Confidential & Proprietary Internal Kaplan Use Only. THE BUDGET PROCESS – PART III Unit 6 Budget Monitoring and Reporting

Confidential & Proprietary Internal Kaplan Use Only. MONITORING AND REPORTING The execution of the budget requires systems that track the budgeted revenues and expenditures to actuals This monitoring, and ultimately, reporting is done by accounting processes The primary purpose of accounting is to ensure integrity in the reporting of financial transactions

Confidential & Proprietary Internal Kaplan Use Only. GOVERNMENTAL ACCOUNTING Accounting contains financial information on the transactions involving the receipt of funds and their expenditure Each jurisdiction has an accounting standard authority with which it must comply -Each jurisdiction has requirements of how government transactions are accounted for and reported

Confidential & Proprietary Internal Kaplan Use Only. ACCOUNTING STANDARDS In general, the accounting standards with which the jurisdictions comply specify how transactions are categorized and what is published From a financial perspective, these standards provide a “report card” of financial stability for use by the public and financial institutions -i.e. when

Confidential & Proprietary Internal Kaplan Use Only. FUND ACCOUNTING A common method of accounting ofr government purposes is fund accounting -Each fund accounts for the transactions for a specific group of assets and revenues -There are 3 general classes of funds, that contain different types of funds -Governmental -Proprietary -Fiduciary

Confidential & Proprietary Internal Kaplan Use Only. GOVERNMENTAL FUNDS There are five types of funds within the general category of governmental funds General Fund Special Revenue Fund Capital Projects Funds Debt Service Funds Permanent Funds

Confidential & Proprietary Internal Kaplan Use Only. GENERAL FUND The general fund is the most important governmental fund -Several revenue sources are used to fund it -This is a discretionary fund in that the jurisdiction can expend funds for any purpose that it is empowered to pursue

Confidential & Proprietary Internal Kaplan Use Only. SPECIAL REVENUE FUNDS Special Revenue Funds are exactly what they are called -These are funds that receive revenues that are earmarked for specific purposes -Recall our example of the Road Fund in a previous unit. -A Road Fund is generally funded by gasoline tax

Confidential & Proprietary Internal Kaplan Use Only. CAPITAL PROJECTS FUNDS Capital Project Funds account for the transactions that relate to capital improvements -i.e. constructing a new office building These types of Funds are forecasted for over extended periods of time as the costs for a capital project likely extends beyond a single budget year -In most jurisdictions, the timeframe and the annual funds required to see the project through to completion are budgeted in a capital fund

Confidential & Proprietary Internal Kaplan Use Only. DEBT SERVICE FUNDS Debt service funds account for interest and principal on long term debt. -Recall one of the strategies for balancing the budget is for the issuance of long term debt

Confidential & Proprietary Internal Kaplan Use Only. PERMANENT FUNDS Permanent funds are the equivalent of a trust fund and are generally for specific uses -Only interest generated by the principal contained in the fund can actually be expended -Some jurisdictions have run into trouble budgeting higher interest revenues than actually received

Confidential & Proprietary Internal Kaplan Use Only. PROPRIETARY FUNDS Enterprise Funds -These funds are used to account for a governmental entity that is run as a traditional business. -Entities accounted for in Enterprise funds are generally held to performance requirements similar to those shareholders hold Boards of Directors to Internal Service Funds (ISFs) -These are funds that internally operate the business of government and therefore also have typical business performance standards they conform to. -Operations in these funds establish the internal government as their “customer”

Confidential & Proprietary Internal Kaplan Use Only. FIDUCIARY FUNDS These types of funds are generally dedicated to the benefit of a 3 rd party -Pension Trusts -Government Employee pension funds -Investment Trust Funds -Used for the tracking of local government investment pools -For example, a county might invest funds jointly with a Unified School District in order to obtain more favorable yields and this type of fund would be used to account for those transactions

Confidential & Proprietary Internal Kaplan Use Only. FIDUCIARY FUNDS (CONT’D) -Agency Funds -This type of fund accounts for the collection one government entity might do for another -A good example of this would be a court collecting DUI fines that would then be passed onto the jurisdiction in which the infraction occurred -Private Purpose Trust Funds -These funds account for all other trust arrangements a jurisdiction has in which both principal and earnings may be expended

Confidential & Proprietary Internal Kaplan Use Only. SUMMARY This presentation covered the purpose of government accounting You also learned the fund accounting is primarily how government accounting differs from the private sector