10/24/2018 Finance 101 1 Learning Outcomes Define funds and review the fund structure of a government • Identify the components of fund financial statements • Know how fund balance is generated and what it should be • used for Identify the laws affecting budget preparation and adoption • Recognize the process of preparing, adopting and administering • a budget Recall methods of budget communication • Recite annual audit and financial reporting requirements • 2 Accounting 3 3 1
10/24/2018 GASB AND GAAP The Governmental Accounting Standards Board • (GASB) is the standard-setting body for state and local governments Generally Accepted Accounting Principles are • conventions, rules, and procedures that serve as the norm for the fair presentation of financial statements 4 What is a Fund? Separate accounting entity • Separate set of self-balancing accounts • Separate set of financial statements • Three categories of funds • 5 Minimum Number of Funds Establish the minimum number of funds in order to • Comply with laws • Exercise sound financial administration 6 2
10/24/2018 Fund Accounting Fund Categories Business Type Activities Reporting Entity Governmental Proprietary Fiduciary Funds Funds Funds Do not belong to government – just Most government functions financed holding for another external party and cannot be used for governments own programs 7 Governmental Funds Generic Fund Types GO Bonds, SPLOST E-911, Law Library, Hotel/Motel Governmental Confiscated Assets Funds General Special Capital Debt Permanent Revenue Project Service Fund Funds Funds Funds Funds 8 Proprietary Funds Generic Fund Types Proprietary Water/Sewer, Electric, Gas, Internal Enterprise Cable, Solid Service Funds Waste, Mass Funds Transit, Civic Center 9 3
10/24/2018 Fiduciary Funds Generic Fund Types Court Fees Fiduciary Funds Investment Pension Private Purpose Agency Trust Trust Trust Funds Funds Funds Funds 10 Uniform Chart of Accounts 11 TYPES of financial statements Statements of Position • Operating Statements • 12 4
10/24/2018 Statements of Position Balance Sheet • Statement of Net Position • 13 Balance Sheet Governmental Funds Current Assets Balance Sheet Page A-1 Deferred Outflows Current Liabilities Deferred Inflows 14 Balance Sheet Governmental Funds Balance Sheet A-1 Equity 15 5
10/24/2018 Balance Sheet – Governmental Funds Focus on ability to pay the government’s bills • Near-term cash inflows and outflows • Does NOT include capital assets • Does NOT include long term debt • 16 Statement of Net Position – Proprietary Funds Focus on economic perspective of government • BOTH current and non-current assets and current • and non-current liabilities • Includes Capital Assets • Includes Long Term Debt 17 Statement of Net Position – Proprietary Funds Proprietary Funds Page A-3 Current Assets Noncurrent Assets 18 6
10/24/2018 Statement of Net Position – Proprietary Funds Current Liabilities Noncurrent Liabilities 19 Operating Statement Revenues • Expenditures/Expenses • 20 Governmental Fund Operating Statement Page A-2 21 7
10/24/2018 Governmental Fund Operating Statement 22 Governmental Fund – Operating Statement 23 Proprietary Funds Page A-4 24 8
10/24/2018 Relationship Operating Statement to Balance Sheet Ending fund balance – operating statement = ending fund balance on balance sheet 25 Internal Report Name of Government Date Revenues Budgeted Actual Encumbrances Variance Property Tax Sales Tax Charges for Services Other Revenues Total Expenditures General Government Police Parks/Rec Total Expenditures Excess Revenues Over/(Under) Expenditures Beginning Fund Balance Ending Fund Balance 26 Review 27 27 9
10/24/2018 Review For reporting purposes, governments classify their individual funds within three categories - Governmental, Proprietary, and Fiduciary A. General, Special, and Debt Service B. Governmental, Enterprise, and Fiduciary C. None of the above D. 28 Review For reporting purposes, governments classify their individual funds within three categories - Governmental, Proprietary, and Fiduciary A. General, Special, and Debt Service B. Governmental, Enterprise, and Fiduciary C. None of the above D. 29 Review The five generic governmental funds are G___________ S_______ R_________ C_________ P________ D________ S_________ P__________ 30 10
10/24/2018 Review The five generic governmental funds are General Special Revenue Capital Projects Debt Service Permanent 31 Review The two generic proprietary funds are E_________ I_________ S________ 32 Review The two generic proprietary funds are Enterprise Internal Service 33 11
10/24/2018 Review The four generic fiduciary funds are P_______ P_______ T_______ P_______ T__________ I___________ T______ A_________ 34 Review The four generic fiduciary funds are Private Purpose Trust Pension Trust Investment Trust Agency 35 Fund Balance 36 36 12
10/24/2018 What is Fund Balance? Equity in Governmental funds • Revenue increases fund balance and expenditures • decrease fund balance 37 Is Fund Balance Equal to Cash and Investments? 38 Is Fund Balance Equal to Cash and Investments? Cash and investments are a part of fund balance • Other parts of fund balance include amounts • owed to your government, cash value of inventory and other assets 39 13
10/24/2018 Governmental Fund Equity Net Current Assets or Fund Balance Calculated as follows: Current Current Assets & Liabilities Fund Deferred & Deferred Balance Outflows Inflows 40 How the Fund Balance Evolved - Year 1 Net result of the difference between revenues and expenditures from the inception of the government Revenues $ 100,000 Expenditures $ ‒ 90,000 Net Revenue $ 10,000 41 How the Fund Balance Evolved – Year 2 Re ve nue s $ 110,000 E xpe nditure s $ 95,000 Ne t Re ve nue $ 15,000 F und Ba la nc e Ye a r 1 $ 10,000 F und Ba la nc e Ye a r 2 $ 25,000 42 14
10/24/2018 How the Fund Balance Evolved – Year 3 Re ve nue s $ 97,000 E xpe nditure s $ 100,000 $ -3,000 Ne t Re ve nue F und Ba la nc e Ye a r 2 $ 25,000 F und Ba la nc e Ye a r 3 $ 22,000 43 Use of Fund Balance The fund balance should be used for One-time expenditures • Unexpected events • 44 Available Fund Balance The entire Fund Balance may not be available to fund deficiency of revenues and expenditures 45 15
10/24/2018 Fund Balance—5 Categories Restricted Unassigned • Debt Covenant Nonspendable Enabling • What’s left • Inventory • Legislation • Advances to • Permanent fund principal Assigned Committed Formal Board • Intent • Not Action to • restricted or commit or de- committed commit 46 Fund Balance Fund Balance Nonspendable $100,000 Restricted $250,000 Committed $175,000 Assigned $ 25,000 Unassigned $133,000 Total Fund Balance $683,000 47 Unrestricted Fund Balance Unrestricted Committed Assigned Unassigned Maintain balance sufficient to manage risk of revenue fluctuations and unexpected expenditures 48 16
10/24/2018 What is the Right Amount of Unassigned Fund Balance? Unique to each government • Government Finance Officers Recommends • 2 months of General Fund operating revenues or expenditures 49 Where Do You Stand? Unassigned Fund Balance as a % of General Fund operating revenues: Calculated as follows: Unassigned Fund Balance /General Fund Revenues = % 50 Sample Calculation – Step 1 I de ntify Una ssig ne d F und Ba la nc e – Go ve rnme nta l F unds Ba la nc e She e t 51 17
10/24/2018 Sample Calculation – Step 2 Identify Total Revenues for the General Fund - 52 Sample Calculation – Step 3 Perform the following calculation- General Fund Unassigned Fund Balance $ 4,815,949 Total General Fund Revenues $ 34,620,817 Unassigned Fund Balance as a % of Revenues 13.91% 53 Fund Balance vs. Contingency Fund Balance and Contingency are not the same • The law is silent on how much contingency to budget • Amounts are not charged to the contingency line • item—budgetary only Budget adjustments are necessary to move • contingency to appropriate account for spending 54 18
10/24/2018 Review 55 Review Fund Balance is defined as the difference between current assets & deferred outflows of resources and current liabilities & deferred inflows of resources. True or False 56 Review Fund Balance is defined as the difference between current assets & deferred outflows of resources and current liabilities & deferred inflows of resources. True or False 57 19
10/24/2018 Review Georgia Law requires governments to budget a contingency in an amount no less than 3% and no greater than 5%. True or False 58 Review Georgia Law requires governments to budget a contingency in an amount no less than 3% and no greater than 5%. True or False 59 Review Ending fund balance on the operating statement must equal ending fund balance on the balance sheet. True or False 60 20
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