Governmental Accounting Basics OBJECTIVES Governing Bodies / - PDF document

Governmental Accounting Basics OBJECTIVES Governing Bodies / Policies Account Codes Modified vs Full Accrual Accounting Fund Accounting Financial Reporting Fund Equity Component Units 2 1

GOVERNING BODIES / POLICIES 3 OVERVIEW OF GOVERNMENTAL ACCOUNTING Governed by Governmental Accounting Standards Board GASB standards  Establish Generally Accepted Accounting Principles for governmental entities Statutes  Montana Code Annotated (Section 17‐2‐102, MCA)  Requires DOA to maintain a system of financial control (MOM Accounting Policies and use of SABHRS)  DOA State Accounting Bureau (SAB) establishes all Montana Operations Manual (MOM) related to accounting  (MOM 302 Governmental Accounting Overview) (one of many) 4 2

ACCOUNT CODES 5 ACCOUNT CLASSIFICATIONS Accounts Classification Normal Balance 1xxx Assets / Deferred Debit Outflows 2xxx Liabilities / Deferred Credit Inflows 4xxx Equity Credit 5xxxxx Revenue Credit 6xxxx Expense Debit 6 3

SABHRS – LOOK UP CHARTFIELD VALUES Chartfield Values allows you to look up specific chartfield items such as ACCOUNT . 7 QUERY – ACTIVE GL ACCOUNTS Query shows all active accounts for the State as of the date entered. 8 4

Website address: Follow Link to Procedures. Accounting request forms for Chartfields and various transactions 9 RUNNING A TRIAL BALANCE Trial Balance Queries: MTGL_TB_FUND_CHOOSE_LEDGER 10 5

RUNNING A TRIAL BALANCE (cont) 11 MODIFIED VS FULL ACCRUAL ACCOUNTING 12 6

MODIFIED ACCRUAL BASIS OF ACCOUNTING  Recognizes increases and decreases in financial resources only to the extent that they reflect near‐term inflows or outflows of cash (60 days)  Revenue is only recognized to the extent that it is available to finance expenditures of the current period  Certain expenditures are only recognized when payment is due because it is only at that time that they normally are liquidated with expendable available financial resources 13 FULL ACCRUAL BASIS OF ACCOUNTING  Recognizes increases and decreases in economic resources as soon as the underlying transaction or event occurs.  Using full accrual accounting, revenues are recognized as soon as they are earned, and expenses are recognized as soon as the related liability is incurred, regardless of the timing of related cash flows. 14 7

MODIFIED VS FULL ACCRUAL Modified Accrual (current financial resources measurement focus)  Used only by governmental funds and only in the fund financial statements  Represents current operations/resources for the fund  No capital assets or long‐term debt are reflected Full Accrual (economic resources measurement focus)  Used by all funds for the government‐wide financial statements  Used by proprietary and fiduciary funds in the fund financial statements  Represents all activity for the fund 15 Basis of Accounting Modified Accrual Full Accrual Measurement Focus Current Economic Total Economic Resources – transactions Resources – all that affect current transactions for that financial resources reporting period Objective Determine if current Match revenues with inflows are sufficient to expenditures cover current outflows Revenue Recognition When earned, When earned and measurable and measurable available – 60 days Expenditure Recognition When delivery has When delivery has occurred or services occurred or services have been rendered have been rendered with several exceptions 16 8

FUND ACCOUNTING 17 FUND ACCOUNTING  Fund: A fiscal and accounting entity with a self‐balancing set of accounts recording cash and other financial resources, together with all related liabilities residual equities or balances, and changes therein, which are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions, or limitations 18 9

ACCOUNTING EQUATION Assets + Deferred Outflows of Resources = Liabilities + Deferred Inflows of Resources + Fund Equity 19 FUND CLASSIFICATIONS • Governmental funds Fiduciary funds  General Fund  Pension Trust  Special Revenue (State & Federal)  Private‐Purpose Trust  Debt Service  Investment Trust  Capital Projects  Agency  Permanent • Proprietary funds  Enterprise  Internal Service 20 10

REQUESTING A FUND  Form 121 – Fund Code  http://sfsd.mt.gov/SAB/AccountingFormsInfo  Responsible agency submits to State Accounting Bureau, designating access to other agency  Agency monitors by running query, MTGL_Fund_by_Resp_BU , filter for the Agency once saved  Additionally funds can be shared between multiple agencies  One agency receives resources  Another agency allowed to spend  Reduces transfers among agencies funds 21 FINANCIAL REPORTING 22 11

GOVERNMENTAL FUNDS Fund Type Fund Number Fund Accounts For General 01100 All government financial resources not required to be accounted for in another fund State Special Revenue 02xxx Budgeted & Resources from state/other 080xx‐08499 Nonbudgeted nonfederal sources with imposed restrictions Federal Special Revenue 03xxx Resources from a federal sources with imposed restrictions Debt Service 04xxx Accumulation of resources for the payment of general long‐ term debt Capital Projects 05xxx Resources to be used for the acquisition/construction of major capital projects Permanent 09xxx‐09499 Resources whose principle portion is legally required to remain intact 23 PROPRIETARY FUNDS Fund Type Fund Number Fund Accounts For Enterprise 06xxx‐06499 The financing of goods or services to the general public when the intent is that costs will be recovered primarily though user charges Internal Service 065xx The financing of goods or services provided by one state agency to another on a cost‐ reimbursement basis 24 12

FIDUCIARY FUNDS Fund Type Fund Number Fund Accounts For Agency 07xxx Resources held temporarily in a purely custodial capacity for an individual, private organization or other government Investment Trust 085xx The external portion of investment pools reported by the state Private‐Purpose 086xx Trust arrangements under which Trust principal and income benefit an individual, private organization or other government Pension Trust 095xx Resources required to be held in trust for the members and beneficiaries of an employee benefit plan 25 BASIC CAFR FINANCIAL STATEMENTS Government‐Wide Statements Component Units 1) Statement of Net Position 2) Statement of Activities Proprietary Fund Statements 1) Statement of Net Position 2) Statement of Revenues, Expenses, and Changes in Net Governmental Fund Statements Position 1) Balance Sheet 3) Cash Flow Statement 2) Statement of Revenues, Expenditures, and Changes in Fiduciary Fund Statements Fund Balance 1) Statement of Net Position 3) Reconciliation to 2) Statement of Changes in Government‐Wide Statements Net Position 26 13

SABHRS LEDGERS THREE PRIMARY SABHRS LEDGERS  ACTUALS Ledger  Basic operations of an agency (all budgeted activity)  All cash transactions for an agency  Capital assets/long‐term debt for full‐accrual funds only  Used for Legislative Audit Schedules and CAFR financial statements  ENTITYWIDE Ledger  Records conversion entries that allow governmental funds to be reported on a full accrual basis in the government‐wide financial statements  Not used for Legislative Audit Schedules, but used for CAFR financial statements  A_ACCRUAL Ledger  Reservation of budget  Encumbers resources for goods/services received after fiscal year‐end  Must have valid contract/agreement in place prior to fiscal year‐end  Used for Legislative Audit Schedules, not used for CAFR financial statements 28 14

TREATMENT FOR GOVERNMENTAL FUNDS ONLY Type of Transaction Modified Accrual – Full Accrual – Actuals Ledger Entitywide Ledger Cash is received in advance of Recorded as unearned No Entry good/service being provided revenue in the actuals ledger Customer is billed, a Receivable and The Unavailable inflows good/service is provided, but unavailable inflows of of resources are the cash will not be available resources are reversed and revenue is to finance expenditures for established established the current fiscal year (or within 60 days of year‐end) 29 EXAMPLE 30 15

TREATMENT FOR PROPRIETARY FUNDS ONLY Type of Transaction Full Accrual – Actuals Ledger Cash is received in advance of Recorded as unearned good/service being provided revenue in the actuals ledger Customer is billed, a Receivable and revenue good/service is provided, but is established the cash will not be available to finance expenditures for the current fiscal year (or within 60 days of year‐end) 31 GOVERNMENTAL FUNDS Government‐wide Full Accrual Conversion Path ENTITYWIDE Financial Ledger Statements: Full Accrual Governmental Funds Fund Financial ACTUALS Ledger Statements: Modified Accrual Modified Accrual Path 32 16

TRIAL BALANCE – ACTUALS AND ENTITYWIDE BALANCE Query shows ACTUALS and ENTITYWIDE ledgers and how they combine for financial reporting. 33 QUERY: MTGL_TB_FUND_ACT_ENTWIDE_COMB GOVERNMENTAL FUNDS RECONCILIATION EXAMPLE (CAFR) 34 17