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Basics of Governmental
Financial Reporting
Rodeo Sanitary District Board Presentation
January 25, 2012
Justin Williams, CPA, CVA
FUND ACCOUNTING
What is Fund Accounting?
Fund accounting groups financial data together into funds or accounts that share a similar purpose.
TYPES OF FUNDS
Governmental Funds
Proprietary Funds
Fiduciary Funds
GOVERNMENTAL FUNDS
Governmental Funds
Used by the government to account for tax supported activities.
General Fund, Special Revenue Funds, Capital Project Funds, Debt Service Funds, and Permanent Funds
Chief operating fund of a local government. Used to account for all financial resources except those required to be accounted for in a different fund
Used to account for revenues raised for a specific purpose. Examples include Gas Tax fund and grant funds.
General Fund
Special Revenue Funds
Capital Projects Funds
Debt Service Funds
Permanent Funds
Used to report major capital acquisitions separately from ongoing operating activities
Used to account for the accumulation of resources for payment of long-term debt and interest
First Introduced as part of GASB 34 reporting model
GOVERNMENTAL FUNDS (CONTINUED)
PROPRIETARY FUNDS
Proprietary Funds
Used to account for the type activities (activities supported,
at least in part, by fees or charges).
Enterprise funds (Rodeo) and Internal Service funds
Used to report any activity for which a fee is charged to external users for goods and services
Used to account for the allocation of services between funds
Enterprise Funds
Internal Service Funds
Used to report assets held in a trustee or agencycapacity for others and therefore cannot be used tosupport the governments own operations.
Examples: Pension and employee benefit trust funds,investment trust funds (pooled with other entities), agencyfunds.
FIDUCIARY FUNDS
RODEO SANITARY DISTRICT
Financial Statements
Independent Auditor’s Report
Managements Discussion and Analysis (MD&A)
Financial Statements
Supplementary Information
Other Reports
INDEPENDENT AUDITOR’S REPORT
Auditor’s responsibility is to express an opinion on the financial statements.
Types of Opinions: Unqualified
Qualified
Adverse
Disclaimer
MANAGEMENT’S DISCUSSION
& ANALYSIS
Prepared by management to provide users with anarrative introduction, overview and analysis of thefinancial statements.
Contents of MD&A:
Discussion of financial statements
Condensed comparative data
Overall analysis
Capital asset and long-term liability activity
Statement of Net Assets
Statement of Revenues, Expenses and Changes in Net Assets
Statement of Cash Flows
FINANCIAL STATEMENTS
3 Basic Financial Statements
for Proprietary Funds
STATEMENT OF NET ASSETS
“Balance sheet”
Presented at a single moment in time: June 30, 2011.
Assets – Liabilities = Net Assets
Classified format- Current and non-current separated
Net assets classified as restricted and unrestricted
STATEMENT OF REVENUES,
EXPENSES, & CHANGES IN NET ASSETS
“Income Statement”
Presents activity over a period of time:
The year ended June 30, 2011
Revenue – Expenses = Changes in net assets
Separate between operating and non-operating
Capital Contributions
STATEMENT OF CASH FLOWS
Required for Proprietary Funds only
Format classified into four categories:
Cash flows from operating activities
Cash flows from noncapital financing activities
Cash flows from capital and related financing activities
Cash flows from investing activities
Cash Flows from
Noncapital Financing
Activities
Cash Flows from Capital
& Related Financing
Activities
Cash Flows from
Investing Activities
Generally include all cash flows related to transactions and events included in operating income in the Statement of Revenues, Expenses, and Changes in Net Assets
Include borrowing and repayments of debt that is not clearly attributable to capital purposes
Include the repayment of debt that is attributable to capital assets, and the purchase of capital assets
Include receipt of interest and proceeds from investment sales
STATEMENT OF CASH FLOWS (CONTINUED)
Cash Flows from
Operating Activities
RECONCILIATION OF OPERATING INCOME TO CASH FLOWS FROM OPERATING ACTIVITIES
Illustrates the difference between operating income reported on the Statement of Revenues, Expenses, and Changes in Net Assets and net cash provided by operating activities included in the Statement of Cash Flows.
NOTES TO THE FINANCIAL STATEMENTS
Summary of Significant Accounting Policies
Cash and Investments
Other Receivable
Capital Assets
Long-Term Liabilities
Retirement Plan
Insurance
SUPPLEMENTARY INFORMATION
Combining Schedule of Net Assets
Combining Schedule of Revenues, Expenses andChanges in Net Assets
Schedule of Operating Expenses
REPORT ON INTERNAL CONTROL
Any compliance findings or significant control deficiencies would be included in this report.
over Financial Reporting and on Compliance and Other
Matters Based on an Audit of Financial Statements
Performed in Accordance with Government Auditing
Standards
INTERNAL CONTROL DEFICIENCY
Material Weakness
Significant Deficiencies
Control Deficiency
MATERIAL WEAKNESS
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s financial statements will not be prevented, or detected and corrected on a timely basis.
SIGNIFICANT DEFICIENCY
A significant deficiency is a deficiency, or a combination of
deficiencies, in internal control over financial reporting that is less severe
than a material weakness, yet important enough to merit attention
by those charged with governance.
CONTROL DEFICIENCY
A deficiency in internal control over financial reporting exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis.
SCHEDULE OF FINDINGS
Parts required by Government Auditing Standards
Criteria, Condition, Cause, Recommendation, Management’s Response, Status
End of Presentation
QUESTIONS?
Sacramento Office
2515 Venture Oaks, Suite 135
Sacramento, CA 95833
Tel (916) 929-0540
Fax (916) 929-0541
www.muncpas.com
Justin J. Williams, CPA, CVA – Partner
PRESENTER
MANN • URRUTIA • NELSON CPAS & ASSOCIATES, LLP