Exam 11: Issues of Reporting, Disclosure, and Financial Analysis

Two cities entered into a contractual agreement to operate a landfill. The cities each contributed the necessary assets to operate the landfill in proportion to their populations. First City has the ability to appoint five members of the seven-person governing body of the landfill. The appointees serve for six-year terms, cannot be reappointed, and can be removed only for cause. First City has no obligation to contribute to the landfill if the landfill revenues are insufficient to cover current operating costs. The landfill would be considered a(n)

Internal service funds are presented in a single column in the proprietary fund financial statements, even if one or more of them is a major fund.

Which of the following is a necessary characteristic of a component unit?

The city created a legally separate entity to operate a county hospital. The city council appoints a voting majority of the board of the hospital. The city cannot impose its will on the hospital and there is no potential for a financial benefit or financial burden to the city. The county hospital would be a(n)

The county created a legally separate county hospital authority. Members of the board of the county hospital are elected in county-wide elections. The hospital receives no financial support from the county, except that the county pays the hospital bills for county indigents. All revenues of the hospital are user fees. The county hospital would be considered a(n)

Which of the following is generally considered to be a positive fiscal characteristic for a city?

A city established an airport authority as a municipal corporation under state law for the purpose of acquiring, maintaining, operating, and financing airports. The authority's governing board consists of five members--four appointed by the mayor of the city and one appointed by the board of county commissioners. The board members may not be removed by the appointing officials, except for cause through an impeachment process. The authority is authorized to issue bonds, to levy taxes, to own property in its own name, to determine its budget, and to establish rates. All debt issued is payable from revenues derived solely from the operation of the authority. The city has no obligation for the debt of the authority. The authority's board controls the day-to-day operations of the organization. The authority has sole responsibility for financing its deficits and has sole control of its surplus funds. Should the city include the authority in its financial statements as a component unit? How, if at all, should it report the authority? Explain and justify citing the specific criteria that you used to make your determination.

The State has a legally separate State Building Authority which has a board appointed by the governor. The authority issues debt in its own name, holds title to buildings in its own name, and leases its building exclusively to the state. In what manner would the authority be included in the State's basic financial statements?

Governments must combine their blended component units into both the fund and government-wide statements.

A city's Revenue from own sources/Median family income ratio is a measure of its

A related organization is a contractual arrangement whereby two or more participants agree to carry out a common activity and share its risks and rewards.

The Friends of the City Public Library Foundation is a legally separate, tax-exempt 501(c)(3) entity organized for the purpose of raising funds to provide financial assistance to the library. Members of the board of the foundation are elected by the existing foundation board members. The foundation provides financial assistance to the library, but the foundation receives no financial support from the library. If dissolved, all of the foundation assets would revert to the library. The foundation would be considered a(n)

The required supplementary information (RSI) includes all but the the following

Koch County has two component units-an Electric Utility and a Housing Authority. In its separate financial statements, the Electric Utility reports using a single enterprise fund. The Housing Authority reports using a general fund, a special revenue fund, and a debt service fund. a. Assuming that both component units meet the criteria for presentation as discretely presented component units -Where should their financial information be presented in the county's financial report? -How would the Housing Authority's general fund be reported? b. Assuming that the Electric Utility meets the criteria for reporting as a major component unit, what is the most likely way in which the city would meet the additional disclosure requirement for the utility? What are two other ways that the disclosure requirements could be met? c. Assuming that the Housing Authority meets the criteria for presentation as a blended component unit -Where should the authority's financial information be presented? -How would the authority's general fund be reported?

Fund financial statements for fiduciary funds include which of the following?

The county created a legally separate county hospital authority. Members of the board of the county hospital are elected in county-wide elections. The county must approve the budget of the hospital, but the hospital receives no financial support from the county, except that the county pays the hospital bills for county indigents. All revenues of the hospital are user fees. In what manner would the hospital be included in the county's basic financial statements?

A government strives to maintain a positive fund balance, defined as:

The Hospital Foundation is a legally separate, tax-exempt 501(c)(3) entity organized for the purpose of raising funds to provide scholarships only to academically qualified students at the Hospital Medical School. Members of the board of the Hospital Foundation are elected by the existing board of trustees. The foundation provides scholarships to students of the Hospital Medical School, but the foundation receives no financial support from the hospital. The foundation would be considered a(n)

Two cities entered into a contractual agreement to operate a landfill. The cities each contributed the necessary assets to operate the landfill in proportion to their populations. Each city has the ability to appoint two members of the governing body of the landfill. The assets contributed by First City were primarily in the form of property and equipment that had been used in general government activities. In what manner would the landfill be included in First City's fund financial statements?

Two cities entered into a contractual agreement to operate a landfill. The cities each contributed the necessary assets to operate the landfill in proportion to their populations. Each city has the ability to appoint two members of the governing body of the landfill, and each has an equity interest in the arrangement. The assets contributed by First City were primarily in the form of property and equipment that had been used in general government activities. In what manner would the landfill be included in First City's government-wide financial statements?