Creating a Statement of Cash Flows

Transcription

1 MARCH 22, 2018 Creating a Statement of Cash Flows Presented by Nicole Ryan, CPA 1

2 What is a Cash Flow Statement? A financial statement that provides aggregate data regarding Cash Inflows receipts from both ongoing fund operations and external sources Cash Outflows payments made for operating and financing activities during a given period of time (i.e. January 1 December 31, 20XX) and breaks down the analysis into 3 primary categories operating, financing and investing. Note: The direct method for governmental cash flows could include up to 4 categories with the additional category called noncapital financing. 2

3 Purpose of a Cash Flow Statement Show how CHANGES in balance sheet accounts and income/expenses affect cash and cash equivalents Show the flow of cash in and cash out of the fund (increases/decreases in cash balances) GREAT analytical too! Short-term viability of a fund, particularly its ability to pay bills Ability to repay potential debt obligations 3

4 Which method do I use? Indirect Method vs. Direct Method Indirect Method Net income(loss) is the starting point, which is then adjusted for all non-cash transactions, resulting in the net income(loss) provided (used) by operating activities. Direct Method Begins with the cash received and cash paid to arrive at net cash flow from operating activities. The cash inflows and outflows from financing and investing activities are added or deducted, respectively. Required for proprietary funds (enterprise funds and internal service funds), which are reported using full accrual on the fund basis statements. [GASB ] 4

5 Elements of a Cash Flow Statement Direct method (Local Government) Cash flows from operating activities Cash flows from capital and related financing activities Cash flows from noncapital financing activities Cash flows from investing activities 5

6 Keys to preparing the Statement of Cash Flows ASSETS When an asset (other than cash) increases Cash account decreases When an asset (other than cash) decreases Cash account increases LIABILITIES When a liability increases Cash account increases When a liability decreases Cash account decreases 6

7 QUESTIONS: 1) What balance sheet accounts increase and/or decrease when the Water Fund purchases a capital asset? 2) What balance sheet accounts increase and/or decrease when the Water Fund pays an insurance provider 6 months in advance? 3) What balance sheet accounts increase and/or decrease when the Water Fund receives proceeds from a bond anticipation note? 4) What balance sheet accounts increase and/or decrease when the Water Fund pays a vendor? 7

8 ANSWERS: 1) Asset increases (capital assets) Cash decreases 2) Asset increases (prepaid expenses) Cash decreases 3) Liability increases (BAN Payable) Cash increases 4) Liability decreases (accounts payable) Cash decreases 8

9 VILLAGE OF ANYWHERE STATEMENT OF NET POSITION - ENTERPRISE FUND MAY 31, 20XX Enterprise Fund Current Year Prior Year ASSETS Current assets: Cash and cash equivalents $ 2,140,000 $ 2,000,000 Accounts receivable - utility 25,000 50,000 Accounts receivable - other - 5,000 Prepaid items 15,000 20,000 Total current assets 2,180,000 2,075,000 Sample Statement of Net Position Noncurrent assets: Capital assets not being depreciated 1,000,000 1,000,000 Capital assets, net of accumulated depreciation 3,150,000 2,650,000 Total noncurrent assets 4,150,000 3,650,000 Total assets 6,330,000 5,725,000 LIABILITIES Accounts payable 45,000 35,000 Accrued liabilities 25,000 20,000 Accrued interest payable 15,000 5,000 Bond anticipation notes payable 550,000 - Due to retirement system 35,000 20,000 Compensated absences 85,000 75,000 Serial bonds payable 200, ,000 Total liabilities 955, ,000 NET POSITION Net investment in capital assets 3,400,000 3,375,000 Unrestricted 1,975,000 1,920,000 Total net position 5,375,000 5,295,000 9

10 VILLAGE OF ANYWHERE STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION - ENTERPRISE FUND FOR THE YEAR ENDED MAY 31, 20XX Enterprise Fund Current Year Prior Year OPERATING REVENUES Charges for services $ 500,000 $ 400,000 Other operating revenue 15,000 15,000 Total operating revenues 515, ,000 OPERATING EXPENSES Personnel services 350, ,000 Contractual expense 175, ,000 Depreciation 200, ,000 Total operating expenses 725, ,000 Operating Ioss (210,000) (275,000) Sample Statement of Revenues, Expenses and Changes in Net Position NONOPERATING REVENUES (EXPENSES) State aid 150,000 - Interest earnings 5,000 5,000 Interest expense 35,000 20,000 Total nonoperating revenues (expenses) 190,000 25,000 Loss before transfers (20,000) (250,000) Transfers in 100,000 - Change in net position 80,000 (250,000) Net position - beginning 5,295,000 5,545,000 Net position - ending 5,375,000 5,295,000 10

11 Cash flows from Operating Activities INFLOWS OF CASH AND CASH EQUIVALENTS Cash rec d from customers: Income Stmt - Charges for services $ 500,000 Balance Sheet - Receivables (current yr) $ (25,000) Balance Sheet - Receivables (prior yr) 50,000 Inflow on Cash Flow $ 525,000 Cash rec d from other operating revenues: Income Stmt - Other operating revenues $ 15,000 Balance Sheet - Receivables - other (current yr) $ - Balance Sheet - Receivables other (prior yr) 5,000 Inflow on Cash Flow $ 20,000 11

12 Cash flows from Operating Activities (con t) OUTFLOWS OF CASH AND CASH EQUIVALENTS Cash payments to vendors: Income Stmt Contractual expenses $ 175,000 Balance Sheet - Prepaid Exp (current yr) $ 15,000 Balance Sheet - Prepaid Exp (prior yr) (20,000) Balance Sheet Accts Payable (current yr) (45,000) Balance Sheet - Accts Payable (prior yr) 35,000 Outflow on Cash Flow $ 160,000 12

13 Cash flows from Operating Activities (con t) OUTFLOWS OF CASH AND CASH EQUIVALENTS Cash payments to employees: Income Stmt Personnel services (salary/benefits) $ 350,000 Balance Sheet - Payroll accrual (current yr) $ (25,000) Balance Sheet - Payroll accrual (prior yr) 20,000 Balance Sheet Comp Absences (current yr) (85,000) Balance Sheet - Comp Absences (prior yr) 75,000 Balance Sheet Due to Retirement Sys (current yr) (35,000) Balance Sheet - Due to Retirement Sys (prior yr) 20,000 Outflow on Cash Flow $ 320,000 13

14 Other Activities Cash flows from Noncapital Financing Activities Transfers from other funds $ 100,000 Operating grants - Cash flows from Capital and Related Financing Activities Acquisition and construction of capital assets $ (700,000) Proceeds from the sale of capital assets 70,000 Proceeds from bond anticipation notes 550,000 Principal paid on capital debt (75,000) Interest paid on capital debt (after removing accrual) (25,000) Capital grants 150,000 Cash flows from Investing Activities Interest received $ 5,000 14

15 VILLAGE OF ANYWHERE STATEMENT OF CASH FLOW - ENTEPRISE FUND FOR THE YEAR ENEDED MAY 31, 20XX Enterprise Fund CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers $ 525,000 Cash payments for contractual expenses (160,000) Cash payments to employees for services (320,000) Other operating revenues 20,000 Net cash provided by operating activities 65,000 Sample Cash Flow Statement CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfer from other funds 100,000 Net cash provided by operating activities 100,000 CASH FLOWS FROM CAPITAL AND FINANCING ACTIVITIES Acquisition and construction of capital assets (700,000) Proceeds from sale of capital assets 70,000 Proceeds from bond anticipation notes 550,000 Principal paid on debt (75,000) Interest paid on debt (25,000) Capital grants 150,000 Net cash used for capital and financing activities (30,000) CASH FLOWS FROM INVESTING ACTIVITIES Interest received 5,000 Net cash provided by investing activities 5,000 Net increase in cash and cash equivalents 140,000 Cash and cash equivalents - beginning 2,000,000 Cash and cash equivalents - ending $ 2,140,000 15

16 Reconciliation of operating loss to net cash provided by operating activities: Operating Ioss $ (210,000) Adjustments to reconcile operating loss to net cash provided by operation activities: Depreciation expense 200,000 Sample Cash Flow Statement (con t) Change in assets and liabilities: Decrease (increase) in: Accounts receivable - utility 25,000 Accounts receivable - other 5,000 Prepaid items 5,000 Increase (decrease) in: Accounts payable 10,000 Accrued liabilities 5,000 Due to retirement system 15,000 Compensated absences 10,000 Net cash provided by operating activities $ 65,000 16

17 Non-Cash Entries Disclosure is required of non-cash capital, financing and investing activities May be disclosed as a footnote or within the cash flow statement itself per Generally Accepted Accounting Principles (GAAP) Examples: Bad debt expense Capital contributions revenue (donations of capital assets) Depreciation expense 17

18 Questions 18