Presentation Transcript

1. How to Understand and Prepare the Entity-Wide Financial Statements

2. Why are we here today?
3. WHY? New auditing standards require Skills, Knowledge, and Experience (SKE) sufficient to understand the statements Save money on your audit by preparing your own Because it’s fun!!! SKE is the KEY!
4. I HEAR AND I FORGET. I SEE AND I REMEMBER. I DO AND I UNDERSTAND. -CONFUCIUS
5. MY HEAD IS FULL OF STUFF I DO NOT UNDERSTAND -RANDOM TEXT MESSAGE
6. Presenters Susan Barkley CPA Assistant Director District Support Kentucky Department of Education Edward D. Muns CPA Director of Accounting Jefferson County Public Schools

7. Introduction to the Entity-Wide Statements – Structure and Theory

8. One Picture – Two Views Fund Statements Entity-Wide Statements Integrated reporting unit Full accrual Operational accountability Separate funds Modified accrual Fiscal accountability
9. Structure Governmental Activities Business-Type Activities Enterprise funds Governmental funds Fiduciary Funds are not incorporated into the entity-wide statements
10. Conversion Fund statements Governmental – current financial resources Proprietary funds – economic resources Entity-Wide statements All information is economic resources Requires converting governmental funds information to economic resources measurement focus
11. The Big Differences Capital Assets Purchase Depreciation Long-term Debt Issuance Repayment
12. Example: Capital Assets Gov’t Funds Entity Wide Purchase = asset Expense is only annual depreciation No asset Purchase = expenditure in that year No depreciation
13. Terminology Current Financial Resources Economic Resources Revenue Expense Revenue or Other Financing Source Expenditure or Other Financing Use I love accounting
14. When is revenue recognized? Modified Accrual Accrual When earned When earned IF Measurable and Available Collectible within the current period or soon enough thereafter to use for liabilities of current period MAMA
15. When is expenditure/expense recognized? Modified Accrual Accrual When liability is incurred When liability is incurred EXCEPT Unmatured debt Accrued interest Inventories Prepaids Certain accrued liabilities not expected to be liquidated with expendable available financial resources
16. Statement of Activities Presents the cost of providing services Expense – Revenue = Net Change Upper section shows program costs and program-specific revenue Lower section shows additional revenue needed to support the programs Minimum level of expenditure detail is function
17. Revenues Program Revenue Charges for Services Operating Grants & Contributions Capital Grants & Contributions General Revenues Examples: Property taxes, SEEK, grants that are not program-specific
18. Reconciliations The “map” Between government funds statements and entity-wide statements Listing of the conversion items to produce the entity-wide statements
19. Conversion Process MUNIS = governmental funds statements Entity-wide is prepared off-system Excel spreadsheet Quickbooks sort of software
20. Exercise Small Group Quiz: Entity-Wide Statements

21. Conversion Entries:Governmental Funds to Entity-Wide

22. Gather Documents Prior year entity-wide statements Current year governmental funds statements (Munis) Long-term debt information Refunding bonds Capital asset information Materials from this class
23. PY Entity-wide statements Enter the ending balances of the accounts that appear ONLY on the entity-wide statements Including net assets (position) These provide a beginning balance for the current year conversion activity Accounts in ALL CAPS
24. CY fund statements All other beginning balances in trial balance come from funds statements Accounts in upper/lower case Be sure debits and credits net to zero
25. Conversion entries Begin listing the conversion entries Need guidance? PY financial statements Resources from this class GFOA blue book
26. Conversion entries Do not enter the conversion entries into Munis The conversion is performed off-system
27. Capital assets CY additions CY depreciation expense CY disposals Accumulated depreciation on CY disposals Can group these together or perform 4 separate conversion entries
28. CY additions Recorded as expenditure in the funds Will be an asset in entity-wide Dr. CAPITAL ASSETS Cr. Expense ENTRY A
29. CY depreciation Is not recorded at all in the funds Will be expense in entity-wide Dr. Expense Cr. ACCUMULATED DEPRECIATION ENTRY B
30. CY disposals Not recorded in the funds Will be a reduction of an asset in entity-wide Dr. Expense Cr. CAPITAL ASSETS ENTRY B
31. Accumulated depreciation on CY disposals Not recorded in the funds Will be a reduction of accumulated depreciation in entity-wide Dr. ACCUMULATED DEPRECIATION Cr. Expense ENTRY B
32. Long Term Debt Bond proceeds Bond principal payments Refundings Deferred outflows/inflows Accrued interest Premiums and discounts
33. Bond proceeds Recorded as Other Financing Source in funds Will be a LT liability in entity-wide Dr. Other Financing Source Cr. LT BONDS PAYABLE ENTRY F
34. Bond principal payments Recorded as expenditure in the funds Will be reduction of liability in entity-wide Dr. LT BONDS PAYABLE Cr. Expenditure – debt principal ENTRY G
35. Refundings Is recorded as Other Financing Source and Use in funds Will be eliminated in entity-wide Dr. Other financing source Cr. Other financing use ENTRY F, G
36. Deferred outflows/inflows New with GASB 65 Analyze all outstanding refundings Prior period adjustment required Record the CY net savings/cost as a revenue Amortize the total remaining lifetime savings/cost as an expense Remainder is deferred outflow/inflow
37. Deferred outflows/inflows Sample shows a CY net cost: Dr. Expense Dr. Miscellaneous revenue Cr. Deferred outflows ENTRY C
38. Accrued interest Not recorded in funds Will be a liability in entity-wide Record the change in the balance Dr. Expense – interest Cr. ACCRUED INTEREST PAYABLE ENTRY E
39. Premiums/discounts Recorded as Other financing source/use in funds Will be eliminated in entity-wide Dr. Other financing source (premiums) Cr. Other revenue Dr. Other revenue Cr. Other financing use (discounts) ENTRY D
40. Other LT debt Vacation leave, sick leave, other Not recorded in funds Will be liability in entity-wide Record the change in the account balance Dr. Expense Cr. LT liability (for an increasing balance) ENTRY H, M
41. Transfers Funds include transfers within governmental activities Eliminate them on entity-wide Dr. Transfers in Cr. Transfers out ENTRY J
42. Due to / Due from Funds include amounts owed between governmental funds Eliminate for entity-wide Dr. Due to other funds Cr. Due from other funds ENTRY K
43. Indirect costs Funds include indirect cost amounts among governmental funds Eliminate for entity-wide Dr. Other revenue Cr. Other expense ENTRY I
44. Revenues Revenues classified by source in funds Different categories on entity-wide Dr. Other local revenue Cr. CHARGES FOR SERVICES Dr. Federal source revenue Cr. OPERATING GRANTS & CONTRIBUTIONS ENTRY L, O
45. Function 4XXX Expenditures are shown by function in funds Different presentation in entity-wide Eliminate balance in this function DO THIS LAST Dr. Expense (other functions) Cr. Expense (function 4XXX) ENTRY Q
46. Additional Entries Your district may have additional entries
47. Post to Trial Balance Once all conversion entries are listed, post the amounts to an off-system trial balance Entry reference letter Be sure total debits = total credits Resulting entity-wide balances are shown in the two far right columns
48. Ending Net Position Calculate the amount of revenues over (under) expenses from the entity-wide balances in the two far right columns Add this amount to beginning net position to arrive at ending net position
49. Reconciliations Must show how to get from: Balance sheet to statement of net position Statement of revenues, expenditures and changes in fund balances to statement of activities Conversion entries will help you complete the reconciliations
50. Game Brain-teaser

51. Excel Template

52. PY Statement of Net Position Need for beginning balances in ENTITY-WIDE accounts PY Stmt net position TAB 1
53. Balance Sheet CY balance sheet Agrees to Munis Governmental funds information Accounts in red box provide beginning balances Balance sheet TAB 2
54. Statement of Revenues, Expenditures, and Changes in Fund Balances CY “income statement” Agrees to Munis Governmental funds information Accounts in red box provide beginning balances Stmt rev exp TAB 3
55. Capital Assets Information needed to prepare note CY depreciation expense by function (from Munis) Capital assets TAB 4
56. LT Liabilities Information needed to prepare note Difference between short-term and long-term Changes in balances LT liabilities TAB 5
57. Deferred Outflow Schedule of all refundings Need CY total and historical total Deferred outflow TAB 6
58. Expense Allocation Systematic approach to spreading costs over each function Use any reasonable method – be consistent – document Can use different methods for different costs Capital assets purchases for capital asset costs Salary expenditure for vacation liability 7 Expense alloc TAB
59. Conversion Entries Listing of all off-system entries needed to get from fund statements to entity-wide Conv entries TAB 8
60. Trial Balance The Hub Fill in beginning balances “Post” entries Two right columns show entity-wide statements Change in net assets calculated at the bottom Trial balance TAB 9
61. Reconciliation – Balance Sheet Listing of all the items that change between the balance sheet and the statement of net position “map” Recon bal sheet TAB 10
62. Reconciliation – “Income Statement” Listing of all the items that change between the statement of revenues, expenditures, and changes in fund balances and the statement of activities “map” Recon rev exp TAB 11
63. Statement of Net Position The entity-wide statement of net position All balances come form the trial balance Must allocate total net position among the classifications Net investment in capital assets Restricted Unrestricted Net position TAB 12
64. Statement of Activities All balances for governmental activities come from the trial balance Business-type activities are the same as fund statements Stmt of activities TAB 13

65. Sample School District - Walkthrough

66. Questions