Exam 9: Reporting Principles and Preparation of Fund Financial Statements

The statistical section of the CAFR includes information about five categories of data: financial trends, revenue capacity, debt capacity, demographic and economic information, and operating data.

For each item listed in the left hand column of the table below, choose the letters associated with the financial statement(s) that should be prepared for that item. (Note that the letters may be used more than once.) Items Financial Statem ents General Fund Government-wide Pension Trust Fund Water Enterprise Fund Permanent Fund a. Statement of Revenues, Expenditures, and Changes in Fund Balance b. Statement of Net Position c. Statement of Fiduciary Net Position d. Statement of Activities e. Statement of Cash Flows f. Balance Sheet g. Statement of Changes in Fiduciary Net Position h. Statement of Revenues, Expenses, and Changes in Fund Net Position

Prepare entries to record the following selected transactions. Identify the fund affected by the transaction. If a transaction affects more than one fund, prepare entries for all affected funds. Use these abbreviations for the funds: GF - General Fund CPF - Capital Projects Fund DSF- Debt Service Fund PF - Permanent Fund UEF - Utility Enterprise Fund WEF - Water Enterprise Fund ISF - Intemal Service Fund LSRF - Library Special Revenue Fund PSRF - Parks Special Revenue Fund PTF - Pension Trust Fund a. The city's utility fund sends an invoice for $10,000 to the General Fund for electricity provided to the city's agencies, and the General Fund receives the invoice. b. The General Fund sends its annual $150,000 cash subsidy to the water enterprise fund. c. To undertake a major capital project, the city issues $950,000 of 10-year serial bonds. The bonds are sold at a discount, so the city realizes bond proceeds of $935,000. d. A wealthy citizen donates $500,000 to the city. In a formal trust agreement, the citizen requires that the funds be held intact in perpetuity, but that any income from the funds must be used to buy books for the city library. The city invests the $500,000. The fund earns revenue of $23,000 from investing the donation and sends the cash to the Library Special Revenue Fund. e. To provide retirement benefits for its employees, the city makes a cash payment of $400,000 to its pension fund. The pension fund immediately invests the cash. At year-end, the pension fund investments have a fair value of $420,000. f. The city receives a $300,000 invoice from a construction contractor. The invoice is approved, after deducting 10 percent retainage. g. General Fund property taxes receivable at year-end were $100,000. The entity's allowance for uncollectible property taxes has a zero balance. Year-end adjusting entries are needed: (a) to report the receivables as delinquent; and (b) to record the fact that, of the $100,000, it is expected that $65,000 will be collected in the first 60 days of the next year, $30,000 will trickle in during the rest of the year, and $5,000 will probably need to be written off as uncollectible. h. The law requires park entrance fees to be used only for park maintenance. Record the budget, which provides for estimated fees of $45,000 and a maintenance appropriation for $40,000. Also, record a budgetary amendment increasing the appropriation to $42,000. i. The General Fund pays an electric bill for $12,000. It sends an invoice for $1,000 to the fund that provides central printing services to city agencies for that fund's share of the bill. j. The General Fund had previously ordered supplies amounting to $24,000. The supplier ships half the order and sends an invoice for $12,500. The supplier also advises the city that it plans to ship the rest of the order in 60 days and will charge the city $12,500 for that portion as well. The city approves the first invoice and agrees to the price on the rest of the order.

Information related to a government's financial statements, financial position, results of operations, and even financial condition may be located in Management's Discussion and Analysis (MD&A), notes to the financial statements (Notes), required supplementary information (RSI), and in the statistical section of a CAFR (Statistical). State where in a government's financial report (MD&A, Notes, RSI, or Statistical) each of the following types of information may be found. 1) Description of the component units of a reporting entity, including the criteria for including them in the reporting entity, and their relationship to the primary government 2) Comparison of the original appropriated budget, final appropriated budget, and actual inflows, outflows and balances for the year on the budgetary basis of accounting 3) 10-year schedules of data relevant to a government's revenue capacity, such as taxable assessed value and estimated actual value of taxable real property 4) Description of pension plans, including types of benefits and major elements of the pension formulas, number of employees covered, and contribution requirements 5) 10-year schedules showing the trends in the status of a government's pension plans, as well as the details of the changes in the net pension liability 6) Discussion of significant variances between a government's original budget, final budget, and actual results on a budgetary basis for the General Fund; also, discussion of currently known reason for variations they might significantly affect future services or liquidity 7) Disclosure of significant violations of finance-related legal and contractual provisions and actions taken to address such violations 8) 10-year schedules of changes in net position, showing expenses by function and revenues by source, and shown separately for governmental and business-type activities 9) Description of facts, decisions, or conditions known to management as of the date of the audit report that are expected to significantly affect the government's financial position 10) Description of risks related to cash deposits with institutions and investments

An example of a state's ability to impose its will on the operations of a legally separate toll road is its ability to approve the road's proposed increases in toll rates