AGA Montgomery Chapter CGFM Exam Review
Presented By
Steven H. Emerson, CPA, CGFM, CGAP, CFE, CITP
 Added a new level of reporting for state and local
governments – the government-wide level.
 The previous model focused on funds. The
government-wide level does not focus on funds – the
focus is on the activities of the government –
governmental and business-type.
 Established an additional reporting requirement –
management’s discussion and analysis (MD&A)
 The major impact of GASB Statement 34 is the
requirement for reporting about the government as an
economic entity.
 There was no presentation that focused on the
government as a whole in the previous reporting
 The focus was on funds.
 The total column on the Combined Balance Sheet
titled “Memorandum Only” cautioned users that the
numbers may not be useful for financial reporting.
 Two reasons for this caution were:
 The measurement focus and basis of accounting was not
the same for all fund types.
 There were no interfund eliminations.
 Even GAAP operating statements that used the same
measurement focus and basis of accounting, had the
“Memorandum Only” caption because there were no
interfund eliminations.
 The central focus of the government-wide statements
is the primary government. They are not fund based.
 Government-wide statements distinguish between
governmental activities and business-type activities.
 Governmental Activities
 Activities primarily associated with governmental funds
 Business-Type Activities
 Primarily associated with enterprise funds
 Internal Service funds are generally included with
governmental activities, but with substantial
eliminations for interfund activities.
 Virtually all interfund transactions are eliminated,
thus providing a complete picture of the government
as a whole.
 Discrete component units are presented separately to
complete the financial picture of the reporting entity.
 A total for the primary government is required. A total
for the reporting entity including the component units
is optional.
 Fiduciary funds are not presented in the governmentwide statements.
 As stated earlier, internal service funds are usually
reported with governmental activities, however if the
primary customers of the internal service funds are
enterprise funds, then they would be reported with
business-type activities.
 The change in net assets for internal service funds is
eliminated so that the funds “break even” for the fiscal
 The two required statements for government-wide
reporting are the statement of net assets and the
statement of activities.
 Presented before the basic financial statements
 Required Supplementary Information (RSI)
 Easily readable analysis of the financial activities of the
 Discuss current year compared with the prior year
 Distinguish between the primary government and its
component units
 Primary emphasis is the primary government
 Brief discussion of the basic financial statements, how
the government-wide statements are related and how
they are different from the fund-level financial
 Condensed financial information with comparisons to
the prior year. The following elements should be
 Capital assets, other assets and total assets
 Long-term, other and total liabilities
 Total net assets, distinguished by its components
Program revenues by major source
General revenues by major source
Total revenues
Program expenses by function
Total expenses
Results of operation before contribution, special &
extraordinary items
Contributions to capital
Special and extraordinary items
Change in net assets
Ending net assets
Practical Example:
State of Alabama
Comprehensive Annual Financial Report
For the Fiscal Year Ended September 30, 2010
 Government-Wide Financial Statements are prepared
using the economic resources measurement focus and
the accrual basis of accounting
 Business-type activities require no adjustments since
enterprise funds use the same MFBA as the businesstype activities
 Governmental activities require adjustments from the
current financial resources measurement focus and
modified accrual basis of accounting used by
governmental funds to the Government- Wide MFBA
(see examples in the text)
 The first of the two required government-wide
 Assets – Liabilities = Net Assets
 The traditional balance sheet may be used instead
 Net Assets instead of Fund Balances or Equity
 Assets and Liabilities should be presented in order of
their relative liquidty
 The classified statement of net assets may be used –
i.e. City/County of San Francisco 2006 and 2010 CAFRs
 Net assets should be displayed in three components
 Invested in capital assets, net of related debt
 Only debt attributable to the acquisition, construction or
improvement of the capital assets
 Unspent proceeds should not be included
 Restricted net assets (Restricted assets used in the text)
 Constraints placed on net asset use, either externally imposed
by creditors, grantors, contributors, or laws or regulations of
other governments or imposed by law through enabling
legislation or constitutions
 Unrestricted net assets (Unrestricted assets used in the
 All other net assets
 Format
 Prepared using a columnar format
 Assets, liabilities and net assets of the primary
government are reported in two columns –
governmental activities and business-type activities
A total column for the primary government should be
A final column is for discretely presented component
units if present
A total column for the reporting entity is optional
Comparative data for the prior year is also optional
 Modified approach for Infrastructure
 In lieu of depreciation for infrastructure, conditional
assessments can be made on the ongoing maintenance
of the infrastructure assets. Certain requirements need
to be met such as keeping and up to date inventory of
the infrastructure, condition assessments using a
measurement scale and the conditional level at which
the infrastructure is to be kept must be disclosed.
 Failure by a government to meet the modified approach
requirements would require depreciation on the
infrastructure to be reported.
Practical Examples:
State of Alabama 2010 CAFR
City/County of San Francisco, CA 2006 CAFR
City of Cape Canaveral, FL 2010 CAFR
Town of Priceville, AL 2010 Audit Report
 Net cost format
 To identify the extent to which a particular function
requires financial support from the taxpayers
 Which revenues are program revenues
 Which revenues are general revenues
 To determine the operating results for the fiscal year
including the economic cost and net cost of services
 Governmental activities should be detailed by function
at the same level used for the fund financial statements
 All expenses are to be reported by function
 Indirect expenses are not required to be allocated to the
 If a government allocates the indirect expenses they may do
so in a separate column
 The separate column is necessary to enhance comparability among
 Depreciation expenses specifically identified with a
function should be included in direct expenses of the
 If a separate line is used for shared capital assets, it should
clearly indicate that it excludes direct depreciation of the
various functions
 Interest on long-term liabilities should be considered
an indirect expense and reported as a separate line
 Interest that can be attributed to a function should be
reported as an expense of that function
 Business-type activities are presented for each
significant enterprise
 Component units are displayed for major component
units, with minor component units totaled
 Revenues
 Program revenues are reported in three categories
 Charges for services
 Exchange or exchange-like transactions
 Licenses and permits
 Assessments for street cleaning
 Water and sewer fees
 Refuse collection fees
 Recreation fees
 Fines and forfeitures
 Program-specific operating grants and contributions
 Program-specific capital grants and contributions
 Entire grant needs to be restricted for capital purposes
 A grant that allows spending for operating and capital would be
reported as an operating grant
 Revenues – continued
 General revenues
 All other revenues
 All taxes are reported as general revenues
 Unrestricted grants and earnings from investments
 Gain and loss from sale of assets
 Special and extraordinary items
 Special items – significant transactions or events within
the control of management and are either unusual in
nature or infrequent in occurrence
 Reported separately after general revenues
 Sale of a major capital asset
 Settlement of a major lawsuit
 Special and extraordinary items – continued
 Extraordinary items – transactions that are both unusual
in nature and infrequent in occurrence
 Reported separately after special items
 Damage from a tornado or hurricane
 A “near special item” is either unusual in nature or
infrequent in occurrence but not in the control of
 Reported separately in the appropriate revenue or expense
category or disclosed in the notes to the financial statements
 Alternate Reporting Formats
 Two-page approach
 Pages 7-208 and 7-209 in GASB Comprehensive
Implementation Guide
 Displaying functions in columns
 Page 7-211 in GASB Comprehensive Implementation Guide
 Single-column format
 Page 7-214 in GASB Comprehensive Implementation Guide
 Combined fund and government-wide format
 Page 7-217 in GASB Comprehensive Implementation Guide
Practical Examples:
State of Alabama 2010 CAFR
City/County of San Francisco, CA 2006 CAFR
City of Cape Canaveral, FL 2010 CAFR
Town of Priceville, AL 2010 Audit Report
 Interfund Receivables and Payables
 All interfund receivables and payables should be
eliminated in the governmental and business-type
activities column of the statement of net assets
 Due to/froms among governmental funds
 Due to/froms among enterprise funds
 Only residual amounts of interfund payables/receivables
between governmental and business-type activities
should be presented as internal balances
 Internal balances would be eliminated in the total
column for the primary government
 Amounts due to or from fiduciary funds should be included
as a receivable from or payable to an external party
 Charges for Services
 Charges levied for services by governmental activities or
internal service funds to business-type activities should
not be eliminated nor should charges by business-type
activities to governmental activities
 Transfers
 Would be reported in the same manner as interfund
payables and receivables
 Transfers among governmental activities or among enterprise
activities are eliminated
 Only residual transfers between governmental and businesstype activities are reported on the statement of activities to
net to zero
 Internal Service Funds
 Designed to break even. If net revenue is positive, the
internal service fund overcharged. If negative, the
internal service fund undercharged. The overcharge or
undercharge should be charged or credited back to the
functions that incurred the user charges
 Investment income or interest expense should be
reclassified as governmental activities
 Blended component units are reported along with other
activities of the government either as governmental or
business-type activities
 Discretely presented component units are reported only at
the government-wide level
 Major component units can be reported in one of three
 In a separate column of the statement of net assets and
statement of activities
 Providing combining statements in the basic financial
statements after the fund financial statements
 Presenting condensed financial statements in the notes to the
financial statements
State of Alabama 2010 CAFR
City/County of San Francisco, CA 2006 CAFR
City of Cape Canaveral, FL 2010 CAFR
Town of Priceville, AL 2010 Audit Report
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