, includes essential elements of general-purpose financial reporting.
  • Management’s discussion and analysis (MD&A)
  • Basic government-wide and fund financial statements with notes.
  • Required supplementary information (RSI).
• Additional content may include auditor’s report, individual fund statements, statistical section, and management narrative.

Sections of a CAFR

Introductory Section

• Generally subjective information, forecasts, and expectations.
• Contains table of contents, letter of transmittal, and other appropriate materials.

Financial Section

• Minimum content includes:
  • Auditor’s report, MD&A, basic financial statements, required supplementary information, and combining statements.
• Basic Financial Statements:
  • Government-wide financial statements (statement of net position, activities).
  • Fund financial statements for governmental, proprietary, and fiduciary funds.

Statistical Section

• Contains five categories defined by GASB, presenting data for the last ten years.
  • Financial trends information, revenue capacity information, debt capacity information, demographic/economic information, operating information.

Financial Trends Information

• Illustrates changes in a government’s financial position over time.
• Emphasis on trends in fund balances and net position.

Revenue Capacity Information

• Demonstrates a government's ability to generate revenue.
• Includes details on revenue base, rates, principal revenue payers, and property tax levy information.

Debt Capacity Information

• Indicates the existing debt burden and ability to incur more debt.
• Analyzes ratios of debt to total personal income and legal debt limits.

Demographic and Economic Information

• Explores the socioeconomic context where the government operates, including personal income and unemployment rates.

Operating Information

• Provides a context for government operations, including employee counts and service levels.

Preparing Financial Statements

• All adjusting entries, including depreciation, must be recorded before statement preparation.

Conceptual Framework for Financial Reporting

• Aims to assess accountability and assist in economic, social, and political decision-making.
• Two types of accountability: operational (efficient resource use) and fiscal (regulation compliance).

Primary Users

• External users including citizens, lawmakers, oversight bodies, and creditors.

Usefulness in Reports

• Must be understandable, reliable, relevant, timely, consistent, and comparable.

Most Useful Information Presentation

• GASB Concepts Statement 3 emphasizes the importance of recognition and disclosure in financial statements.
• A measurable item should be recognized in financial statements, while notes should provide context and essential information.

Test your knowledge on the preparation of governmental fund financial statements, including the role of pre-closing trial balances and the impact of reclassification entries. This quiz covers key concepts related to governmental activities and the financial reporting process for fund financial statements.