Fund Accunting Class II
BS&A Fund Accunting Class II Cntents Gvernmental Financial Reprting Mdel - Minimum GAAP Reprting Requirements... 1 MD&A (Management's Discussin and Analysis)... 1 Basic Financial Statements... 1 RSI (Required Supplemental Infrmatin)... 1 Mdified Accrual vs. Full Accrual Basis f Accunting... 2 Mdified Accrual Basis (Gvernmental Funds)... 2 Accrual Basis (Prprietary and Fiduciary Funds)... 2 Fund Financial Statements... 3 Gvernmental Fund Statements... 3 Prprietary Fund Statements... 3 Fiduciary Fund Statements... 3 Gvernment-Wide Financial Statements (GASB 34)... 4 Useful Websites... 6 BS&A GASB 34 Reprting Functin... 7 Accunt Classificatin Setup and Selectin n Accunts... 8 Functin/Prgram Setup and Selectin n Departments (r Revenue Accunts)... 10 Revenue Types... 14 Majr Fund Setup... 16 GASB 34 Adjustment Prcess... 18 Michigan F-65 Frm... 24 Capital Assets... 26 Types f Capital Assets... 26 Capital Expenditures vs. Capitalizatin... 26 Valuatin f Capital Assets... 26 Estimating Useful Life... 26 Salvage Value... 27 Depreciatin Methds... 27 Cntacting Us... 28 i
BS&A Fund Accunting Class II ii
BS&A Fund Accunting Class II Gvernmental Financial Reprting Mdel - Minimum GAAP Reprting Requirements MD&A (Management's Discussin and Analysis) MD&A is the analysis f the financial cnditin and perating results f the unit written by its wn financial managers. Basic Financial Statements Gvernment-wide Financial Statements The fcus f gvernment-wide reprting is nt n cmpliance with the budgets r n the use f available (r current) spendable financial resurces, but n peratinal accuntability infrmatin. Generally, a gvernment's perating bjective is t prvide services t its citizens, and therefre these reprts. The gvernment-wide financial statements reprt the extent t which the unit has met its perating bjectives efficiently and effectively, using all resurces available fr that purpse. Statement f Net Assets Statement f Activities Fund Financial Statements The fcus f fund financial statements is the Majr Funds f the primary gvernment in cntrast t the activities in the gvernment-wide statements. Fund financial statements are used t reprt additinal and detailed infrmatin abut the primary gvernment. Gvernmental fund financial statements Prprietary fund financial statements Fiduciary fund financial statements Ntes t the basic financial statements Used t present essential infrmatin fr fair presentatin f the financial statements that is nt displayed n the face f the financial statements. Examples include: Current millage rates Value f Cash and Cash Equivalents FDIC insured Descriptins f Cmpnent Units RSI (Required Supplemental Infrmatin) RSI is defined as schedules, statistical data, and ther infrmatin that the GASB has determined is essential fr financial reprting. An example f RSI is a budgetary cmparisn f the General Fund and each majr Special Revenue fund that has a legally-adpted budget. The budgetary cmparisn must cntain at least the fllwing three clumns: Original Budget Final Amended Budget Actual inflws and utflws These cmparisns may be presented as schedules in RSI r as statements with the fund financial statements. 1
BS&A Fund Accunting Class II Mdified Accrual vs. Full Accrual Basis f Accunting Mdified Accrual Basis (Gvernmental Funds) Revenues are recrded when bth "measurable" and "available: Measurable means that the amunt is knwn r can be reasnably estimated. Available means that the amunt is cllectable within the current perid r sn thereafter (usually 60 days) t be used t pay current liabilities. Generally, if measurable, expenditures shuld be recgnized in the perid in which a liability is incurred. Hwever, under the mdified accrual basis, liabilities and expenditures fr debt service n general lng-term dept shuld be recgnized when due, nt when incurred. Example: Prperty Taxes may be billed July 1st and are nt due until September 14th (mre than 60 days). Therefre, revenue is nt recrded until payment is received. Accrual Basis (Prprietary and Fiduciary Funds) Transactins are recrded when they ccur, regardless f when the cash is received r paid. Prprietary Funds recgnize revenue in the perid in which a service is prvided, regardless f hw lng after the end f the perid the revenue is expected t be cllected. Example: Water revenue is recrded as revenue at the time f billing, regardless f when payment is received. 2
BS&A Fund Accunting Class II Fund Financial Statements Gvernmental Fund Statements Shuld be presented using the current financial resurces measurement fcus and the mdified accrual basis f accunting. Balance Sheet - presents current assets, current liabilities, and fund balance Statement f Revenues, Expenditures, and Changes in Fund Balances - presents infrmatin abut the inflws, utflws, and balances f current financial resurces f each majr Gvernmental Fund and fr the nn-majr funds in the aggregate. Revenues are reprted by type (i.e., Prperty Taxes, Charges fr services, etc.), and expenditures as a minimum by functin (i.e., General Gvernment, Public Wrks, Public Safety, etc.). Prprietary Fund Statements Shuld be presented using the ecnmic resurces measurement fcus and the accrual basis f accunting. Prprietary Funds are reprted in the same way that all activities are reprted in gvernment-wide financial statements. Statement f Net Assets - presents bth current and nncurrent assets and liabilities. Statement f Revenues, Expenses, and Changes in Net Assets - presents all changes in fund net assets, including capital cntributins. This reprt must differentiate between perating revenues/expenses, nnperating revenues/expenses, and capital cntributins and transfers in/ut, with subttals fr perating revenues/expenses and incme. Statement f Cash Flw - the primary purpse f this reprt is t prvide relevant infrmatin abut the cash receipts and cash payments f an entity during a perid as is nly required fr Prprietary Funds at the fund financial statement level. Cash flws shuld be reprted using the fllwing fur categries: Operating Nncapital financing Investing Capital financing The "direct" methd is nw required by GASB 34. Prir t GASB 34, units had the ptin t use the direct methd r the indirect methd. Fiduciary Fund Statements Shuld be presented using the ecnmic resurces measurement fcus and the accrual basis f accunting, except fr certain liabilities related t defined benefit pensin and ther pst-emplyment benefit plans. Statement f Fiduciary Net Assets - presents infrmatin abut the assets, liabilities, and net assets fr each Fiduciary Fund. Statement f Changes in Fiduciary Net Assets - presents infrmatin abut the additins t, deductins frm, and net increase (decrease) in net assets fr the year. 3
BS&A Fund Accunting Class II Gvernment-Wide Financial Statements (GASB 34) GASB 34 statements are prepared using the ecnmic resurces management fcus and the accrual basis f accunting. Therefre, the Gvernmental Fund financial statements must be adjusted frm the mdified accrual basis t the (full) accrual basis. One f the bjectives f these statements is t determine if the current year's inflws paid fr the current year's utflws. Key pints... GASB 34 statements d nt reprt infrmatin n a fund basis, but n the tw different types f activities carried ut by a gvernment (Gvernmental Activities and Business-type Activities). Fiduciary activities are nt reprted in the gvernment-wide financial statements, since these resurces are nt available t supprt the unit's wn prgrams. Interfund activity within Gvernmental r Business-type Activities shuld be eliminated r reclassified in the gvernmentwide financial statements t avid "duble cunting" in the aggregate ttal amunts. Interfund activity between Gvernmental and Business-type Activities shuld nt be eliminated. Statement f Net Assets Separate clumns fr Gvernmental Activities, Business-type Activities, and discreetly-presented Cmpnent Units. Must have a ttal clumn fr primary gvernment (Gvernmental Activities + Business-type Activities), but is ptinal fr the unit as a whle. Assets and liabilities shuld be reprted in rder f liquidity (hw quickly/easily can it be cnverted t cash). Lng-term liabilities must be reprted as tw separate types: 1) Due within ne year; 2) Due in mre than ne year. The difference between the assets and liabilities must be reprted as net assets, nt as fund balance. Furthermre, net assets must be brken dwn int these classificatins: 1) invested in capital assets; 2) net f related debt; 3) restricted; 4) unrestricted. 4
BS&A Fund Accunting Class II Statement f Activities Separate clumns fr Gvernmental Activities, Business-type Activities, and discreetly-presented Cmpnent Units. Minimum level f detail fr Gvernmental Activities is at the functin level (i.e., General Gvernment, Public Safety, Public Wrks). Minimum level f detail fr Business-type Activities is at the different identifiable activity levels (water, sewer, parking facilities) Expenses are reprted in ttal at the functin level Revenues are reprted as either Prgram r General: Prgram Revenues are reprted by functin/identifiable activities in the net revenue expense prtin f the statement and include exchange revenues (fees and charges) and restricted nn-exchange revenues (grants and cntributins) a. Charges fr services are charges t custmers r applicants wh purchase, use, r directly benefit frm the service they are paying fr (Water and Sewer Usage, Permit Fees, Fines, Frfeitures, Operating Special Assessments [Street Lighting]) b. Operating Grants and Cntributins are prgram-specific grants r cntributins that are restricted t a particular perating purpse (DARE Grant) c. Capital Grants and Cntributins are prgram-specific grants r cntributins that are restricted t a capital purpse (Capital grant t finance a new jail) General Revenues are reprted at the bttm f the statement and include all taxes (even if restricted t a specific prgram) and unrestricted nn-exchange revenues (interest) 5
BS&A Fund Accunting Class II Useful Websites Unifrm Reprting Frmat fr Financial Statements fr Cunties and Lcal Units f Gvernment in Michigan: http://www.michigan.gv/dcuments/unifrmreprtingfrmatmanual_20446_7.pdf Instructins fr Michigan Frm F-65 (3965) Annual Lcal Unit Fiscal Reprt http://www.michigan.gv/dcuments/treasury/f65instructins_223912_7.pdf Annual Lcal Unit Fiscal Reprt: http://www.michigan.gv/treasury/0,1607,7-121-1751_2194-171577--,00.html 6
BS&A Fund Accunting Class II BS&A GASB 34 Reprting Functin This sectin prvides yu with a basic verview f hw the GL/Budgeting applicatin generates the reprts required by GASB 34. Key pints... Yu must have a unifrm Chart f Accunts in rder fr accurate gvernment-wide reprts t be generated. Accunt Type ptins have changed (i.e., Lng Term Liability due within 1 year r due after 1 year) t agree with thse set frth in GASB 34. Yu will need t review the current Accunt Type setup and make any necessary changes. Accunt Classificatins will need t be set up and attached t the Accunts. These are used t derive the amunts reprted n the Statement f Net Assets. Functin/Prgrams will need t be set up and attached t the Departments/Activities. These are used t derive the amunts reprted n the Statement f Activities. Of nte: Fr expenditure/expense accunts, the Functin/Prgram is based n the Department/Activity prtin f the GL number. Fr revenue accunts, it depends n whether yur Prgram Revenues are departmentalized: a. If departmentalized, the Functin/Prgram gruping will wrk the same way as it des fr expenditure/expense accunts. b. If nt departmentalized, the Functins/Prgrams will need t be attached t the accunt. Revenue accunts need t be classified as the revenue type (i.e., General r Prgram revenue) set frth in GASB 34. Each fund must have the Fund Type setup reviewed t ensure it will be reprted crrectly. Each fund must have the GASB 34 sectin cmpleted (i.e., Majr Fund, Cmpnent Unit, and Reprt as Gvernmental Activity if the Fund Type is Prprietary/Business Activity). Different adjustment methds are available in generating the GASB 34 reprts: Establish the necessary Accunt Grups (General Capital Assets, General Lng Term Debt, Gvernmental Full Accrual, and General Infrastructure Assets) Use ur GASB 34 Adjustments File Use ther means ("D Nt Adjust" methd) t accumulate the necessary data t cnvert the fund-based financial statements t the gvernment-wide financial statements as required by GASB 34. 7
BS&A Fund Accunting Class II Accunt Classificatin Setup and Selectin n Accunts Accunt Classificatins are used t grup accunts fr reprting n the Statement f Net Assets and are added in Prgram Setup>Database Setup>Accunt Classificatins. In this example, Cash and Cash Equivalents is an Accunt Classificatin that has been set up and attached t Accunts 001.000 and 004.000 (Accunts are set up in Prgram Setup>Database Setup>Accunts). 8
BS&A Fund Accunting Class II Thus, these tw accunts - 001.000 and 004.000 - are reprted in ttal as "Cash and Cash Equivalents" (fr Gvernmental Activity and Business Type Activity) n the Statement f Net Assets. 9
BS&A Fund Accunting Class II Functin/Prgram Setup and Selectin n Departments (r Revenue Accunts) Functins/Prgrams are used t cmbine Departments/Activities as well as Prgram Revenue Accunts (if yur revenue accunts are nt departmentalized) fr reprting n the Statement f Activities and are added in Prgram Setup>Database Setup>Functins/Prgrams. If yu departmentalize yur revenue accunts, the Functins/Prgrams used fr reprting are derived frm the Functin/Prgram selected n the departments, based n each general ledger number. In this example, Departments 441 and 446 are classified as "Public Wrks" and their expenses are cmbined and reprted in ttal n the Statement f Activities (Departments are set up in Prgram Setup>Database Setup>Departments): 10
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BS&A Fund Accunting Class II Functins/Prgrams are als attached t Prgram Revenue Accunts, if thse revenue accunts are nt departmentalized. In this example, Accunts 451.000 and 626.000 are classified as "Charges fr Services" with a Functin/Prgram gruping f "Health and Welfare", and their expenses are cmbined and reprted in ttal n the Statement f Activities (Accunts are set up in Prgram Setup>Database Setup>Accunts): 12
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BS&A Fund Accunting Class II Revenue Types Revenue Types are used t grup accunts fr reprting n the Statement f Activities and are selected n Revenue and Transfers-In accunts in Prgram Setup>Database Setup>Accunts. Please refer t the sectin n Functins/Prgrams fr an example f the Statement f Activities reprt that illustrates reprting by revenue type. 14
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BS&A Fund Accunting Class II Majr Fund Setup A fund can be determined t be "Majr" based n the Majr Fund Calculatin Analysis reprt, r cnsidered t be s by management f the gvernmental unit. Funds determined t be "Majr" must have the "Majr Fund" flag checked n in Prgram Setup>Database Setup>Funds: The Majr Fund Calculatin Analysis reprt is lcated under Reprts>GASB 34 Reprts>GASB 34 - Statistical. This analysis calculates the Majr Funds accrding t the guidelines set frth in GASB 34. It displays whether a Fund calculates as Majr and shws whether r nt the flag has been checked in Prgram Setup. This reprt can be run at any time (i.e., preliminary audit prcess and after audit adjustments). The Majr Fund flag determines hw the fund will be reprted n the fund-based reprts, which are the Balance Sheet fr Gvernmental Funds and the Statement f Revenues, Expenditures, and Changes in Fund Balance fr Gvernmental Funds. Fund 230, HUD Prgrams, is cnsidered a Majr Fund and has the Majr Fund flag checked (nn-majr funds are reprted in ttal). 16
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BS&A Fund Accunting Class II GASB 34 Adjustment Prcess Yu have the ptin t use Our GASB 34 Adjustments File Accunt Grups (General Capital Assets; General Lng Term Debt; General Infrastructure Assets; Gvernmental Full Accrual) Micrsft Excel t mdify/recrd the necessary adjustments t cnvert the gvernmental funds frm the mdified accrual methd t the full accrual methd as required by GASB 34 fr gvernment-wide reprting. GL/Budgeting will generate the gvernment-wide reprts based n the methd yu select. Yu may change the methd when yu run the reprt; hwever, be sure that all the data is entered fr that methd. If yu chse the GASB 34 Adjustments File methd, adjustments are entered in Tasks>GASB 34 Adjustments. Adjustments are entered at the Accunt Type, Classificatin, and Functin level instead f at the general ledger accunt number level. This allws yu t make less detailed transactins and still adjust the amunts reprted withut having t adjust each GL accunt number cmbinatin used t cmpile the statements. Be sure t select whether the adjustment is an Adjustment r Reclassificatin, since the Cnversin Wrksheet reprts these types in separate clumns. If yu chse the Accunt Grups methd, be sure yu have the necessary Funds set up, that they are f the crrect Accunt Grup Type, and that the balances in each f these Funds are crrect. If yu chse the D Nt Adjust methd, the fund financial statements are cnverted t the gvernment-wide financial statements withut taking int cnsideratin any f the necessary adjustments. Fllwing is an example f using the GASB 34 Adjustments File. Specifically, nte hw the amunt n Line 3 flws thrugh t the Statement f Activities: 18
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BS&A Fund Accunting Class II Fllwing is an example f using the Accunt Grups methd. We are using Fund 900 as the General Capital Assets Fund, and using Accunt Grups as the surce f data. The balance in Fund 900 fr the Equipment accunt, as f 12/31/02, is $2,000: This Fund is nt reprted n the Gvernmental Funds Balance Sheet since it is set up as an Accunt Grup. Hwever, the balances in this Fund will be reprted n the Statement f Net Assets. 20
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BS&A Fund Accunting Class II The Statement f Net Assets and Statement f Activities can be printed in three different subttal frmats (Detail by GL#; Detail by Accunt; Summarize by Classificatin). Fllwing is an example f the Statement f Net Assets subttaled by Detail by GL#. Each GL number that has the accunt number prtin (the last 6 digits) f the Cash and Cash Equivalents classificatin is shwn. Fllwing is an example f the Statement f Net Assets subttaled by Detail by Accunt. Each GL number that has the Cash and Cash Equivalents classificatin is shwn. 22
BS&A Fund Accunting Class II Fllwing is an example f the Statement f Net Assets subttaled by Summarize by Classificatin. This is the level f detail required by GASB 34 t be reprted in financial statements. Ntice that in all three frmats, the ttal fr Cash and Cash Equivalents is $13,597,899. Hwever, the level f detail is different fr each frmat. The Detail by GL# and Detail by Accunt frmats are prvided t assist yu in recnciling the fund financial statements t the gvernment-wide financial statements. GASB 34 reprts can be printed t Micrsft Excel and mdified if necessary t generate the reprts t be used in yur Annual Financial Statements. Fr instance, if yu decide t use a methd f accumulated GASB 34 data ther than the Accunt Grups r the GASB 34 Adjustments file, the Excel methd wuld be necessary t adjust the data fr GASB 34. 23
BS&A Fund Accunting Class II Michigan F-65 Frm The purpse f the Michigan F-65 Frm is t prvide the Michigan Department f Treasury and the U.S. Census Bureau infrmatin that can be used fr statistical analysis. It is als designed t prvide the State with infrmatin t analyze the impact f any prpsed legislatin, t help identify units shwing early warning signs f financial prblems, and t prvide ther types f analysis (i.e., the ability t d cmparisns f units). Due Date - six mnths after fiscal year-end, but can be extended if the audit extensin has been apprved by the State. If yu fail t file by the due date, yu may lse state-shared revenue. Filing - can be submitted electrnically via email as a Micrsft Excel attachment t LAFD_Audits@michigan.gv. The frm, in Micrsft Excel frmat, is available fr dwnlad frm the Department f Treasury website - www.michigan.gv/treasury. Chart f Accunts - the frm is designed t be cmpatible with the Unifrm Chart f Accunts, which all units in the State f Michigan shuld be fllwing. Surce f infrmatin being reprted - the figures shuld be based n the "audited" financial statements*; hwever, if yu nly have an audit every ther year yu are still required t file the reprt every year. All financial activity is t be reprted, except fr: Trust and Agency Funds Depreciatin fr Prprietary Funds Internal Service Funds *The fund financial statements, nt the gvernment-wide financial statements, shuld be used t determine the figures t be reprted. 24
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BS&A Fund Accunting Class II Capital Assets Types f Capital Assets General capital assets - reprted nly in the gvernment-wide financial statements Capital assets reprted in Prprietary Funds and in Fiduciary Funds Prprietary Fund capital assets are reprted in bth gvernment-wide and fund financial statements Fiduciary Fund capital assets are reprted nly in the Statement f Fiduciary Net Assets Capital Expenditures vs. Capitalizatin Capital expenditures - reprting methd fr general capital assets in the Gvernmental Funds. Capital assets acquired are reprted as capital expenditures equal t the amunt f cash paid r debt incurred. Capitalizatin - reprting methd fr Prprietary Fund and Fiduciary Fund capital assets. Generally, reprted in the same manner as in private-sectr enterprises: capital asset purchases are recrded as assets (nt expenses) and depreciated ver the useful life. Valuatin f Capital Assets Mst capital assets shuld be valued at histrical cst r estimated histrical cst, including any cst incurred t get the asset ready fr use. Dnated capital assets shuld be valued at estimated fair market value at the time f dnatin. Estimating Useful Life GAAP des nt determine the estimated useful life f capital assets. Several factrs must be cnsidered when determining the useful life: Asset's present cnditin Hw the asset is ging t be used Hw the asset was cnstructed The unit's maintenance plicy (is regular maintenance dne?) Hw lng d yu expect the asset t be used Review f histrical recrds fr similar assets Change in useful life (if necessary) shuld be prspectively reprted (i.e., use new remaining life in the calculatin f depreciatin expense) 26
BS&A Fund Accunting Class II Salvage Value An estimate f what a capital asset may be sld fr when it is n lnger being used. Depreciatin Methds Depreciating an asset is the prcess f allcating the net cst f a capital asset ver its estimated useful life. Straight-line methd - assumes asset is used up equally ver the useful life. Frmula: Annual Depreciatin Expense = (cst-salvage value)/useful life Example: an asset with a cst f $21,000 was purchased, and at the time f purchase it was estimated (similar assets in the past) that at the end f its 5-year useful life the asset culd be sld fr $1,000. (21,000-1,000)/5 = $4000 Decreasing-charge methds - these include: Declining balance Duble-declining balance Sum-f-the-year's digits These are ppular methds fr private enterprises since they accelerate expense and reduce taxable incme. Hwever, gvernments generally d nt have an incentive t accelerate expense since they d nt pay taxes. Nearly all gvernments that have implemented GASB 34 have chsen the straight-line methd since it is easy t use, spreads expenses equally ver time, and reduces the cmplexity f calculating depreciatin expense. 27
BS&A Fund Accunting Class II Cntacting Us Supprt staff are available between 8:30 a.m. and 5 p.m. EST, Mnday Friday, with the exceptin f the hlidays listed. Specific hliday dates appear in quarterly newsletters, sent t all registered users and available n ur website. New Years Day Gd Friday (pen frm 8:30 t nn) Memrial Day Independence Day Labr Day Thanksgiving Day and that Friday Christmas Eve Christmas Day New Years Eve (pen frm 8:30 t nn) Phne: 517.641.8900 Ask fr General Ledger Supprt Fax: 517.641.8960 Email: fundsupprt@bsasftware.cm When emailing, please include yur name, municipality, and a phne number where yu can be cntacted. Web: www.bsasftware.cm Click the Prgram Supprt tab and select the applicatin. 28