Principle #1 - Accounting and reporting capabilities The principle requires that the accounting system be capable of providing information which meets the concept of full disclosure and meets compliance related information needs.

Principle #2 - Fund accounting This principle requires fund accounting for governmental accounting systems. Note that the funds are used to segregate different types of activities so that we have the transactions related to certain activities separated from transactions related to other types of activities.

Principle #3 - Types of funds Principle three simply lists the major types of funds by the categories of governmental (4), proprietary (2), and fiduciary (4).

Principle #4 - Number of funds This principle simply suggests that one should have the minimum number necessary. First, all legal requirements should be met (where separate funds are legally required). Everything else is a matter of judgment. Most entities of any size will have a debt service fund, one or more capital projects funds, and special revenue funds. Many entities will also have several internal service funds (these tend to be very useful for control purposes but are difficult to justify in terms of financial reporting).

Principle #5 -- Fixed assets and long term debt General fixed assets and general long term debt are accounted for in the account groups and that the plant and equipment and long term debt of proprietary funds are accounted for in those funds Regarding the recording of infrastructure - roads, bridges, streets, etc. The GASB standards make this recorded optional

Principle #6 -- Valuation of fixed assets The general principle is historical cost Note that donated assets are recorded at FMV on the date of the gift

Principle #7 -- Depreciation of fixed assets Depreciation is not taken in governmental funds. There are no good reasons why depreciation could not be recorded in the GFA account group although it is only an optional procedure and most governmental entities do not record it. Full accrual proprietary funds and fiduciary funds should record depreciation on the fixed assets in those funds.

Principle #8 -- Basis of accounting Governmental funds -- modified accrual Governmental fund revenues should be recognized when available and measurable. Expenditures should be recognized when the liability has been incurred. Transfers are recognized when the interfund liability arises. Proprietary funds -- full accrual basis Fiduciary -- modified accrual or full accrual depending on the measurement focus

Principle #9 -- Budgeting, Budgetary Control, and Budgetary Reporting This principle essentially requires that governmental organizations have a budget and use budgetary accounting procedures whereby the budget is entered into the accounts. As we will see, some of the financial statements of a governmental entity contain budget - actual comparisons.

Principle #10 -- Classification of transfers, expenditures, revenues, and expenses This principle requires that transfers in and proceeds of debt be distinguished from revenues and that transfers out be distinguished from expenditures and expenses. Four types of transfers: Quasi-external, Reimbursements, Residual equity transfers, and Operating transfers.

Principle #11 Requires common terminology and classification, consistently throughout the budget, accounts, and financial reports of each fund

Principle #12 -- Interim and annual reports Interim reporting is required for managerial and oversight purposes A CAFR is required covering all funds and account groups. The CAFR includes an introductory section, appropriate combined, combining, and individual fund statements, notes, supplementary information, statistics, narratives, and schedules.

GPFS may be issued separately GPFS may be issued separately. These are a portion of the statements included in the CAFR and include an introductory section, combining statements and other information essential to full disclosure. CUFR are sometimes required for certain activities. CUFS are sometimes issued separately. Component units are often of a Proprietary Fund nature.

Required GPFS are: Combined balance sheet for all funds and account groups Combined REC for all governmental funds Combined REC -- Budget actual for all G & SR and similar Combined Revenues, Expenses and Changes for Full Accrual Funds Combined Cash Flows for all Full Accrual funds