15/eAccounting for Governmental& Nonprofit Entities                 EARL R. WILSON                 JACQUELINE L. RECK     ...
Chapter                                                                              1        Introduction to Accounting a...
Learning ObjectivesAfter studying Chapter 1, you should be able to: Identify and explain the characteristics that  distin...
Learning Objectives (Cont’d) Explain the minimum requirements for general  purpose external financial reporting of state ...
What are Governmental Organizations? General   purpose governments   Provide   a wide variety of services   Examples: F...
What are Not-for-Profit Organizations? Legally separate organizations Usually exempt from federal, state, and local taxa...
How Do Governmental and       Not-For-Profit Organizations Differ         from Business Organizations? Resource  provider...
How Do Governmental Entities DifferFrom Not-For-Profit Organizations?   Power ultimately rests in the hands of the people...
Criteria for Determining Whether          an NPO is Governmental   Public corporations and bodies corporate and    politi...
Sources of GAAP and    Financial Reporting Standards      FASB Business organizations Nongovernmental not-for-profits   ...
Why Must Governmental Financial Reporting Differ from Business Financial Reporting?   Different financial report users wi...
Objectives of Financial Reporting—State    and Local Governments (SLG)Governmental financial reports are used primarily to...
Objectives of Financial Reporting—            SLG (Cont’d)“ACCOUNTABILITY is the cornerstone of all financial reporting in...
Objectives of Financial Reporting—           SLG (Cont’d)Q: What do we mean by   accountability?A: Accountability arises f...
Objectives of Financial Reporting—SLG                (Cont’d)Q: How does “interperiod equity” relate  to accountability?A:...
Objectives of Financial Reporting—       Federal Government   Accountability is also the foundation of    federal governm...
Objectives of Financial Reporting—    Federal Government (Cont’d)Federal government financial reporting should assistrepor...
Objectives of Financial Reporting—   Not-for-Profit (NFP) OrganizationsNFP financial reporting should provide informationu...
Minimum Requirement for GeneralPurpose External Financial Reporting         Management’s discussion and analysis  Governme...
Fund Accounting   Funds have separate self-balancing sets of    accounts used to account for resources    segregated for ...
Fund AccountingFund categories:   Governmental   Proprietary   Fiduciary
Governmental FundsCharacteristics: Focus on short-term flow of financial resources Only account for current assets and c...
Proprietary and Fiduciary FundsCharacteristics: Focus on flow of economic resources Accrual basis of accounting (revenue...
Comprehensive Annual Financial Report              (CAFR)Introductory sectionFinancial sectionStatistical section
CAFR - Introductory Section              Title page              Contents page              Letter of transmittal      ...
CAFR - Financial Section   Auditor’s report   Basic financial statements   Required supplementary information    (RSI)(...
Management’s Discussion and Analysis            (MD&A)   providing management’s   analysis of the government’s   financial...
Basic Financial StatementsGovernment-wide financial statements   Statement of net assets (Illustration A1-1)   Statement...
Basic Financial Statements—Government-wide Financial Statements              (Cont’d)Points of interest (Ill. A1-1 and A1-...
Basic Financial Statement—Government-  wide Financial Statements (Cont’d) Points of interest (Cont’d)    All financial in...
Basic Financial Statements—Fund           Financial StatementsGovernmental funds   Balance sheet—governmental funds (Ill....
Basic Financial Statements—Fund       Financial Statements (Cont’d)Governmental funds—points of interest   Focus on flow ...
Basic Financial Statements—Fund      Financial Statements (Cont’d)Governmental funds—points of interest(Cont’d)   Reporti...
Basic Financial Statements—Fund      Financial Statements (Cont’d)Proprietary funds   Statement of net assets—proprietary...
Basic Financial Statements—Fund            Financial StatementsProprietary funds—points of interest   Reports information...
Basic Financial Statements—Fund      Financial Statements (Cont’d)Fiduciary funds   Statement of fiduciary net assets (Il...
Basic Financial Statements—Fund      Financial Statements (Cont’d)Fiduciary funds—points of interest   Fiduciary activiti...
CAFR - Statistical Section            Tables and charts            showing multiple-year            trends in financial an...
Concluding Comments   In this course you will become familiar with    current GASB, FASB, and FASAB standards    relative...
A Quote from the Original Author“...Even when developed to the ultimate stage ofperfection, governmental accounting cannot...
Upcoming SlideShare
Loading in …5
×

rr

373 views

Published on

DSA-12067

Published in: Business
0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
373
On SlideShare
0
From Embeds
0
Number of Embeds
14
Actions
Shares
0
Downloads
6
Comments
0
Likes
1
Embeds 0
No embeds

No notes for slide
  • 1
  • 2
  • rr

    1. 1. 15/eAccounting for Governmental& Nonprofit Entities EARL R. WILSON JACQUELINE L. RECK SUSAN C. KATTELUS
    2. 2. Chapter 1 Introduction to Accounting and Financial Reporting for Governmental and Not-for- Profit EntitiesMcGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.
    3. 3. Learning ObjectivesAfter studying Chapter 1, you should be able to: Identify and explain the characteristics that distinguish governmental and not-for-profit entities from for-profit entities Identify the authoritative bodies responsible for setting GAAP and financial reporting standards for all governmental and not-for-profit organizations Contrast and compare the objectives of financial reporting for state and local governments, the federal government, and not-for-profit organizations
    4. 4. Learning Objectives (Cont’d) Explain the minimum requirements for general purpose external financial reporting of state and local governments and how they relate to comprehensive annual financial reports Explain the different objectives, measurement focus, and basis of accounting of the government-wide financial statements and fund financial statements of state and local governments
    5. 5. What are Governmental Organizations? General purpose governments  Provide a wide variety of services  Examples: Federal government, state governments, cities, towns, townships, villages, counties, boroughs, and parishes Special purpose governments  Usually provide only a single or just a few services  Examples: Independent school systems, public colleges and universities, public hospitals, fire protection districts, sewer districts, transportation authorities, and many others
    6. 6. What are Not-for-Profit Organizations? Legally separate organizations Usually exempt from federal, state, and local taxation Religious, community service, private educational and health care, museums, and fraternal and social organizations, among many other kinds of organizations
    7. 7. How Do Governmental and Not-For-Profit Organizations Differ from Business Organizations? Resource providers do not expect to receive proportional benefits Lack of a profit motive Absence of transferable ownership rights
    8. 8. How Do Governmental Entities DifferFrom Not-For-Profit Organizations? Power ultimately rests in the hands of the people People delegate power to public officials through the election process Empowered by and accountable to a higher level government Taxation powers
    9. 9. Criteria for Determining Whether an NPO is Governmental Public corporations and bodies corporate and politic Other organizations with 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
    10. 10. Sources of GAAP and Financial Reporting Standards FASB Business organizations Nongovernmental not-for-profits GASB Governmental organizations Governmental not-for-profits FASAB Federal government and its agencies
    11. 11. Why Must Governmental Financial Reporting Differ from Business Financial Reporting? Different financial report users with different needs Governmental financial reporting focuses on stewardship and accountability for how public resources are raised and used to provide services
    12. 12. Objectives of Financial Reporting—State and Local Governments (SLG)Governmental financial reports are used primarily to: 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
    13. 13. Objectives of Financial Reporting— SLG (Cont’d)“ACCOUNTABILITY is the cornerstone of all financial reporting in government “ (GASB Concepts Statement No. 1, par. 56)
    14. 14. Objectives of Financial Reporting— SLG (Cont’d)Q: What do we mean by accountability?A: Accountability arises from 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
    15. 15. Objectives of Financial Reporting—SLG (Cont’d)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?
    16. 16. Objectives of Financial Reporting— Federal Government Accountability is also the foundation of federal government financial reporting Federal Accounting Standards Advisory Board (FASAB) standards are targeted at both internal users (management) and external users
    17. 17. Objectives of Financial Reporting— Federal Government (Cont’d)Federal government financial reporting should assistreport users in evaluating: Budgetary integrity Operating performance Stewardship Adequacy of systems and controls
    18. 18. Objectives of Financial Reporting— Not-for-Profit (NFP) OrganizationsNFP financial reporting should provide informationuseful in: Making resource allocation decisions Assessing services and ability to provide services Assessing management stewardship and performance Assessing economic resources, obligations, net resources, and changes in them
    19. 19. Minimum Requirement for GeneralPurpose External Financial Reporting Management’s discussion and analysis Government-wide Fund financial financial statements statements Notes to the financial statements Required supplementary information (other than MD&A)
    20. 20. Fund Accounting Funds have separate self-balancing sets of accounts used to account for resources segregated for specific purposes or restricted as to use by donors or grantors Funds are separate accounting and fiscal entities (Chapters 2-9 provide detail)
    21. 21. Fund AccountingFund categories: Governmental Proprietary Fiduciary
    22. 22. Governmental FundsCharacteristics: Focus on short-term flow of financial resources Only account for current assets and current liabilities Use modified accrual basis of accounting (revenues recognized when measurable and available for spending and expenditures when incurred) Closely tied to budgetary accounting
    23. 23. Proprietary and Fiduciary FundsCharacteristics: Focus on flow of economic resources Accrual basis of accounting (revenues recognized when earned and expenses when incurred) Account for both current and noncurrent assets and current and noncurrent liabilities—similar to business accounting
    24. 24. Comprehensive Annual Financial Report (CAFR)Introductory sectionFinancial sectionStatistical section
    25. 25. CAFR - Introductory Section  Title page  Contents page  Letter of transmittal  Other (as desired by management)
    26. 26. CAFR - Financial Section Auditor’s report Basic financial statements Required supplementary information (RSI)(other than MD&A) Combining and individual fund statements and schedules
    27. 27. Management’s Discussion and Analysis (MD&A) providing management’s analysis of the government’s financial performance
    28. 28. Basic Financial StatementsGovernment-wide financial statements Statement of net assets (Illustration A1-1) Statement of activities (Illustration A1-2)
    29. 29. Basic Financial Statements—Government-wide Financial Statements (Cont’d)Points of interest (Ill. A1-1 and A1-2) Information is reported separately for the primary government and discretely presented component units Withinthe primary government, information is reported separately for governmental and business-type activities
    30. 30. Basic Financial Statement—Government- wide Financial Statements (Cont’d) Points of interest (Cont’d)  All financial information in the government-wide financial statements is reported on the accrual basis with an economic resources focus— similar to business financial reporting  Assists in assessing operational accountability —how efficiently resources are being used
    31. 31. Basic Financial Statements—Fund Financial StatementsGovernmental funds Balance sheet—governmental funds (Ill. A1-3) with reconciliation (Ill. A1-4) Statement of revenues, expenditures, and changes in fund balances—governmental funds (Ill. A1-5) with reconciliation (Ill. A1-6) These statements report information separately for the General Fund and other major funds (Chapter 2 defines major funds)
    32. 32. Basic Financial Statements—Fund Financial Statements (Cont’d)Governmental funds—points of interest Focus on flow of current (i.e., short-term) financial resources recognized on the modified accrual basis of accounting Assist in assessing fiscal accountability— whether financial resources were raised and expended in compliance with budgetary and other legal provisions
    33. 33. Basic Financial Statements—Fund Financial Statements (Cont’d)Governmental funds—points of interest(Cont’d) Reporting the same information about governmental activities in two different ways creates a need to reconcile the information reported in the governmental fund financial statements to that in the Governmental Activities Column of the government-wide statements (see Illustrations A1-4 and A1-6)
    34. 34. Basic Financial Statements—Fund Financial Statements (Cont’d)Proprietary funds Statement of net assets—proprietary funds (Ill. A1-7) Statement of revenues, expenses, and changes in fund net assets—proprietary funds (Ill. A1-8) Statement of cash flows—proprietary funds (Ill. A1-9)
    35. 35. Basic Financial Statements—Fund Financial StatementsProprietary funds—points of interest Reports information for enterprise funds and internal service funds using an economic resources focus and accrual basis of accounting Information is reported in separate columns for major enterprise funds. All internal service fund information reported is combined in a single column
    36. 36. Basic Financial Statements—Fund Financial Statements (Cont’d)Fiduciary funds Statement of fiduciary net assets (Ill. A1-10) Statement of changes in fiduciary net assets (Ill. A1-11)
    37. 37. Basic Financial Statements—Fund Financial Statements (Cont’d)Fiduciary funds—points of interest Fiduciary activities relate to the government’s responsibility as an agent or trustee to hold and/or manage resources for the benefit of private parties Since fiduciary resources cannot be used by the government, they are reported only in the fiduciary fund financial statements—not in the government-wide statements
    38. 38. CAFR - Statistical Section Tables and charts showing multiple-year trends in financial and socio-economic information (discussed in detail in Chapter 9)
    39. 39. Concluding Comments In this course you will become familiar with current GASB, FASB, and FASAB standards relative to governmental and not-for-profit organizations Accounting and reporting for governmental and not-for-profit entities differ from those of for- profit entities because each type of entity has different purposes and reporting objectives
    40. 40. A Quote from the Original Author“...Even when developed to the ultimate stage ofperfection, governmental accounting cannotbecome a guaranty of good government. Atbest, it can never be more than a valuable toolfor promotion of sound financial management...” Professor R. M. Mikesell, 1951 END

    ×