Chapter 1 ACCT NFP

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Course Intro • Governments - Provide services that benefit all citizens - Services that the private sector may not provide - Course focus on state and local govt (SLG) - Characteristics / Revenue Sources - GASB • Not-for-profits - Private organizations serving a purpose (other than to make profit) - Characteristics / Revenue Sources - FASB Entities - Examples • Governmental - State governments - Local governments (municipalities) - Governmental college and universities - School districts - Park districts • (Non-governmental) NFPs - Foundations - Colleges and universities - Cultural organizations - Religious organizations Chapter 1 Introduction to State and Local Governmental Units Differences in Govt. Environment • Organizational Purposes - exist for the well being of citizens by providing public services, not for the purpose of generating returns to owners • Sources of Revenues - Derive many of their resources from taxes and other non-exchange transactions • Potential for Longevity - Rarely go out-of-business. Long term nature of operations changes the focus to the sustainability of services and the ability to meet future demand • Relationship with Stakeholders - Obligation to demonstrate accountability for public funds • Role of the Budget - Budgets carry the authority of law, preventing public officials from spending outside their budgetary authority How Accounting Adapts for Govt. Differences • Different view/meaning of view of "equity"
• Budget compliance > income measurement • Revenue recognition - Non-exchange transactions • Emphasize on the existence of restrictions on the use of resources How Do Govt. Objectives Differ from Business Objectives? • There is more emphasis on - The budget - Legal compliance - Efficiency and effectiveness measures other than net income • GASB Concepts Statement No. 2 explains that nonfinancial measures (i.e. measures other than dollars) are required to assess effectiveness Overview of Basic Financial Statements • Government-wide Statements - Statement of Net Position • Similar to business balance sheet - Statement of Activities • Similar to business income statement • Fund Financial Statements - Detailed reports of governmental, proprietary, and fiduciary activities Overview of Fund Financial Statements • Governmental — general citizen services - Balance Sheet - Statement of Revenues, Expenditures, and Changes in Fund Balance • Proprietary — business-like activities such as water utility - Statement of Net Position - Statement of Revenues, Expenses, and Changes in Fund Net Position - Statement of Cash Flows • Fiduciary — holding money in trust for others - Statement of Fiduciary Net Position - Statement of Changes in Fiduciary Net Position Accrual and Modified Accrual Basis • Accrual Basis/Economic Resources Measurement Focus - General business concepts of revenue and "expense" apply when recording exchange-like transactions • Modified Accrual Basis/Current Financial Resources Measurement Focus - Applies to funds financed by taxes and other involuntary contributions Modified Accrual Basis • Revenues are recorded when "measurable and available" - For example, property taxes revenues are recorded as revenues if levied this year and collected this year, or soon enough after the year end to still pay current year bills • Outflows are called "expenditures" - typically cash basis What is a "fund"? • A fund
- Represents a part of the activities of some organization - Is an accounting entity • Self-balancing set of accounts, reflecting the assets, liabilities, net assets, and changes in those balances - Segregates resources for specific activities • In such a way as to ensure compliance with appropriate regulations or restrictions Chapter 1 Part 2 Introduction to State and Local Governmental Units State and Local Government Fund Types • Governmental (5) - Used for activities that are largely unique to the government environment and do not fall into either the proprietary or fiduciary categories • Proprietary (2) - Business-type activities • Fiduciary (4) - Acting as an agent or trustee of money that generally belongs to other parties Governmental-Type Funds • General Fund • accounts for most of the basic services provided by the government (It accounts for and reports all financial resources not accounted for and reported in another fund) • Special Revenue Funds • account for the proceeds of specific revenue sources that are restricted or committed for specified purpose other than debt service or capital projects • Debt Service Funds • account for financial resources that are restricted, committed or assigned for principal and interest (other than interest or principal on proprietary or fiduciary activities) Governmental-Type Funds • Permanent Funds • account for resources that are restricted to the extent that only earnings, and not principal, may be used for purposes that support the reporting government's programs • Capital Projects Fund • account for resources that are restricted, committed or assigned for capital outlays (accounts for the purchase of capital improvements, except those in a proprietary fund) Proprietary Funds Types • Enterprise Fund
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