BAR on Fund Accounting - Washington State Board for Community

Report
Overview of
Governmental Fund
Accounting
Budget, Accounting, and Reporting Council
May 29, 2014, Columbia Basin College
Stuart Trippel, CPA, CGMA, Executive Director, Business and
Student Support Services, Shoreline Community College
Concepts
• Basic concepts of fund accounting are common to both
government entities and not-for-profit organizations
• Contrast with for-profit organizations (businesses)
• “How much money did we make?” versus “How did we spend
the money?”
• Fund accounting is now primarily used in governmental
reporting; earlier it was also used by not-for-profits
• FAS 117 (issued 1993) changed to reporting by net asset
classification for not-for-profits
• Some not-for-profit organizations still use fund accounting
internally
• Government-owned colleges and universities account by fund
but may report like not-for-profits (BTAs)
Sources of Authority
• Governmental Accounting Standards Board (GASB)
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Statements
Interpretations
Technical bulletins
Implementation guides
Concepts statements
Law (RCW 43.88, appropriations acts)
Regulation (State Administrative and Accounting Manual)
Documented internal policies and procedures
Accounting literature
The Accounting Entity
• For purposes of fund accounting and reporting, the accounting
entity for community and technical colleges is the State of
Washington
• Comprehensive annual financial report (CAFR) prepared
annually and audited by the state auditor’s office
• CAFR includes financial statements by fund as well as
government-wide financial statements (intended to be more
“user-friendly” and paint a broader picture)
Colleges as “Entities”
• Individual CTCs are not accounting entities for purposes of the
CAFR; the state is the entity
• Balances of individual accounts used by most CTCs are usually
not material to the CAFR (some larger colleges’ accounts may
be material)
• College financial statements are titled “_______ College, A
Component Unit of the State of Washington”
• College statements present only the portion of activities of the
state that is attributable to the transactions of the college
• Audit opinion letter will state that college financial statements
“do not purport to, and do not, present fairly the financial
position of the state of Washington . . .”
What is a Fund?
• Self-contained accounting entity
• Own set of accounts
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Asset
Liability
Revenue
Expenditure or expense
Fund balance or other equity
• Each fund must balance individually
• In some sense, individual pro-orgs in CTC accounting are
“mini-funds”
Categories of Funds
• Governmental funds
• FMS Fund Types 1, 2, and 3
• Governmental non-fund accounts (not self-balancing)
• FMS Fund Type 3
• Proprietary funds
• FMS Fund Type 4
• Fiduciary funds
• FMS Fund Type 5
Governmental Funds
• General fund
• FMS Fund Type 1, Fund 001
• Special revenue funds
• FMS Fund Type 3; examples include Funds 145, 147, 148, 149,
846, and 860
• Capital projects funds
• FMS Fund Type 1, Funds 057 and 060
• Debt service funds (not used at CTC level)
• Permanent funds
• FMS Fund Type 2, Funds 843 (exceptional faculty endowment if
held by college) and 859 (local endowment)
Governmental “Non-Funds”
• General capital assets account
• FMS Fund Type 3, Fund 997
• General long-term liabilities account
• FMS Fund Type 3, Fund 999
Proprietary Funds
• Internal service funds
• FMS Fund Type 4; examples include Fund 443 (data processing),
Fund 448 (printing), and Fund 460 (motor pool)
• Enterprise funds
• FMS Fund Type 4; examples include Fund 522 (associated
students), Fund 524 (bookstore), Fund 528 (parking), and Fund
570 (other auxiliary enterprises)
Fiduciary Funds
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Pension trust funds (not used by CTCs)
Private-purpose trust funds (not used by CTCs)
Investment trust funds (not used by CTCs)
Agency funds
• FMS Fund Type 5, Funds 790 and 840
Fund Reference Manual
• www.ofm.wa.gov/fund
• Generally not necessary to consult, but can sometimes be
useful
• Provides links to statutory authority (which may be very
general)
• Provides description of fund and sources of revenue
• May not always be completely up-to-date or entirely accurate
• Always fun to look at!
Measurement Focus and Basis
• Measurement focus — what is being measured?
• Flow of current financial resources
• Flow of economic resources
• Basis of accounting — when are we recognizing events?
• Modified accrual
• Revenue when measurable and available
• Expenditures when liability is incurred
• Accrual
• When revenue is earned
• When expense is incurred or asset consumed
Application to Funds
• Governmental funds
• Current financial resources measurement focus
• Modified accrual basis of accounting
• Proprietary and fiduciary funds
• Economic resources measurement focus
• Accrual basis of accounting
What’s the Difference?
• Consider the issuance of bonds under two different scenarios
• Scenario 1
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General fund
Current financial resources measurement focus
Modified accrual basis of accounting
Government issues $2,000,000 bonds
• Scenario 2
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Electric utility enterprise fund
Economic resources measurement focus
Accrual basis of accounting
Government issues $2,000,000 bonds
What’s the Difference?
Dr.
Cr.
Scenario 1 (General Fund)
One entry in the fund:
Cash
2,000,000
Other Financing Sources—Bond Proceeds
2,000,000
Plus entries in the GLTL non-fund account:
Current Portion of Bonds Payable
200,000
Long-Term Portion of Bonds Payable
1,800,000
Scenario 2 (Enterprise Fund)
Entry in the fund only:
Cash
Bonds Payable
2,000,000
2,000,000
What’s the Difference?
• Consider the purchase of capital equipment under two
different scenarios
• Scenario 3
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General fund
Current financial resources measurement focus
Modified accrual basis of accounting
Government purchases $300,000 capital asset
• Scenario 4
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Electric utility enterprise fund
Economic resources measurement focus
Accrual basis of accounting
Government purchases $300,000 capital asset
What’s the Difference?
Dr.
Cr.
Scenario 3 (General Fund)
One entry in the fund:
Expenditures—Capital Outlay
300,000
Cash
300,000
Plus an entry in the GCA non-fund account:
Equipment
300,000
Scenario 4 (Enterprise Fund)
Entry in the fund only:
Equipment
Cash
300,000
300,000
Expenditures versus Expenses
• It’s the same money, the same checks being written, the same
things being purchased
• The words are different
• Under the modified accrual basis, we speak of expenditures
• Under the accrual basis, we speak of expenses
• Governmental funds record expenditures
• Other funds record expenses
Budgetary Accounting
• Funds sometimes use “budgetary accounting”
• We actually record the budget in journal entries
• This is used to allow ledgers to be prepared to assist in
preventing overspending, which can have legal ramifications
• Initial budget and modifications
• Estimated revenues (GL 3110)
• Appropriations (or allotments) (GL 6210)
• Budgetary fund balance (GL 9100)
• Encumbrances are used for purchasing control
• Encumbrances (GL 6410)
• Reserve for encumbrances (GL 9510)
What About Our Statements?
• CTCs operate as agencies of the state of Washington and
therefore use fund accounting
• We have no choice whether to use governmental fund
accounting
• Since we are engaged only in business-type activities, we
report as if we were a single enterprise fund
• We account one way and report another way
• We need to get from one way to another
• The alternative would be to keep two sets of books and enter
every transaction twice
• This would truly be double-entry bookkeeping!
• The state board has prepared a worksheet for us to use
Working an Example
• We’re going to work a very brief, very simple example for a
general fund of a city
• Remember that the general fund uses the current financial
resources measurement focus and the modified accrual basis
of accounting
• This is the approach most different from what we do in our
BTA-only college financial statements and in enterprise funds
• The same measurement focus and basis would apply to
special revenue funds (e.g., Fund 145, Fund 148, Fund 149)
• Source: Martin Ives, Terry K. Patton, and Suesan R. Patton,
Introduction to Governmental and Not-for-Profit Accounting,
7th ed. (Upper Saddle River, N.J.: Pearson Education, 2013),
Exercise 4-8 (p. 120), © 2013 Pearson Education, Inc.
Transaction 1
• The approved budget for the year follows
• Estimated Revenues
• Property tax revenues
• Licenses and fees
$600,000
30,000
• Appropriations
• Public safety salaries
• Public safety, other expenditures
$550,000
90,000
Transaction 1 Journal Entry
Dr.
Estimated revenues—property taxes
600,000
Estimated revenues—licenses and fees
30,000
Budgetary fund balance
10,000
Appropriations—public safety salaries
Appropriations—public safety other expenditures
Cr.
550,000
90,000
Transaction 2
• Property taxes of $600,000 were levied, and bills totaling that
amount were mailed at the beginning of the year.
• During the year, $590,000 of property taxes were collected.
• Licenses and fees collected amounted to $28,000.
Transaction 2 Journal Entry
Dr.
Property taxes receivable
600,000
Revenues—property taxes
Cash
600,000
590,000
Property taxes receivable
Cash
Revenues—licenses and fees
Cr.
590,000
28,000
28,000
Transaction 3
• Salaries paid during the year amounted to $580,000;
• police officers earned an additional $12,000 that will be paid
in January.
Transaction 3 Journal Entry
Dr.
Expenditures—public safety salaries
580,000
Cash
Expenditures—public safety salaries
Accrued salaries payable
Cr.
580,000
12,000
12,000
Transaction 4
• Purchase orders for supplies were placed in the amount of
$60,000.
• The entire amount ordered was received during the year,
together with invoices totaling $56,000.
• The invoices were approved for payment.
Transaction 4 Journal Entry
Dr.
Encumbrances
60,000
Budgetary fund balance reserved
for encumbrances
Budgetary fund balance reserved for encumbrances
60,000
60,000
Encumbrances
Expenditures—public safety other expenditures
Vouchers payable
Cr.
60,000
56,000
56,000
The End
• Questions
• Discussion

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