A Walkthrough of Government Financial Statements Presented by Laura Beltran-Schmitz for the AGA PDT 2018

Understanding the MD&A Management’s Discussion & Analysis (MDA) Required Supplementary Information (RSI) Precedes the Basic Financial Statements Designed to introduce the basic financial statements A brief discussion of the financial statements Condensed financial information derived from government-wide financial statements comparing the current year to the prior year

Fund Types What is a fund? Governmental Funds Proprietary Funds General, Special Revenue, Capital Projects, Debt Service, Permanent Proprietary Funds Fiduciary Funds

Gov’t Fund Types, as defined by GASB 54 General Fund - used to account for and report all financial resources not accounted for and reported in another fund Special Revenue Funds - used to account for and report the proceeds of specific revenue sources that are restricted or committed to expenditure for specified purposes other than debt service or capital projects The restricted or committed proceeds of specific revenue sources should be expected to continue to comprise a substantial portion of the inflows reported in the fund Special Revenue Funds 30. Special revenue funds are used to account for and report the proceeds of specific revenue sources that are restricted or committed to expenditure for specified purposes other than debt service or capital projects. The term proceeds of specific revenue sources establishes that one or more specific restricted or committed revenues should be the foundation for a special revenue fund. Those specific restricted or committed revenues may be initially received in another fund and subsequently distributed to a special revenue fund. Those amounts should not be recognized as revenue in the fund initially receiving them; however, those inflows should be recognized as revenue in the special revenue fund in which they will be expended in accordance with specified purposes. Special revenue funds should not be used to account for resources held in trust for individuals, private organizations, or other governments. 31. The restricted or committed proceeds of specific revenue sources should be expected to continue to comprise a substantial portion of the inflows reported in the fund.2 Other resources (investment earnings and transfers from other funds, for example) also may be reported in the fund if those resources are restricted, committed, or assigned to the specified purpose of the fund. Governments should discontinue reporting a special revenue fund, and instead report the fund's remaining resources in the general fund, if the government no longer expects that a substantial portion of the inflows will derive from restricted or committed revenue sources. 32. Governments should disclose in the notes to the financial statements the purpose for each major special revenue fund-identifying which revenues and other resources are reported in each of those funds.

Gov’t Fund Types, as defined by GASB 54 Capital Projects Funds - used to account for and report financial resources that are restricted, committed, or assigned to expenditure for capital outlays, including the acquisition or construction of capital facilities and other capital assets Debt Service Funds - used to account for and report financial resources that are restricted, committed, or assigned to expenditure for principal and interest. Capital Projects Funds 33. Capital projects funds are used to account for and report financial resources that are restricted, committed, or assigned to expenditure for capital outlays, including the acquisition or construction of capital facilities and other capital assets. Capital projects funds exclude those types of capital-related outflows financed by proprietary funds or for assets that will be held in trust for individuals, private organizations, or other governments. Debt Service Funds 34. Debt service funds are used to account for and report financial resources that are restricted, committed, or assigned to expenditure for principal and interest. Debt service funds should be used to report resources if legally mandated. Financial resources that are being accumulated for principal and interest maturing in future years also should be reported in debt service funds.

Gov’t Fund Types, as defined by GASB 54 Permanent Funds- used to account for and report resources that are restricted to the extent that only earnings, and not principal, may be used for purposes that support the reporting government's programs-that is, for the benefit of the government or its citizenry.

Proprietary and Internal Service Funds Business type activities Enterprise funds NMCD – Corrections Industries GSD – Workers’ Comp, State Transportation Pool, etc.. Internal Service Account for financing of goods or services provided by one dept. of a gov’t unit to other depts. within same gov’t unit Cost reimbursement basis Self insurance Goal to break even (or as close as possible)

Fiduciary Funds Pension (and other employee benefit) trust funds Investment trust funds Private-purpose trust funds Agency funds Account for other people’s money Pension – pension plans that are offered to employees Investment – used by gov’t that sponsor external investment pools and that provide individual investment accounts to other legally separate entities Private-purpose – used to report all trust arrangements under which the principal and income benefit individuals, private orgs, and other gov’ts Agency – assets held solely in a custodial capacity; ex: University accounts student group accounts; TRD – tax collections

Fund Types Governmental Funds Proprietary Funds Fiduciary Funds Basis of accounting Modified Accrual Accrual Long-term liabilities No Yes Capital Assets Financial Statements Balance sheet Statement of revenues, expenditures, and changes in fund balances Statement of net position Statement of revenues, expenses, and changes in fund net position Statement of cash flows Statement of fiduciary net position Statement of changes in fiduciary net position

Fund Financial Statements Where do the Fund Financial Statements Appear? If the funds are major they appear as part of the basic financial statements, before the notes. Non major funds appear in the supplementary section – Combining Statements – Individual Fund Statements, after the notes.

Fund Financial Statements General Fund is always major Management may designate a fund as major Funds that meet the following criteria must also be major: 10% & 5% test

Fund Financial Statements For the Governmental Funds Statement of Governmental Funds – Balance Sheet Reconciliation of the Balance Sheet to the Statement of Net Position Statement of Revenues, Expenditures and Changes in Fund Balance Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of the Governmental Funds to the Statement of Activity

Fund Financial Statements Governmental Funds, cont’d: Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual -General Fund Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual –Major Special Revenue Fund

Fund Financial Statements Proprietary Funds Statement of Net Position Statement of Revenues Expenses and Changes in Fund Net Position Statement of Cash Flows

Gov’t – Wide Financial Statements Include all governmental and business-type activities, but not fiduciary activities Statement of Net Position Statement of Activities

Gov’t – Wide Financial Statements Fund level to Gov’t Wide level Modified Accrual to Full accrual Reconciliation of the Balance Sheet to the Statement of Net Position – Governmental Funds Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities

Financial Statements Notes to the Financial statements Budgetary comparisons Schedule of Expenditures of Federal Awards (SEFA)

Auditors’ Reports Types of reports Independent Auditors’ Report YellowBook Report (Governmental Auditing Standards) Uniform Guidance Report (SEFA/Single Audit)

Laura Beltran-Schmitz, CPA, CFE, CGFM, CICA Assurance Director Laura Laura Beltran-Schmitz, CPA, CFE, CGFM, CICA Assurance Director Laura.beltran-schmitz@claconnect.com 505-222-3526