FUND ACCOUNTING - 101

Transcription

1 FUND ACCOUNTING THE BASICS James A. Wells Denton County Auditor OVERVIEW & OBJECTIVES I. Theory 2. Types of Funds Used 3. Practical Considerations 4. Financial Reporting 5. Changes GASB Pronouncements 1

2 PREREQUISITES Since This is an Introductory Class, There is No Prior Knowledge of Fund Accounting Required. THEORY OF GOVERNMENTAL ACCOUNTING 1. Accountability use of separate funds. 2. Compliance using revenues per statutes. 3. Meeting Fiduciary Responsibilities 2

3 THEORY Emphasis is on measuring yearly results and beginning of year financial status. No profit motive. Emphasis is on the budget. No emphasis on performance. GASB 34 added longer term emphasis. FUND TYPES 1. General Fund 2. Special Revenue Funds 3. Debt Service Funds 4. Capital Projects Funds 5. Enterprise Funds 6. Internal Service Funds 7. Fiduciary Funds 3

4 THE GENERAL FUND This is the primary fund for all governments. As a rule, all activities should be accounted for in the General Fund unless they are specifically required by law to be in a separate fund, or if the measurement focus or basis of accounting is different. SPECIAL REVENUE FUNDS Special Revenue Funds are used to account for specific revenue sources that are restricted for limited purposes. Same accounting as the General Fund. Road and Bridge, Courthouse Security, and Records Funds are examples. 4

5 SPECIAL REVENUE FUNDS TAC s Publication Special and Dedicated Funds lists 65 possible Special Revenue Funds. Special Revenue Funds are meet the goals of demonstrating accountability and compliance. CAPITAL PROJECT FUNDS Are used to account for resources that are used to acquire or construct major capital facilities and infrastructure. Each separate debt issue requires a separate capital project fund. The funds are closed when the projects are completed. Allow for separate, multi-year accounting for projects. 5

6 CAPITAL PROJECT FUNDS No fixed assets or depreciation are recorded. No long term debt. Typically do not have annual operating budgets. A capital budget is prepared for selling bonds and for controlling the project. Capital budget may be formally recorded. DEBT SERVICE FUND Debt Service Funds are used to account for the revenues and expenditures related to the annual principal and interest payments on L-T debt bonds, tax notes, certificates of obligation. A separate debt tax rate must be adopted with the budget. 6

7 DEBT SERVICE FUNDS A separate debt service fund for each debt issue may be used, or only one. There are statutory limits on how much tax revenue may be budgeted each year. There are IRS regulations limiting the amount of fund balance, and use of debt service funds. ENTERPRISE FUNDS For operations that are business-like. Golf courses, parks, airports, convention centers. Same accounting as a business. Profit and loss measurement. 7

8 INTERNAL SERVICE FUNDS For projects that exist to serve the County as a whole. Insurance Funds, Vehicle Maintenance, Print Shops Same accounting as Enterprise Funds. AGENCY FUNDS Used for non-county funds held for the benefit of others. Trust Funds, State Court Costs, Restitution. Report only assets and liabilities, no fund balance. 8

9 PRACTICAL CONSIDERATIONS 1. Measurement Focus 2. Basis of Accounting 3. The Goals of Governmental Accounting MEASUREMENT FOCUS Governmental funds use the flow of current financial resources measurement focus emphasis on spendable assets. Enterprise and Internal Service funds use the flow of economic resources focus. Longer term emphasis. 9

10 BASIS OF ACCOUNTING Governmental funds the modified accrual basis. Only recognize revenues that will be received in cash within days. Only recognize liabilities that will be paid with current financial resources. BASIS OF ACCOUNTING Enterprise & Internal Service funds use the full accrual basis of accounting. Recognize revenues receivable and measurable. Recognize liabilities when incurred. 10

11 GOALS OF FUND ACCOUNTING Assess financial system/condition Provide reliable financial information Support the budget Support financial reporting, grants, capital projects Support purchasing and payroll GOALS OF FUND ACCOUNTING To allow an assessment whether or not a government will be able to meet its financial obligations at the start of the year. No emphasis on profitablility. No attempt to measure the quality of the government s performance. 11

12 REQUIRED FUNDS 1. General Fund 2. Road and Bridge Fund 3. Jury Fund 4. Lateral Road Fund 5. Law Library Fund 6. Courthouse Security Fund 7. Four Records Management Funds MORE REQUIRED FUNDS 8. Attorney Hot Check Fee Fund 9. Forfeiture Funds 10. JP Court Technology Fund 11. JP Court Security Fund 12. VIT Interest Fund 13. Capital Projects Funds 14. Debt Service Fund 12

13 OTHER COMMON FUNDS 1. Indigent Care Fund 2. Juvenile Probation Fund 3. Court Costs Fund 4. Individual Road and Bridge Funds 5. Adult Probation Fund 6. Elections Fund 7. Grant Funds 8. Officers Salary Fund FUND ACCOUNTING AND FINANCIAL REPORTING Financial statement once came directly from fund accounting system GASB Standards have changed this GASB 34, GASB 45, GASB 68 Full accrual vs modified accrual government-wide vs. budgetary 13

14 EFFECTS OF GASB 34 A major departure from the current resources focus. An attempt to report using both measurement focuses and both bases of accounting. Results in two sets of financial statements that must be reconciled. FINANCIAL REPORTING Government-wide financial statements Statement of Net Assets and a Statement of Activities Full accrual basis Long-term assets and libilities are included. Program revenues are tied to specific areas of expense. 14

15 FINANCIAL REPORTING Governmental fund statements Balance sheet and statement of revenues and expenditures Modified accrual basis, flow of current financial resources focus Fixed assets and long-term liabilities not recognized. FINANCIAL REPORTING Must reconcile full-accrual and modified accrual basis statements. Must convert budgetary basis statements to full accrual Includes MD&A, infrastructure, fixed assets, depreciation, long-term debt. 15

16 EFFECTS OF OTHER GASB STANDARDS Emphasis on moving away from yearly focus to include all potential long-term liabilities. Must include future liabilities for retiree health benefits and compensated absences. Must include future liabilities for retirement benefits. ACCOUNTING RESOURCES TACA Website resouces tab Texas Association of Counties Publications Public Finance, Special & Dedicated Funds, Guide to Texas Laws GFOA Publications and Best Practices 16

17 GOVERNMENTAL ACCOUNTING IN THE FUTURE For the near term, the practical focus will remain year to year. The annual budget will retain its importance and emphasis. More GASB standards will make accounting more and more complex. More consultants will be required. SUMMARY 1. The goals of fund accounting are compliance and accountability. 2. The are seven basic fund types. 3. The fund types differ in their measurement focus and basis of accounting. 4. Many funds are legally required. 5. Many optional funds are commonly used. 6. Accounting will get more and more complex. 17

18 SUMMARY Our jobs will get more and more comlex, but County Auditors and Assistant County Auditors will continue to become more and more important. 18