Government and Non-Profit Accounting

Accounting Standards for State and Local Governments WEEK ONE Accounting Standards for State and Local Governments

Learning Objectives After Week 1, you should be able to: Demonstrate an understanding of why governmental accounting is–and should be–different from for-profit business accounting. Model the governmental accounting system used to account for revenues, expenditures, encumbrances, expenses, capital, and debt.

Compare and Contrast Governmental Accounting and For-Profit Accounting Missions Objectives Characteristics Absence of a profit motive. No direct link between revenues and expenses. No relationship between resources provided and the benefits received. Restriction on assets.

Governing Standard Setting Bodies The Governmental Accounting Standards Board’s (GASB) Web site at (www.gasb.org) provides extensive information about the mission, structure, the due-process it follows in setting standards, and the role of its advisory council. Financial Accounting Standards Board (FASB) provides information located at its Web site at (www.gasb.org).

Basis of Accounting Financial accounting Governmental accounting Full accrual FASB Governmental accounting Modified accrual GASB Governmental budgets Cash basis Commitments

Objectives of Financial Reporting “Accountability is the cornerstone of all financial reporting in government… Accountability requires governments to answer to the citizenry—to justify the raising of public resources and the purposes for which they are used.” -GASB Concepts Statement No. 1

Comprehensive Annual Financial Reports (CAFR) Purpose of CAFR Components of CAFR Uses of CAFR GASB 34 Reasons for implementation Advantages and disadvantages Applies to local and state entities but not the Federal Government Management Discussion and Analysis (MD&A)

Basic Financial Statements Overview Government-Wide Financial Statements Statement of Net Assets Statement of Activities Governmental Funds Financial Statements Balance Sheet Statement of Revenues, Expenditures, and Changes in Fund Balances (GAAP basis) Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual

Basic Financial Statements Overview (Cont.) Proprietary Funds Financial Statements Statement of Net Assets (Balance Sheet) Statement of Revenues, Expenses, and Changes in Net Assets Statement of Cash Flows Fiduciary Funds Financial Statements Statement of Fiduciary Net Assets Statement of Changes in Fiduciary Net Assets Notes to the financial statements

Questions?