GASB 33 & 34. Changing Accounting Practices of the County

Transcription

1 GASB 33 & 34 Changing Accounting Practices of the County

2 GASB STATEMENT NUMBERS 33 & 34 CHANGING COUNTY FINANCIAL ACCOUNTING PRACTICES PRESENTED BY: Marla L. Pendleton, CPA Principal Accountant (909)

3 GASB 33

4 GASB 33 Revenue Recognition Recognize revenue in the accounting period when: The department is entitled to the revenue The revenue becomes available and measurable

5 Revenue Entitlement Part 1 Entitled to revenue based on one of following: Underlying exchange transaction occurred Enforceable legal claim (lien date)

6 Revenue Entitlement Part 2 Entitled to revenue based on one of following: Use permitted by time requirement All eligibility requirements met

7 TIME REQUIREMENT Stipulates the period(s) when resources may be used, begin to be used or not used at all (indefinite period or occurrence of an event).

8 Availability County has collected revenue in the current period Revenue is expected to be collected soon enough after the end of the period to use for payment of current liabilities

9 Reasonably estimable Measurable

10 MAJOR Impact: Trust Funds Fees/charges received with restricted uses were held until expended Now requires revenue recognition

11 GASB 33 is effective for the fiscal year 2000/2001

12 GASB 34 Trust Fund Reclassification

13 Significance of GASB 34 Assets: Capitalization of infra structures Depreciation calculation Elimination of fixed asset account group Financial Statement Reporting Fund Accounting Trust Fund Reclassification Revenue recognition (GASB 33) Definitions of fund types New fund types

14 Fund Classifications Governmental Funds Proprietary Funds Fiduciary Funds

15 Governmental Funds Account for tax supported activities

16 Governmental Fund Types General Fund Special Revenue Funds Capital Project Funds Debt Service Funds Permanent Funds

17 From Fiduciary Fund Start Is the fund used to account for governmental (tax supported) activities? YES Governmental Fund Classification NO To Proprietary Fund Is fund used for the payment of general longterm debt (principal & interest accumulation)? NO Is fund used for the proceeds of specific revenue sources that are legally (outside government or imposed by governing body) restricted to expenditures for specified purposes? NO Is fund used to account for acquisition or construction of major capital facilities? YES NO YES YES Is there a legal mandate to use a debt service fund? FUND TYPE = SPECIAL REVENUE (SRF) YES YES Are both principal & interest, if applicable, restricted? NO Is there a legal requirement to use a capital project fund? Does the debt require accumulation of principal & interest? NO NO YES (REQUIRED) NO Does County management prefer using a capital project fund? NO YES Is the accumulation of resources in excess of a full year s principal & interest payments? NO FUND TYPE = PERMANENT (PF) YES Does principal have to be maintained in tact & only earning used for restricted government program(s)? NO YES (PERMITTED) YES (REQUIRED) FUND TYPE = CAPITAL PROJECT (CPF) FUND TYPE = DEBT SERVICE (DSF) FUND TYPE = GENERAL (GF)

18 Proprietary Funds Account for business-type activities supported primarily by users charges/ fees

19 Proprietary Funds Enterprise Funds Internal Service Funds

20 From Governmenta l Fund Proprietary Fund Classification Is the fund used to account for County business-type activites & is supported, at least in part, by user fees/ charges? NO To Fiduciary Fund YES Is the fund used to primarily account for services provided internally to other County funds, depts, agencies and/or component units? NO ** The use of an Enterprise Fund is required for any activity with principal revenue meeting any of the following criteria: - Fees & charges back issued debt - Costs must be legally recovered through fees/charges - County Policy requires cost recovery through fees/charges YES FUND TYPE = INTERNAL SERVICE (ISF) Fee charged to external users for goods or service** FUND TYPE = ENTERPRISE (EF)

21 Fiduciary Funds Assets held in custodial capacity for others and use prohibited for County programs

22 Pension (and other employee benefit) trust funds Fiduciary Funds Investment trust funds Private-purpose trust funds Agency funds

23 From Proprietary Fund Fiduciary Fund Classification Are assets held in a trust or agency capacity for others & use prohibited for County programs? NO To Governmental Fund FUND TYPE = PENSION (AND OTHER EMPLOYEE BENEFIT) TRUST YES Are assets held for members of employee or postemployment benefit plans? YES NO Are some of the assets external portions of investment pool? YES NO Is the fund used to report other trust arrangement which principal & interest benefit individuals, private org, or other gov? NO Resources purely held in custodial capacity; only receipt, temp investment & remittance to individual, private org, or other govts. External Portion FUND TYPE = INVESTMENT TRUST (ITF) YES FUND TYPE = PRIVATE- PURPOSE TRUST FUND TYPE = AGENCY TRUST

24 Now for the practical financial impact

25 Current Accounting Practice under RIFMIS Financial Advantage

26 Trust Funds are used in quantity to segregate money

27 Trust Funds are used as: Holding Accounts Clearing Accounts

28 HOLDING FUNDS External Parties Pass Through and Refundable Deposits Future Restricted Use Internally & Externally Imposed Revenue Received in Advance External Funding Grants Private Citizens Developer DBF Miscellaneous

29 Journal entries demonstrating current accounting practice using Trust Funds

30 To record $5,000 cash deposited into trust Debit: Cash $5,000 Credit: Fund Balance $5,000

31 Three steps to expend trust money: 1. Process payment from Operating Fund 2. Transfer cash out of Trust 3. Transfer cash to Operating Fund for amount expended recognizing revenue

32 To process payment voucher to disburse money from operating fund Debit: Expense $1,100 Credit: Cash $1,100

33 To record transfer of cash from trust fund Debit: Fund Balance $1,100 Credit: Cash $1,100

34 To record cash transferred into operating fund and recognizing revenue amount for amount expended or disbursed from operating fund Debit: Cash $1,100 Credit: Revenue $1,100

35 OASIS Implementation Effective July 1, 2002

36 Changes Affecting Departments: Fund Structure Account Structure

37 Changes relate to the Accounting Events of the Primary Government (i.e governmental and business-type activities of the County as opposed to money held in the Treasurer in a fiduciary capacity)

38 Fund Structure Operating Funds Sub Funds

39 Operating Funds Primary fund used to account for financial transactions (operations) of an entity

40 Sub Funds Funds reported in OASIS one level below operating fund Separate accounting entity Unique Fund Number Not Budgetable Entity Tracks Actual Financial Data Only

41 CRITIERIA TO ESTABLISH SUB-FUND Legislative or contractual requirement to maintain and account for proceeds separately without commingling Requirement for funding source to be maintained separate for interest earning calculations Transactions would be accounted for in the operating fund of the entity if one of the above criteria did not exit

42 New accounts departments will be using: Customer Deposits Deferred Revenue Net Assets Restricted Designated Revenue - Clearing

43 Customer Deposits Liability account Deposits made by customer as a requirement to receive goods or services provided by the County Usually held until specific conditions are met and then refunded to customer. Some or all could be retained as revenue by the County

44 To Record Initial Cash Receipt (And Transfer From Old Trust Fund In FY 2001/02) Debit: Cash (Restricted For CAFR Purposes) $100 Credit: Customer Deposits (Liability - Payable) $100

45 To Record Refund of Deposit To Customer (Processed By Payment Voucher) Debit: Customer Deposits (Liability - Payable) $100 Credit: Cash $100

46 CUSTOMER DEPOSITS Assets = Liabilities No Effect to Net Assets Assets Restricted In County Financial Statements (CAFR Only)

47 Deferred Revenue Liability Account Proceeds received in advance of revenue recognition criteria being met Earning/entitlement process not complete May be county requirement for customer to pay in advance of services being performed

48 Deferred Revenue Differs from Customer Deposits in customer deposits are retained as a condition of performance and usually refundable Deferred Revenue is expected to be recognized as revenue when the earning process is complete County has liability to perform services/provide goods when assets are received For departments with multiple accounts, a unique account (description and number) are required for each type

49 To record cash received in advance of performing services Debit: Cash $200 Credit: Deferred Revenue (Liability) $200

50 Debit: To record revenue after gaining entitlement/performing services/delivering goods: Deferred Revenue (Liability) $200 Credit: Revenue $200

51 Equity Retained Earnings Fund Balance New term = Net Assets

52 Equation For Net Assets ASSETS - LIABILITIES = NET ASSETS

53 Net Assets Appears on Statement of Net Assets (What we use to call Balance Sheet )

54 Classifications of Net Assets Unrestricted Restricted Designated

55 Unrestricted Net Assets Portion of assets that is not restricted

56 Restricted Net Assets Legal or contractual obligation externally imposed for specified use

57 Designated Net Assets Internally imposed restriction by the BOS for specified use Requires BOS approval (Minute Order) to designate funding source or retain existing assets

58 BUDGET PROCESS

59 Net County Cost (NCC) REVENUE ** - EXPENDITURES = NET COUNTY COSTS **Calculation includes both departmental and non-departmental revenue, except for general fund departments which only include departmental revenue

60 Pre-GASB 33 Cash from restricted sources was held in trust Revenue was not recognized until expended Therefore, revenue from restricted sources = expenditures in operating fund No effect to fund balance

61 Post-GASB 33 Revenue is required to be recognized when entitled As oppose to recognized when expended for restricted use Therefore, highly unlikely for revenue = expenses

62 Earlier Revenue Recognition Requires Changes Without procedure changes, NCC would be distorted by the difference between revenue received from restricted sources and the amount expended from these sources (i.e. the amount that should flow into the Restricted Net Assets account).

63 Two new classifications of accounts in accounting system Restricted Revenue Sources Restricted Object Codes (Expenditures)

64 Restricted Revenue and Expenses Budgetable Accounts Restricted Expense Accounts Can Not Exceed: Anticipated Revenue for FY + Beginning Balance of Restricted Net Assets

65 YE Reclassification Required Financial system can only close revenue and expense accounts to one Net Asset Account For funds/sub-funds with more than one type of restricted net asset account, YE reclassification adjustment(s) will be required

66 For example If closing account = Net Assets, Unrestricted, the following journal entry will be required when revenue exceeds expenditures from restricted sources (Note: accounts closed to Net Assets, Unrestricted, which has a normal Credit Balance)

67 To restricted net assets for proceeds received with legal or contractual restriction as to its use Debit: Net Assets, Unrestricted $8,500 Credit: Net Assets, Restricted for (specified restriction) $8,500

68 Designated Net Assets If restriction is internally imposed Restricted should be changed to Designated for credit side of previous journal entry

69 Department s Responsibility For Restricted Proceeds Budget anticipated revenue Budget expected amount to be expend during year Monitor budget Obtain approval if actual expenditures exceed budgeted appropriations Prepare entry to reclassify restricted net assets

70 Funding Source to increase Appropriations is Restricted Net Assets Revenue previously recognized in Operating Fund Cash (Restricted for CAFR) is held in Operating Fund Therefore, increase in Appropriations means decrease in Restricted Net Assets

71 REVENUE CLEARING Temporary revenue holding account to receipt money until appropriate revenue source can be determined Account is within each entities operating fund To be used in place of Clearing Funds

72 To receipt revenue received from unknown source Debit: Cash $750 Credit: Revenue Clearing $750

73 To distribute revenue from clearing to various known revenue sources Debit: Revenue Clearing $750 Credit: Revenue $750

74 Countywide Requirement to Implement GASB 33/34

75 Implement Recommendations In Department Trust Fund Analysis

76 If multiple recommendations for single fund, split proceeds and account for in manner recommended. If multiple funds required: *Submit Fund Establishment Forms to open new funds *Transfer applicable amounts into each fund *Ensure proper accounting structure set up to account for fund activity/balance

77 TRUST FUND CLOSURES

78 Close trust funds recommended for closure *If accounting to be performed in operating fund: *Open new specific accounts *Transfer cash to new accounts to zero out trust *Submit Fund Closure Form

79 New Accounts in Operating Fund Deferred Revenue Accounts Restricted Net Assets Designated Net Asset Accounts Restricted Revenue Accounts (Sources)* Restricted Expenditure Accounts (Object Codes)* *May already exist, but attribute needs to be linked to restricted source

80 Cash balance to be recognized as revenue Only the amount collected in FY 2001/02, not previously recognized as revenue, is to be recognized by FYE All other amounts (related to prior year revenue), require posting directly to fund balance as a Prior Period Adjustment* *This may have been performed for CAFR purposes last FY to implement GASB 33 and now requires posting to RIFMIS. This needs to be coordinated with A-C Office to prepare journal entries.

81 TRUST FUND RECLASSIFICATION

82 Trust funds recommended for reclassification Prepare revenue recognition journal vouchers, if not previously recognized and are now required Entry requires analysis of current year revenue and beginning fund balance adjustment Funds will automatically be reclassified in OASIS Review OASIS to ensure account structure matches recommendation for fund

83 UNCHANGED TRUST FUNDS

84 Trust funds recommended to remain as Agency funds Funds will account for cash and liabilities Net Assets will not appear in funds Review OASIS for proper liability account designation Offset accounting transaction to liability accounts, effective 7/1/02

85 Coordinate Accounting Effort with A-C Schedule Appointment To Prepare and Discuss Needed Accounting Entries for FYE Review Account Establishment Forms to Ensure Descriptions Meet Your Department Approval

86 WHEN IN DOUBT...ASK QUESTIONS

87

88

89

90

91

92

93