Financial Statements in Government: A Compliance and Liquidity Approach

Project elements
in chapter III of Financial Reporting in Government
By Dr. John Sacco , George Mason University
Revised Saturday, April 12, 1997

Introduction

In this part of the project you have an opportunity to examine fund data pertaining to the success , conditions , and compliance of a particular government. The information is limited to several funds , namely, the general fund and the capital project fund. In later chapters, data on other funds will be presented. All the statements are highly simplified for the purposes of this project. Presentation in the CAFR would be more detailed. From time to time comments are made to note where simplifications have been made.

Last Year's Operating Statement: General and Capital Project Funds

Assignment

For this project assignment on Last Year's Operating Results (Statement of Revenues, Expenditures and Changes in Fund Balance) you are to:

Recreate the funds as a spreadsheet using proper formulas.
Do an analysis of the operating success of the general fund. The analysis should include a quantitative evaluation with accompanying report. Using the operating statements, has this been a fiscally successful or unsuccessful year? Defining successful is an important part of the task. Would it be helpful to look at the other funds or groups to answer these questions about operating success? For example, you also have an operating statement for the capital projects fund. If including information for other funds is helpful in assessing the government, explain why and provide some details to your answer.

                      Governmental Unit Name

  Statement of Revenues, Expenditures and Change in Fund Balance
                            General Fund
                  For the Fiscal Year Ended 12/31/19x0

  Revenues:
  ----------------
  taxes           1,000,000
  permits             2,000
  intergovt          40,000
  fees                2,000
  fines                 500
   Total revenue            1,044,500

  Expenditures:
  ----------------
  general govt      190,000
  safety            350,000
  transportation    100,000
  sanitation        200,000
  welfare           100,000
  recreation         75,000
  other              13,500
   Total expenditure        1,028,500

  Other financing
   sources(uses)
  ----------------
  transfers out               (11,500)

  Over(under)                   4,500

  beg fund balance                  0
  end fund balance             $4,500
                            ==========


  Transfers out included:
            9,500 to pensions, 8,000 regular; 1,500 for a short fall
            2,000 to debt service fund
         --------
           11,500

For this fund, transfers out are usually called operating. Fund balances are given by dates not beg and end.

                       Governmental Unit Name

    Statement of Revenues, Expenditures and Change in Fund Balance
                               Capital Projects
                  For the Fiscal Year Ended 12/31/19x0

  Revenues:
  ----------------
   Total revenue                    0

  Expenditures:
  ----------------
  transportation     50,000
   Total expenditure           50,000

  Other financing
   sources(uses)
  ----------------
  Bond Proceeds                50,000

  Over(under)                       0

  beg fund balance                  0
  end fund balance                 $0
                            ==========

The expenditures for transportation consist of road repair work. The government typically uses general obligation bonds to cover this cost. The government feels the repairs will last longer than a year. Fund balances are given by dates not beg and end.

Last Year's Balance Sheet

Assignment

In this balance sheet (b/s) project assignment, notice that the fund balance from the operating statement ($4500) is the same as the total fund equity (4500) in the balance sheet. In general the balance sheet shows the financial status (health or conditions) of the government which resulted from all the operating activities (of, in this case, the general fund). For example, after all the operating activities, there is $1000 of cash in the fund. Remember, this balance sheet shows only the annual or short term financial conditions, resulting from last year's budget and operations. Long term debt or obligations are lodged elsewhere. For this project assignment, you are to:

redo the balance sheet using the appropriate formulass
comment on the "financial condition" of the general fund, that is, what shape is it in as it goes into the next year? Establish your criteria and comment on the value of using these criteria.
go into some items on the b/s and comment, especially on the items in fund equity

                             Government Unit Name
                                    Balance Sheet
                                      12/31/19x0

  Assets                        General Fund
  ---------------------
  cash                              1000
  receivables, tax                  4000
  due from other govts              2500
    Total assets                             7500
                                         =========
  Liabilities
  ---------------------
  vouchers payable                  1000
  notes payable                     2000
    Total liabilities                        3000

  Fund Equity
  ---------------------
  reserve for encumbrances          4000
  undesignated                       500
    Total fund equity                        4500

  Total liabilities and
   fund equity                               7500
                                         =========

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