chapter 1 financial reporting for governmental and not-for-profit entities
Post on 22-Dec-2015
241 Views
Preview:
TRANSCRIPT
Chapter1Financial Reporting for
Governmental and Not-for-Profit
Entities
Approximately: o 87,500 local governments exist in USo One million not-for-profit organizations
What types of Governmental and Not-For-Profit Organizations do you think of?
?
How do they get revenue?
?
What do they spend money on?
?
o Benefits are not proportional to resources provided
o Lack of a profit motiveo Absence of transferable ownership
rightso Services better society
How Do Governmental and Not-For-Profit Organizations Differ
From Business Organizations?
Power ultimately rests in the hands of the people People vote and delegate that power to public
officialsCreated by and accountable to a higher level
government (states, county, township, city)Power to tax citizens for revenueGoverned by budgets not markets
How Do Governmental Entities Differ From Not-For-Profit Organizations?
1) FASB Business organizations Nongovernmental not-for-profits
(YMCA) 2) GASB Governmental organizations Governmental not-for-profit
(U of MI) 3) FASAB Federal Government and its agencies
***Hospitals can fall into either group 1 of 2 above
Sources of GAAP andFinancial Reporting Standards
Governmental organizations typically have one or more of the following characteristics: Popular election of officers, or appointment of
a controlling majority of the governing body by officials of another government
Potential dissolution by a government with net assets reverting to a government
Power to enact and enforce a tax levy and impose charges
States can issue tax-exempt debt
Criteria for Determining Whether an NPO is Governmental
Budgets not annual reports are the most significant financial document
Budgets drive financial reporting Some can be legally binding Some must be balanced
Governments can seize assets of other governments within their jurisdiction!!!!!!
Additional Governmental Characteristics
Revenue does not indicate demand for services (Benton Harbor) No direct link between revenues and expenses
Many capital assets neither produce revenues or save costs (roads) so projects are evaluated differently
Some resources are restricted (land, cash, art)
Equity does not exist and ownership cannot be bought or sold
Additional Government Characteristics
“ACCOUNTABILITY is the cornerstone of all financial reporting in government “
REMEMBER ELECTED OFFICALS ARE OFTEN SHORT TERM FOCUSED !!!!!!!!!
“Interperiod Equity the concept that constituents pay for the services that they receive and do not shift the burden to their children “
Objectives of Financial Reporting
Q: What do we mean by accountability?
A: Accountability arises from the citizens’ “right to know?” It imposes a duty on public officials to be accountable to citizens for raising public monies and how they are spent.
Objectives of Financial Reporting
Q: How does “interperiod equity” relate to accountability?
A: Interperiod equity is a government’s obligation to disclose whether current-year revenues were sufficient to pay for current-year benefits or did current citizens defer payments to future taxpayers (Doesn’t mean governments shouldn’t borrow) – For example – Interstate Highway System
Objectives of Financial Reporting
Users of Financial Reports
Governing BoardsInvestors & Creditors
Approx. $1.8 trillion bonds outstanding/bank loansCitizens/TaxpayersDonors/Grantors
United Way and Ford FoundationRegulatory and oversight agenciesEmployees
Financial reports are used primarily to: (CAFR’s) Compare actual financial results with legally
adopted budget Assess financial condition and results of
operations Assist in determining compliance with
finance-related laws, rules, and regulations Assist in evaluating efficiency and
effectiveness
Objectives of Financial Reporting—State and Local Governments
Comprehensive Annual Financial Report (CAFR)
Introductory section
Financial section
Statistical section
Title page
Contents page
Letter of transmittal *
General information on organization structure
Other (as desired by management)
*From CEO or CFO about state of affairs
CAFR - Introductory Section
Auditor’s report
MD&A
Basic Financial Statements
Required Supplementary Information (RSI)
Combining and individual fund financial statements
and schedules (if required)
CAFR - Financial Section
Management’s Discussion and Analysis (MD&A)
Brief objective narrative providing management’s analysis of the government’s financial performance
Basic Financial Statements
Government-wide Financial Statements*
Statement of Net Assets (page 42)
Statement of Activities (page 43)
Fund Financial Statements (see next slide)
Notes to the Financial Statements
*Sometimes called Governmental Activities
Fund Financial Statements
Balance Sheet (Page 44) Statement of Revenues, Expenditures, and
Changes in Fund Balances - Governmental Funds with reconciliation (page 45-46)
Statement of Net Assets - Proprietary Funds (Page 51)
Statement of Revenues, Expenses, and Changes in Fund Net Assets - Proprietary Funds (Page 53)
Fund Financial Statements (Cont’d)
Statement of Cash Flows - Proprietary Funds Statement of Fiduciary Net Assets Statement of Changes in Fiduciary Net
Assets
Tables and charts showing multiple-year trends in financial and socioeconomic information
What information would be important?
CAFR - Statistical Section
top related