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Transcript of INTERMEDIATE GOVERNMENTAL ACCOUNTING - … GOVERNMENTAL...6/22/16 1 1 P INTERMEDIATE GOVERNMENTAL...
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©20
12Cli+
onLarson
AllenLLP
INTERMEDIATEGOVERNMENTALACCOUNTING
KarinSlater,CPFOCFOMontroseCountySchoolDistrict
June23,2016
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TheGovernmentalEnvironment
• Keyenvironmentalcharacteris=cs– Twocharacteris=csofthegovernmentalenvironmenthavehadanimportantimpactonthedevelopmentofpublic-sectoraccoun=ngandfinancialrepor=ngprac=ce:1)Notalloftheac=vi=esofstateandlocalgovernmentshavethesamefinancialobjec=ves(opera=onalaccountability).
2)Governmentshaveaspecialresponsibilitytodemonstratethattheyhavecompliedwithrestric=onsontheuseofresources(fiscalaccountability).
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TheGovernmentalEnvironment
• Differentfinancialobjec=vesfordifferentac=vi=es– Privatesectorenterprisessetouttomakeaprofitbyprovidinggoodsorservicestocustomers
◊ Some=messervicesofferedbygovernmentsfunc=oninmuchthesamewayasprivate-sectorbusinessessotheyaredescribedasbusiness-typeac=vi=es(i.e.governmentoperatedgolfcourses).
◊ Some=messervicesofferedbygovernmentsdonotfunc=onlikeprivate-sectorbusinessessotheyaredescribedasgovernment-typeac=vi=es(i.e.publicsafety.)
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TheGovernmentalEnvironment
• Fiscalaccountability– Budgetsinthepublicsectorfunc=onasmorethanjustafinancialplan.Theyaretheconcretemanifesta=onofalegisla=vebody’sabilitytosetpublicpolicy.
– Theappropriatedbudgetofastateorlocalgovernmentenjoystheforceoflawandviola=onsaresubjecttolegalsanc=ons
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TheGovernmentalEnvironment
• FundAccoun=ng– Intheprivatesectorgenerallyeventhemostcomplexbusinessesarepresentedasasingle,unitaryen=tyforthepurposesoffinancialrepor=ng.
– Governments,however,arerequiredtousefundrepor=ngtoaccompanytheirgovernmentwidefinancialstatements.
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TheGovernmentalEnvironment
• Specialmeasurementfocusandbasisofaccoun=ngforgovernmenten==es– Government’susetwodifferentmeasurementfocus.
◊ Business-typeac=vi=esuseaneconomicresourcesmeasurementfocus.
◊ Government-typeac=vi=esuseafinancialresourcesmeasurementfocus.
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FinancialReporKngModel
• Fundaccoun=ng-wasspecificallydevelopedtoprovideinforma=ononfiscalaccountabilitytousersofthefinancialstatements.
• Government-widefinancials–TheGASBdeterminedthatgovernment-widefinancialstatementsarenecessarytoprovideinforma=ononopera=onalaccountability.
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GovernmentalFunds(Government-typeacKviKes)
• Governmentalfundsinclude:– Generalfund– Specialrevenuefunds– Capitalprojectfunds– Debtservicefunds– Permanentfunds
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GovernmentalFunds
• Generalfund–isthechiefopera=ngfundofastateorlocalgovernment.GAAPprescribesthatthegeneralfundbeused“toaccountforandreportallfinancialresourcesnotaccountedforandreportedinanotherfund.”
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GovernmentalFunds
• Specialrevenuefunds–usedtoaccountforandreportproceedsofspecificrevenuesourcesthatarerestrictedorcommicedtoexpenditureforspecifiedpurposeotherthandebtserviceorcapitalprojects.Notesshoulddisclosethepurposeforeachmajorspecialrevenuefund.
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GovernmentalFunds
• Debtservicefunds–usedtoaccountforandreportfinancialresourcesthatarerestricted,commiced,orassignedtoexpenditureforprincipalandinterest.– Careshouldbetakeninapplyingthenumberoffundsprincipalwithregardstodebtservicefunds.Soundfinancialmanagementdictatesthatgovernmentsshouldaccountforeachdebtissueseparatelyintheiraccoun=ngsystems,butasingledebtservicefundiso+ensufficientforexternalfinancialrepor=ngpurposes.
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GovernmentalFunds
• Capitalprojectsfunds–usedtoaccountforandreportfinancialresourcesthatarerestricted,commiced,orassignedtoexpenditureforcapitaloutlays,includingtheacquisi=onorconstruc=onofcapitalfacili=esandothercapitalassets.Excludescapitalprojectsfinancedbyproprietaryfunds,trustfunds,privateorganiza=ons,orothergovernments.
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GovernmentalFunds
• Permanent–usedtoaccountforandreportresourcesthatarerestrictedtotheextentthatonlyearnings,andnotprincipal,maybeusedforpurposesthatsupporttherepor=nggovernment’sprograms,thatis,forthebenefitofthegovernmentoritsci=zenry.
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ProprietyFunds(business-typeacKviKes)
• ProprietaryFunds– 1)Enterprisefunds– 2)Internalservicefunds
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ProprietaryFunds
• Enterprisefunds–maybeusedtoreportanyac=vityforwhichafeeischargedtoexternalusersforgoodsorservices(definedasan“exchange”or“exchangelike”transac=onasdiscussedinGASB33).GAAPalsorequirestheuseofanenterprisefundwhere:– Debtbackedsolelybyfeesandcharges– Legalrequirementtorecovercostswithfeesandcharges– Pricingpoliciesoftheac=vityestablishfeesandchargesdesignedtorecovercosts
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ProprietaryFunds
• Internalservice–usedtoallocatethecostofcertainsharedac=vi=estootherfunds.– Theuseofaninternalservicefundisneverrequiredandmustalwaysbeeliminatedingovernment-widestatements.
– Thegoalofaninternalservicefundshouldbetomeasurethefullcostofprovidinggoodsorservicesforthepurposeoffullyrecoveringthatcostthroughfeesorcharges.Fullcost,forthispurposeincludesthecostofcapitalassetsusedinprovidinggoodsorservicestocustomers.
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FiduciaryFunds
• GAAPdefinesfiduciaryfundsasfundsthatareused“toreportassetsheldinatrusteeoragencycapacityforothersandthereforecannotbeusedtosupportthegovernment’sownprograms.”
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FiduciaryFunds
• Fiduciaryfunds– Pensionandotheremployeebenefittrustfunds– Investmenttrustfunds– Privatepurposetrustfunds– Agencyfunds
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BasisofAccounKng
• Basisofaccoun=ngdetermineswhenthegovernmentwillrecognizetransac=onsintheaccoun=ngrecordsandwhentheywillbereportedinthefinancialstatements.– Governmentalfundsusethemodifiedaccrualbasisofaccoun=ng.
– Proprietaryfundsusetheaccrualbasisofaccoun=ng.
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BasisofAccounKng
• Accrualbasisofaccoun=ngrecognizestransac=onswhentheyoccur,despitethe=mingoftherelatedcashflows.– Usingthisbasisofaccoun=ng,revenuesarerecognizedintheaccoun=ngperiodwhichtheybecomeobjec=velymeasurableandthegovernmentearnsthem.
– Expensesarerecognizedintheperiodincurredassumingthattheyaremeasurable.
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BasisofAccounKng
• Modifiedaccrualbasisofaccoun=ngmodifiestheaccrualbasisofaccoun=ngtoreflectthespendingoffinancialresources.– Revenuesarerecognizedwhentheyaremeasurableandavailable.
◊ Measurablemeansyouhavesomeobjec=vewaytoquan=fytherevenue.
◊ Availablemeanscollec=blewithinthecurrentperiodorsoonenoughtherea+ertobeusedtopayliabili=esofthecurrentperiod.
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MeasurementFocus
• Measurementfocusdetermineswhatagovernmentmeasuresandreportsinitsfinancialstatements.– Governmentsusetheflowofcurrentfinancialresourcesmeasurementfocus.
– Proprietaryfundsusetheeconomicresourcesmeasurementfocus.
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Governmentalvs.ProprietaryFunds
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RevenueRecogniKonforGrants
• The“available”criterionappliestoreimbursementgrants.Forexpendituredrivengrantsingovernmentalfunds,revenuesarerecognizedatthe=meoftheexpenditureonlyifthereimbursementwillbereceivedwithinthegovernment’speriodofavailability.
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Government-WideStatements
• Thegovernment-widestatementsinclude:– StatementofNetPosi=on.– StatementofAc=vi=es(costofservicesapproach).– Economicresourcesmeasurementfocus.– Accrualbasisofaccoun=ng.– Governmentalac=vi=es.– Business-typeac=vi=es.– Discretelypresentedcomponentunits.
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StatementofNetPosiKon(PreviouslyStatementofNetAssets)
• Allassets(includingcapitalassets)• DeferredInflows• Allliabili=es(includinglong-termliabili=es)• DeferredOullows• Netposi=on(ratherthanfundbalances,retained
earnings;GASB34wascalledtotalnetassets).– Investedincapitalassets,netofrelateddebt– Restricted– Unrestricted
• Choicebetweenclassifiedformatororderofliquidity.
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DeferredOuVlows(1of3)
• DeferredouVlowofresources:aconsumpKonofnetposiKonbythegovernmentthatisapplicabletoafuturereporKngperiod
• HasaposiKveeffectonnetposiKon,similartoassets
• OuVlowofresources:aconsumpKonofnetposiKonbythegovernmentthatisapplicabletothereporKngperiod
StatementofNetPosiKon
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StatementofNetPosiKonDeferredOuVlows(2of3)
SometransacKonsinwhichtheresulKngitemshouldbereportedasadeferredouVlowofresources(currentlyclassifiedasassets)–GrantpaidinadvanceofmeeKngKmingrequirement–Deferredamountsfromtherefundingofdebt(debits)–Coststoacquirerightstofuturerevenues(intra-enKty)–Deferredlossfromsale-leaseback
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StatementofNetPosiKonDeferredOuVlows(3of3)
SometransacKonsinwhichtheresulKngitemshouldbereportedasadeferredouVlowofresources(currentlyclassifiedasassets)-Debtissuancecosts(otherthaninsurance)
• IniKaldirectcostsincurredbythelessorforoperaKngleases
• AcquisiKoncostsforriskpools• LoanoriginaKoncosts
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StatementofNetPosiKonDeferredInflows(1of3)
• Deferredinflowofresources:anacquisiKonofnetposiKonbythegovernmentthatisapplicabletoafuturereporKngperiod
• HasanegaKveeffectonnetposiKon,similartoliabiliKes
• Inflowofresources:anacquisiKonofnetposiKonbythegovernmentthatisapplicabletothereporKngperiod
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StatementofNetPosiKonDeferredInflows(2of3)
SometransacKonsinwhichtheresulKngitemshouldbereportedasadeferredinflowofresources(currentlyclassifiedasliabiliKes)–GrantsreceivedinadvanceofmeeKngKmingrequirement–Taxesreceivedinadvance–Deferredamountsfromrefundingofdebt(credits)–Proceedsfromsalesoffuturerevenues–Deferredgainfromsale-leaseback
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StatementofNetPosiKonDeferredInflows(3of3)
SometransacKonsinwhichtheresulKngitemshouldbereportedasadeferredinflowofresources(currentlyclassifiedasliabiliKes)–“Regulatory”credits(gainsorotherreducKons)–“Unavailable”revenueingovernmentalfunds–LoanoriginaKonfees(excludingpoints)–lessoraccounKng–Commitmentfees(acerexerciseofexpiraKon)
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DifferencefromFundStatements(1of2)
• Long-termassets– Receivables– CapitalAssets
• Liabili=es– Debt– CompensatedAbsences– ClaimsandJudgments– PensionBenefitObliga=on– OtherPostEmploymentBenefits(OPEB)
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DifferencefromFundStatements(2of2)
• Inventory(expensewhenusedratherthanwhenpurchased).Previouslyhadtheop=onofusingtheconsump=onmethodorthepurchasemethod,butnowwecanonlyusetheconsump=onmethod.
• Interestpayableonlong-termdebt.
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CapitalInfrastructureAssets
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DepreciaKon
• Thingstoconsiderinimplemen=ngdeprecia=on.– Depreciablelives– Deprecia=onmethods– Capitaliza=onthreshold– Inwhatdepartmentofthegovernmentdoestheassetbelong?
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DefiniKonofInfrastructure
• Infrastructure,definedas:– Long-livedcapitalassetsthatcanbepreservedforasignificantlygreaterperiodthanmostcapitalassets
– Normallysta=onaryitems– Examples:
◊ Roadsandbridges,dams◊ Waterandsewersystems
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InfrastructureAssets
• Repor=ngalterna=ves– Historicalcostbaseddeprecia=on– Modifiedapproach
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“Modified”Approach
• Nodeprecia=onisrequiredifthegovernmentdemonstratesthatitismaintainingqualifyinginfrastructureassetsapproximatelyatorabovethecondi=onlevelestablished.
• Condi=onassessmentsmustbeperformedatleasteverythreeyears.
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StatementofAcKviKes
• Netcostformat(expensesminusprogramrevenue–netcost)
• Expensesbyfunc=ons/programs• Revenuesby:
– Program(chargesforservicesandprogramspecificopera=ngandcapitalgrants)or
– General(i.e.taxesandothernonprogramrevenue)
• Special,extraordinaryitemsandtransfers
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Expenses
• Expensesarereportedbyfunc=on– Directexpenses–required– Indirectexpensesalloca=onpermiced
◊ Separatecolumnforindirectexpensesifallocated– Deprecia=on– Interest
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ProgramandGeneralRevenues
• Programrevenuesreducethenetcostofaprogram.– Chargesforservices– Programspecificgrantsandcontribu=ons
• Netcostisfinancedbygeneralrevenues.Allrevenuesaregeneralrevenuesunlesstheyarerequiredtobereportedasprogramrevenues.
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DifferencesfromFundStatements
• Recogni=onofrevenuesonaccrualbasis.– Propertytaxes–noavailabilitycriterion,recordedonfullaccrualbasisofaccoun=ng.
– Recogni=onofexpensesforlong-termliabili=es.◊ Compensatedabsences◊ Claimsandjudgments◊ Pensionbenefitobliga=on◊ OPEB
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GASB34RequirementsFundLevelStatements
• FundPresenta=ons– Majorfunds– Non-majorfundspresentedinasinglecolumnbycategory– Majorfundconceptdoesnotapplytofiduciaryfundsorinternalservicefunds
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MajorFundCriteria
• GeneralFundisalwaysamajorfund• Individualfundis:
– Atleast10percentofassetsincludingdeferredoullows,liabili=esincludingdeferredinflows,revenue,expenditures/expenses,(excludingextraordinaryitems)oftherelevantcategoryorfundtype
• Atleast5percentoftotalgovernmentalandenterprisefundscombined
• Otherfundsthataredeemedtobeimportantforseparatedisclosure
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GovernmentalFundStatements
• RequiredStatements:– BalanceSheet– StatementofRevenue,Expenditures,andChangesinFundBalances
– Characteris=csofgovernmentalfundstatements:◊ Currentfinancialresourcesmeasurementsfocus◊ Modifiedaccrual◊ Reconcilia=onrequiredtogovernment-widestatementsforbothstatements
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TreatmentofInternalServiceFunds
• Removethe‘doublingup”effectofinternalservicefundac=vity.
• Generally,assetsandliabili=esarereportedwithgovernmentalac=vi=es–unlessinternalservicefundsprimarilysupportbusiness-typeac=vi=es.
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ProprietaryFunds
• Economicresourcesmeasurementfocus• Accrualbasisofaccoun=ng• Enterpriseredefined
– Debtsecuredsolelybypledgeofnetrevenuesfromfeesorcharges
– Lawsorregula=onsrequirerecoveryofcost– Pricingpolicydesignedtorecovercost
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ProprietaryFundStatements
• ClassifiedStatementofNetPosi=on• StatementofRevenue,Expenses,andChangesinNet
Posi=on• StatementofCashFlows• Reconcilia=onrequiredforfinancialposi=onand
opera=ngstatements(ifnecessary)
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ProprietaryFundStatements
• StatementofNetPosi=on(previouslyNetAssets)– Classified–currentvs.longterm– Restrictedassetsmustbereportedassuch– Netposi=on
◊ Investedincapitalassets,netofrelateddebt◊ Restricted◊ Unrestricted
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ProprietaryFundStatements
• Opera=ngStatement– Dis=nguishbetweenopera=ngandnon-opera=ng– Capitalcontribu=onsandtransfersreportedseparately
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ProprietaryFundStatements
• CashFlow– Fourcategoriesofcashflows
◊ Opera=ng◊ Non-capitalfinancing◊ Capitalandrelatedfinancing◊ Inves=ng
Directmethodisrequiredforcashflows
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ComponentUnitPresentaKons
• Discretepresenta=oningovernment-widestatements• Majorcomponentunitrepor=ngchoices:
– Separatecolumnsinthegovernment-widestatements– Separatestatementsa+erfundpresenta=ons– Condensedinforma=oninthenotes
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RequiredSupplementaryInformaKon
• Budgetarycomparisonsforgeneralfundandmajorspecialrevenuefunds– Originalandfinalbudget– ActualonbudgetarybasisorGAAPbasis– Reconcilia=ontoGAAPbasisstatements– Whenapplicable–infrastructure-modifiedapproach
◊ Threemostrecentcondi=onassessments◊ Es=matedamounttomaintainandpreserveversusactualamountforthelastfiveyears
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MD&AManagementDiscussionandAnalysis
• TheMD&Aisasec=onofagovernment'sannualreportinwhichmanagementdiscussesnumerousaspectsofthecompany,bothpastandpresent.Amongotherthings,theMD&Aprovidesanoverviewofthepreviousyearofopera=onsandhowthegovernmentfaredinthat=meperiod.Managementwillusuallyalsotouchontheupcomingyear,outliningfuturegoalsandapproachestonewprojects.
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MD&A
• TheMD&Aisaveryimportantsec=onofanannualreport,especiallyforthoseanalyzingthefundamentals,whichincludemanagementandmanagementstyle.Althoughthissec=oncontainsusefulinforma=on,investorsshouldkeepinmindthatthesec=onisunaudited.
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MD&A
• MD&A’sshould:• enablereaderstoviewthegovernmentthroughthe
eyesofmanagement;• complementaswellassupplementfinancial
statements;• bereliable,thatis,complete,fairandbalanced,and
providingmaterialinforma=on—namely,informa=onthatcouldinfluenceareasonableinvestorinmakingadecisiontoinvestorcon=nuetoinvestinthegovernment;
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MD&A
• Haveaforward-lookingorienta=on;• focusonmanagement’sstrategyforgenera=ngvalue
forinvestorsover=me;• bewriceninplainlanguage,withcandorandwithout
exaggera=on,andembodythequali=esofunderstandability,relevance,comparabilityandconsistencyoverrepor=ngperiods.
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FinancialStatementDataAnalysis
• MD&Aistheonlyrequiredcomponentofthefinancialstatementsthathascompara=veinforma=on.Thesecompara=vesummariesorschedulesinclude:– NetPosi=ons– ChangesinNetPosi=ons– CapitalAssets– Long-termdebt
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FiscalHealthAnalysisforColoradoCounKesandMunicipaliKesRaKo1:CashtoLiabiliKesRaKo(CLR)
En=ty-WideUnrestrictedCashandInvestmentsEn=ty-WideCurrentLiabili=es
RaKo2:UnrestrictedFundBalanceRaKo(UFB)
GeneralFundUnrestrictedFundBalanceGeneralFundtotalExpenditures(NetofTransfers
RaKo3:DebtBurdenRaKo(DBR)
TotalGovernmentalRevenueofFund(s)PayingDebtTotalGovernmentalDebtPayments
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FiscalHealthAnalysisforColoradoCounKesandMunicipaliKesRaKo4:TaxRevenueperCapita(TRC)
TotalGovernmentalFundsTaxRevenuePopulaKon
RaKo5:ExpendituresperCapita(EPC)
GeneralFundTotalExpenditures(NetofTransfersPopulaKon
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FiscalHealthAnalysisforColoradoCounKesandMunicipaliKesRaKo6:OperaKngMarginRaKo(OMR)GeneralFundTotalRevenue–(GeneralfundTotalExpenditures,NetofTransfersGeneralFundTotalRevenue
• RaKo7:EnterpriseFundsNetPosiKon(EFNP)CurrentYearNetPosi=onoftheEnterpriseFundPriorYearNetPosi=onoftheEnterpriseFundhcp://www.leg.state.co.us/OSA/coauditor1.nsf/LocalGovPublic?openform
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CAFRPreparaKon
• DiscussionTopics– CAFRPrepara=on-overviewandcommonpilalls– CapitalAssets–presenta=onanddisclosureissuesandstrategies
– Long-TermDebt–presenta=onanddisclosureissuesandstrategies
– RevenueRecogni=onandDeferredRevenue–governmentalvs.government-wide
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CAFRPreparaKonCommonPiVallsinCAFRPresentaKon• Conver=ngfrommodifiedaccrualtofullaccrual
statements• Footnotesdonotagreewithwhatispresentedinthe
basicfinancialstatements• Implementa=onofnewpronouncementsandrelated
disclosures
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CAFRPreparaKonKeystoPreparingCAFR• Repor=nginforma=oninthefundstatementsunderthe
correctfunc=onalorac=vity– (i.e.interestexpenditures,debtprincipalpaymentsandcapitaloutlay)
• Preparingfootnotedisclosuresthat=eintothebasicfinancialstatementsandprovideenoughinforma=ontoagreetoreconcilingitems– (debtdisclosure,capitalassetsdisclosureandaccountsreceivabledisclosure)
• Reducethenumberofsubsidiaryschedules.Themoreschedulesandprepara=onworksheetsthatarecreated,thegreaterthelikelihoodofanerror
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CAFRPreparaKonKeystoPreparingCAFR
• Investedincapitalassets,netofrelateddebt– Itemstoexcludefromthecalcula=on
◊ Unexpendedbondproceeds.Bondsonlybecomecapital-relateddebt,andbondproceedsonlybecomecapitalassets,astheproceedsareexpendedforacapitalpurpose.
◊ *Bondissuancecosts.Unlikepremiumsanddiscounts,unamor=zedbondissuancecostsdonot"followthedebt"andareignoredforpurposesofthiscalcula=on.
◊ *Internalborrowings.Borrowingswithintheprimarygovernmentdonotqualifyforpurposesofthiscalcula=on.
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CAFRPreparaKonKeystoPreparingCAFR• Investedincapitalassets,netofrelateddebt(con=nued)
– Itemstoincludeinthecalcula=on◊ Intangiblecapitalassets.Thefactthatacapitalassetisintangibledoesnotmakeitanythelesscapital.
◊ Refundingbonds.Refundingbondsassumethecharacterofthedebttheyreplace.Accordingly,bondsusedtorefundcapital-relateddebtarethemselvesconsideredtobecapital-related.
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CAFRPreparaKonCapitalAssets
• Keyiscapitalassetfootnote• Typicalgovernmenthasnumerousassetsinconstruc=on
inprogressaccountanditisrecommendedthatgovernmentsconsideratransfercolumntoaccountforcompletedprojectsthatgetmovedfromnondepreciableassetstodepreciable
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CAFRPreparaKonCapitalAssets
• Capitaladdi=ons-Purchasedassetsversuscontributedassets– Purchasedassetsarefundexpendituresandtoreconciletofullaccrualbasis
needto“credit”expenditures– Ifcapitaloutlayreportedinthefundstatementsdoesnotagreetothe
purchasedcapitaladdi=onsneedtodeterminethoseitemsreportedundercapitaloutlayandwhatfunc=ontheybelongforrepor=ngonthestatementofac=vi=es
– Ifcapitaloutlayalreadyreportedwithinfunc=onalexpendituresinthefundstatementsneedtoremovetheappropriatecapitaladdi=onsfromthefunc=onalexpenditurestoreporttheaccrualbasedfunc=onalexpenses
– Contributedassetsarenotconsideredfundexpendituresorrevenuesandneedto“credit”appropriatecapitalcontribu=onrevenueac=vity
– Helpfultodis=nguishbetweenaddi=onsthatarecontributedversuspurchasedtoaidthereaderwhencomparingfundac=vi=es
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CAFRPreparaKonCapitalAssets
• Disposalofcapitalassets-Repor=ngandcalcula=nggain/loss– Governmentsrou=nelyreportdisposalsofcapitalassets.Thisac=vity
isreportedinthedele=oncolumnofthefootnoteanditisimportanttoproperlyexplaininthereconcilia=onwhattypeofac=vitythisrepresentedduringtheyear
– Disposalsthemselvesarenotreportedinthegovernmentfundstatements
– Cashproceedsreceivedarereportedinthefundstatementsasotherfinancingsource
– Government-widepresenta=onreportdifferenceofbookvalueofdisposalandproceedsreceivedfromsaleofcapitalassetsasagain/lossonsaleofassets.Thelossisreportedasafunc=onalexpensewithintheproperfunc=onalrela=vetotheassetdisposedofandthegainistypicallyreportedasageneralrevenue
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CAFRPreparaKonCapitalAssets
• Deprecia=on– Reconcilingamounttoagreetothefootnoteaddi=onfigure– Detailinfootnotetodisclosetheexpensebyfunc=on
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CAFRPreparaKonLong-TermLiabiliKes
• Agenda– Reviewdisclosurerequirements– Presenta=onsugges=ons– Inter-rela=onshipsandaccuracychecks
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CAFRPreparaKonLong-TermLiabiliKes
• CommonDisclosureRequirements(GASBCod.2300)– Shouldincludealllong-termliabili=es,includingcompensatedabsencesandclaimsandjudgments
– Tableofchanges– Amountduewithinoneyearofstatementdate– Whichgovernmentalfundstypicallyusedtoliquidateotherlong-termliabili=essuchascompensatedabsencesinprioryears
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CAFRPreparaKonLong-TermLiabiliKes
• CommonDisclosureRequirements(GASBCod.2300)– Debtservicerequirementstomaturity–principalandinterest(variableratedebtshoulduserateinplaceatyearendanddisclosevariableratestructure)
– Debtrefunding– Interestrates,maturitydates,subordinatefeatures(generallyaccepted)
– Pledgedassetsandrestric=vecovenants(SFASNo.5)
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CAFRPreparaKonLong-TermLiabiliKes
• ComponentUnitDisclosure(Cod.2300.115)– Uptoprofessionaljudgment– Basedoncomponentunit’ssignificancetototaldiscretelypresentedcomponentunitsandrela=onshiptoprimarygovernment
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CAFRPreparaKonLong-TermLiabiliKes
• OtherSpecialDisclosure/Repor=ng– Bond,taxorrevenuean=cipa=onnotes– Specialassessmentdebt– Demandbonds– Conduitdebt
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CAFRPreparaKonLong-TermLiabiliKes
• Presenta=onSugges=ons– Includetableofchangesatthebeginningofyourlong-termliabili=esfootnote
– Includealllongtermliabili=esinthesametable– Totaltheen=retableandreflectthatamountinyourreconcilia=on
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CAFRPreparaKonLong-TermLiabiliKes
• Inter-rela=onshipsandaccuracychecks– UsesubtotalsinthetablethatwillagreedirectlytotheSONPandGovernmentalFundsStatementofRevenue,ExpendituresandChangesinFundBalance:
◊ Endingamounts–currentandlongterm=SONP◊ Newdebtissued=StatementofRevenue◊ PremiumsordiscountsshouldbeseparateOtherFinancingSource/Use=StatementofRevenue
◊ Principalpayments=StatementofRevenue◊ Lossonrefunding–disclosureshouldstateamountofprincipalrefunded
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CAFRPreparaKonLong-TermLiabiliKes
• Inter-rela=onshipsandaccuracychecks– InternalServicefunddebt–eithershowseparatelyinfootnoteorinreconcilia=on,toagreetobalancesheet
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CAFRPreparaKonRevenueRecogniKonandDeferredRevenue
• Agenda– Reviewstandards–modifiedaccrualversusaccrual– Rela=onship–government-widevs.governmentalfunds– Rela=onshiptoreconcilia=ons–governmentalfundsandgovernment-widestatements
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CAFRPreparaKonRevenueRecogniKonandDeferredRevenue
• Standards–Modifiedaccrualbasis-GASBCodifica=on1600.106– Revenuesaretoberecognizedintheaccoun=ngperiodtheybecomebothmeasurableandavailabletofinanceexpendituresofthefiscalperiod
– Availablemeanscollec=blewithinthecurrentperiodorsoonenoughtherea+ertobeusedtopayliabili=esofthecurrentperiod
– Lengthof=meusedtodefineavailableshouldbedisclosedinthesummaryofsignificantaccoun=ngpolicies
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CAFRPreparaKonRevenueRecogniKonandDeferredRevenue
• Standards–AICPAAccoun=ngandAuditGuide–StateandLocalGovernments6.12– Notesthatmanygovernmentsusethepropertytaxstandardandaccruebasedoncashreceivedduringadefinednumberofdaysa+eryearend
– Manygovernmentsapplythis=meperiodapproachforalltypesofrevenuesandinallgovernmentalfunds
– Paragraph6.13–Differencesbetweenamountreportedasreceivablesandtheamountsrecognizedasrevenuesarereportedasdeferredinflows(aliability)(PriortoGASB63&GASB65wascalleddeferredrevenues)
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CAFRPreparaKonRevenueRecogniKonandDeferredRevenue• StandardsGenerally
– Measurabilityisusuallynottheproblem– Defining“available”istheproblem– Realkeytodefiningavailabilityiswhethersuchresourceswillbeusedtopayliabili=esofthecurrentperiod
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CAFRPreparaKonRevenueRecogniKonandDeferredRevenue
• Rela=onship–government-widevs.governmentalfunds– Asauditorshaveseentwocommonproblems:
◊ Measurabletransac=onisrecordedasrevenueinbothpresenta=ons,regardlessofwhencashwasreceived
◊ Measurabletransac=onisdeferredinbothpresenta=ons,eventhoughaccrualbasisaccoun=ngclearlyrequiresrevenuerecogni=on
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CAFRPreparaKonRevenueRecogniKonandDeferredRevenue
• Examples– Developmentfeestobepaidoveraperiodofseveralyears– Long-termnotesreceivable
• DisclosureExamples– Considerinclusionoffootnoteifextensivedifferencesexist
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GASB–“ALottoGetOurArmsAround”
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ExposureDracs/PreliminaryViews
• PreliminaryViews– Recogni=onofElementsofFinancialStatementsandMeasurementApproaches
– EconomicCondi=onRepor=ng:FinancialProjec=ons
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GASB65–ItemsPreviouslyReportedasAssetsandLiabiliKes• Objec=veofthisStatementistodeterminewhethercertainbalancescurrentlyreportedasassetsandliabili=esshouldcon=nuetobereportedassuchorinsteadshouldbereportedas:– Adeferredoullowsofresources,or– Anoullowofresources(expense/expenditure);
• Or– Adeferredinflowsofresources,or– Aninflowsofresources(revenue).– Effec=veforperiodsbeginninga+erDecember15,2012.– EarlyApplica=onisencouraged.
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ItemstobeReportedasDeferredOuVlows
• Transac=onsinwhichtheresul=ngitemshouldbeclassifiedasadeferredoullowofresources:– Resourcesadvancedtoanothergovernmentinrela=ontoagovernmentmandatednonexchangetransac=onoravoluntarynonexchangetransac=onwhen=merequirementsaretheonlyeligibilityrequirementsthathavenotbeenmetbytheothergovernment(paragraph19ofStatementNo.33,Accoun)ngandFinancialRepor)ngforNonexchangeTransac)ons).
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ItemstobeReportedasDeferredOuVlows
• Transac=onsinwhichtheresul=ngitemshouldbeclassifiedasadeferredoullowofresources:– Deferredlossresul=ngfromsale-leasebacktransac=ons(paragraph242ofStatement62).
– Netbalance(debit)ofdirectloanorigina=oncosts,includinganypor=onrelatedtopoints,formortgageloansheldforresalepriortothepointofsale(paragraph467ofStatement62).
– Feespaidtopermanentinvestorstoensuretheul=matesaleofloanspriortothepointofsale(paragraph469ofStatement62).
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ItemstobeReportedasanOuVlowofResources• Transac=onsinwhichtheresul=ngitemshouldberecognizedasanoullowofresources:– Acquisi=oncostsforinsuranceen==esandpublicen=tyriskpools(paragraphs28–30ofStatementNo.10,Accoun)ngandFinancialRepor)ngforRiskFinancingandRelatedInsuranceIssues,andparagraphs412–414ofStatement62).
– Ini=aldirectcostsincurredbythelessorforopera=ngleases(paragraph227ofStatement62).
– Debtissuancecosts(paragraph12ofStatementNo.7,AdvanceRefundingsResul)nginDefeasanceofDebt,andparagraph187ofStatement62).
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ItemstobeReportedasanOuVlowofResources• Transac=onsinwhichtheresul=ngitemshouldberecognizedasanoullowofresources:– Netbalance(debit)ofdirectloanorigina=oncosts,includinganypor=onrelatedtopoints,relatedtolendingac=vi=es(paragraph45ofStatement10andparagraph434ofStatement62).
– Feespaidrelatedtoapurchasedloanoragroupofloans(paragraph442ofStatement62).
– Netbalance(debit)ofdirectloanorigina=oncosts,includinganypor=onrelatedtopoints,formortgageloansheldforinvestment(paragraph467ofStatement62).
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ItemstobeReportedasanOuVlowofResources• Transac=onsinwhichtheresul=ngitemshouldberecognizedasanoullowofresources:– Netbalance(debit)ofdirectloanorigina=oncosts,includinganypor=onrelatedtopoints,relatedtolendingac=vi=es(paragraph45ofStatement10andparagraph434ofStatement62).
– Feespaidrelatedtoapurchasedloanoragroupofloans(paragraph442ofStatement62).
– Netbalance(debit)ofdirectloanorigina=oncosts,includinganypor=onrelatedtopoints,formortgageloansheldforinvestment(paragraph467ofStatement62).
– Feespaidtopermanentinvestorstoensuretheul=matesaleofloansa+ertheul=matesaleoccurs(paragraph469ofStatement62).
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ItemstobeReportedasDeferredInflows
• Transac=onsinwhichtheresul=ngitemshouldbeclassifiedasadeferredinflowofresources:– Resourcesreceivedinadvanceinrela=ontoanimposednonexchangetransac=on(paragraph18ofStatement33).
– Resourcesreceivedinadvanceinrela=ontoagovernment-mandatednonexchangetransac=onoravoluntarynonexchangetransac=onwhen=merequirementsaretheonlyeligibilityrequirementsthathavenotbeenmetbythereceivinggovernment(paragraph19ofStatement33).
– Deferredcreditamountsresul=ngfromtherefundingofdebt(paragraph5ofStatement23,andparagraph221ofStatement62).
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ItemstobeReportedasDeferredInflows
• Transac=onsinwhichtheresul=ngitemshouldbeclassifiedasadeferredinflowofresources:– Proceedsfromthesaleoffuturerevenues(paragraphs13–16ofStatement48).
– Unavailablerevenuerelatedtotheapplica=onofmodifiedaccrualaccoun=ng(StatementNo.6,Accoun)ngandFinancialRepor)ngforSpecialAssessments,andStatement33).
– Deferredgainresul=ngfromsale-leasebacktransac=ons(paragraph242ofStatement62).
– Netbalance(credit)ofloanorigina=onfees,excludinganypor=onrelatedtopoints,formortgageloansheldforresalepriortothepointofsale(paragraph467ofStatement62).
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ItemstobeReportedasDeferredInflows
• Transac=onsinwhichtheresul=ngitemshouldbereportedasadeferredinflowofresources:– Netbalance(credit)ofloanorigina=onfeesrelatedtopointsforlendingac=vi=esandmortgageloansheldforinvestment(paragraph45ofStatement10andparagraphs434and467ofStatement62).
– Resourcesgeneratedbycurrentratesintendedtorecovercoststhatareexpectedtobeincurredinthefuture(paragraph482ofStatement62).
– Gainsorotherreduc=onsofnetallowablecostsintendedtoreduceratesoverfutureperiods(paragraph482ofStatement62).
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ItemsreportedasInflowofResources
• Transac=onsinwhichtheresul=ngitemshouldberecognizedasaninflowofresources:– Netbalance(credit)ofloanorigina=onfees,excludinganypor=onrelatedtopoints,relatedtolendingac=vi=es(paragraph45ofStatement10andparagraph434ofStatement62).
– Commitmentfeesrealizeduponexerciseorexpira=onofthecommitment(paragraphs437and438ofStatement62).
– Commitmentfeeschargedforenteringintoanagreementthatobligatesthegovernmenttomakeoracquirealoanortosa=sfyanobliga=onoftheotherpartyunderaspecifiedcondi=onwhenexerciseisconsideredremote(paragraphs437and438ofStatement62).
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ItemsreportedasInflowofResources
• Transac=onsinwhichtheresul=ngitemshouldberecognizedasaninflowofresources:– Feesreceivedrelatedtoapurchasedloanoragroupofloans(paragraph442ofStatement62).
– Netbalance(credit)ofloanorigina=onfees,excludinganypor=onrelatedtopoints,formortgageloansheldforinvestment(paragraph467ofStatement62)
– Netbalance(credit)ofloanorigina=onfees,includinganypor=onrelatedtopoints,formortgageloansheldforresalea+erthesaleoccurs(paragraph467ofStatement62)
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ItemsreportedasInflowofResources
• Transac=onsinwhichtheresul=ngitemshouldberecognizedasaninflowofresources:– Feesthatarerealizeda+erthefundingofmortgageloanshasoccurredora+erthecommitmenttoguaranteethefundingofmortgageloansexpires(paragraph469ofStatement62)
– Feesrealizedwhenacommitmentisarrangeddirectlybetweenapermanentinvestorandaborrower(paragraph470ofStatement62)
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RevenueRecogniKoninGovernmentalFunds
• Revenuesandothergovernmentalfundfinancialresourcesshouldberecognizedintheaccoun=ngperiodinwhichtheybecomebothmeasurableandavailable(NCGAStatement1,paragraph62).
• Whenanassetisrecordedingovernmentalfundfinancialstatementsbuttherevenueisnotavailable,thegovernmentshouldreportadeferredinflowofresourcesunKlsuchKmeastherevenuebecomesavailable.
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OtherAreasAddressedbyGASB65
• Useofthetermdeferredshouldbelimitedtodeferredinflowsanddeferredoullowsofresources
• Majorfundcalcula=onguidancewillbeamended:– Useaggregateassets/deferredoullowsandaggregateliabili=es/deferredinflowsinthecalcula=on
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GASB67and68
• Accoun=ngandFinancialRepor=ngforPensions–anamendmenttoGASB27– Changestotheseagentemployerswouldbeasfollows:
◊ Recognizeanetpensionliability(accrualbasis)◊ Netpensionliability=employer’stotalpensionliabilitylesstheamountofplannetposi=onrestrictedforpensions(plannetposi=on),asoftheendoftheemployer’srepor=ngperiod.
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GASB67and68
• Accoun=ngandFinancialRepor=ngforPensions–anamendmenttoGASB27(con=nued)– Disclosurerequirements:
◊ Forthecurrentyear,changesinthenetpensionliability◊ Significantassump=onsusedtocalculatethetotalpensionliability,includingassump=onsusedincalcula=onthediscountamount
◊ Thedateoftheunderlyingactuarialvalua=on,informa=onaboutchangesofassump=onsandbenefitterms
◊ Thebasisfordeterminingtheemployercontribu=onstotheplan◊ Theindividualcomponentsofthecurrent-periodpensionexpense
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GASB67and68
• Accoun=ngandFinancialRepor=ngforPensions–anamendmenttoGASB27(con=nued)– Disclosurerequirements(con=nued):
◊ Explana=onsofchangesinthedeferredoullowsofresourcesanddeferredinflowsofresourcesrelatedtopensionsduringthecurrentperiod
◊ Descrip=onoftheplan◊ Numberofgovernmentspar=cipa=ngintheplan◊ Classesofemployeescovered◊ Numberofre=redemployeesreceivingbenefits◊ Numberofinac=veemployeesen=tledbutnotyetreceivingbenefits
◊ Numberofac=veemployees
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GASB67and68
• Accoun=ngandFinancialRepor=ngforPensions–anamendmenttoGASB27(con=nued)– RequiredSupplementaryInforma=on:
◊ Changesinthenetpensionliability◊ Informa=onaboutthecomponentsofthenetpensionliabilityandrelatedra=osasoftheemployer’syear-end• Totalpensionliability• Amountofplannetposi=on• Netpensionliability• Plannetposi=onas%ofthetotalpensionliability• Amountofcovered-employeepayroll• Netpensionliabilityasa%ofcovered-employeepayroll
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StatementNo.69
• GovernmentCombina.onsandDisposalsofGovernmentOpera.onsEffec=veDate:TheprovisionsofStatement69areeffec=veforgovernmentcombina=onsanddisposalsofgovernmentopera=onsoccurringinfinancialrepor=ngperiodsbeginninga+erDecember15,2013,andshouldbeappliedonaprospec=vebasis.
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Statement70
Accoun.ngandFinancialRepor.ngforNonexchangeFinancialGuaranteesEffec=veDate:TheprovisionsofStatement70areeffec=veforfinancialstatementsforrepor=ngbeginninga+erJune15,2013.
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StatementNo.71• PensionTransi.onforContribu.onsMadeSubsequenttotheMeasurementDate—anamendmentofGASBStatementNo.68Effec=veDate:TheprovisionsofthisStatementshouldbeappliedsimultaneouslywiththeprovisionsofStatement68.
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StatementNo.72
FairValueMeasurementandApplica.onEffec=veDate:TherequirementsofthisStatementareeffec=veforfinancialstatementsforrepor=ngperiodsbeginninga+erJune15,2015.
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StatementNo.73• Accoun.ngandFinancialRepor.ngforPensionsandRelatedAssetsThatAreNotwithintheScopeofGASBStatement68,andAmendmentstoCertainProvisionsofGASBStatements67and68Effec=veDate:TheprovisionsinStatement73areeffec=veforfiscalyearsbeginninga+erJune15,2015—exceptthoseprovisionsthataddressemployersandgovernmentalnonemployercontribu=ngen==esforpensionsthatarenotwithinthescopeofStatement68,whichareeffec=veforfiscalyearsbeginninga+erJune15,2016.Earlierapplica=onisencouraged.
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Statements74and75
• StatementNo.74FinancialRepor.ngforPostemploymentBenefitPlansOtherThanPensionPlansEffec=veDate:TheprovisionsinStatement74areeffec=veforfiscalyearsbeginninga+erJune15,2016.Earlierapplica=onisencouraged.
• StatementNo.75Accoun.ngandFinancialRepor.ngforPostemploymentBenefitsOtherThanPensionsEffec=veDate:TheprovisionsinStatement75areeffec=veforfiscalyearsbeginninga+erJune15,2017.Earlierapplica=onisencouraged.
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Statements76and77
• GASBStatementNo.76,TheHierarchyofGenerallyAcceptedAccoun.ngPrinciplesforStateandLocalGovernmentsEffec=veDate:TheprovisionsinStatement76areeffec=veforrepor=ngperiodsbeginninga+erJune15,2015.Earlierapplica=onisencouraged.
• GASBStatementNo.77,TaxAbatementDisclosuresEffec=veDate:TherequirementsofthisStatementareeffec=veforrepor=ngperiodsbeginninga+erDecember15,2015.Earlierapplica=onisencouraged.
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Statements78and79
• GASBStatementNo.78,PensionsProvidedthroughCertainMul.ple-EmployerDefinedBenefitPensionPlansEffec=veDate:TherequirementsofthisStatementareeffec=veforrepor=ngperiodsbeginninga+erDecember15,2015.
• GASBStatementNo.79,CertainExternalInvestmentPoolsandPoolPar.cipantsEffec=veDate:TherequirementsofthisStatementareeffec=veforrepor=ngperiodsbeginninga+erJune15,2015,exceptfortheprovisionsinparagraphs18,19,23–26,and40,whichareeffec=veforrepor=ngperiodsbeginninga+erDecember15,2015..
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Statements80and81
• GASBStatementNo.80,BlendingRequirementsforCertainComponentUnits—anamendmentofGASBStatementNo.14Effec=veDate:TherequirementsofthisStatementareeffec=veforrepor=ngperiodsbeginninga+erJune15,2016.Earlierapplica=onisencouraged.
• GASBStatementNo.81,IrrevocableSplit-InterestAgreementsEffec=veDate:TherequirementsofthisStatementareeffec=veforperiodsbeginninga+erDecember15,2016.Earlierapplica=onisencouraged.
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GASBStatementNo.82,
PensionIssues—anamendmentofGASBStatementsNo.67,No.68,andNo.73Effec=veDate:TherequirementsofthisStatementareeffec=veforrepor=ngperiodsbeginninga+erJune15,2016,exceptfortherequirementsofparagraph7inacircumstanceinwhichanemployer’spensionliabilityismeasuredasofadateotherthantheemployer’smostrecentfiscalyear-end.Inthatcircumstance,therequirementsofparagraph7areeffec=veforthatemployerinthefirstrepor=ngperiodinwhichthemeasurementdateofthepensionliabilityisonora+erJune15,2017.Earlierapplica=onisencouraged.
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IssuesUniquetoColoradoGovernments
• BudgetRepor=ngRequirements• TABOR
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BudgetReporKngRequirements
• CRS92-1-103requireseachlocalgovernmenttoadoptanannualbudget.Totheextentthatthefinancialac=vi=esofanylocalgovernmentarefullyreportedinthebudgetorbudgetsofaparentlocalgovernmentorgovernments,aseparatebudgetisnotrequired.Suchbudgetshallpresentacompletefinancialplanbyfundandbyspendingagencywithineachfundforthebudgetyear.
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TABOR
• TheTABORamendmentwasapprovedbyColoradovotersin1992.TABORplaceslimitsonrevenue,spending,anddebtwhichmaybeweakenedonlybytheapprovalofthevoters.
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TABOR
• TABORrequirestheestablishmentof“emergencyreserves…tousefordeclaredemergenciesonly”,amoun=ngto“3%ormoreofitsfiscalyearspendingexcludingbondeddebtservice”.[TABOR(5)]
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TABOR
• “Fiscalyearspendingmeansalldistrictexpendituresandreserveincreasesexcept,astoboth,refundsmadeinthecurrentornextfiscalyearorthosefromgi+s,federalfunds,collec=onsforanothergovernment,pensioncontribu=onsbyemployeesandpensionfundearnings,reservetransfersorexpenditures,damageawards,orpropertysales”.[TABOR(2)(e)]
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TABOR
• Theterm“reserve”inthedefini=onoffiscalyearspendingreferstofundbalances,and“reservetransfersorexpenditures”meansmoneyswhicharepassedfromonefundofcashorassetsheldasareservetoanothersuchfundormoneyswhicharedisbursedfromsuchfund.[C.R.S.24-77-102(12-14)]
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ManagementProcess
• To-Do’sforManagers– Plan– Perform– Evaluate– Communicate
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ManagementProcessOverviewofthePlanningFramework
• Goal/Vision:Toincreasethevalueofstakeholders’interestintheorganiza=on
• Mission:Fundamentalwayinwhichtheen=tywillachievethegoalofincreasingstakeholders’value
• StrategicObjecKves:Broad,long-termgoalsthatdeterminethefundamentalnatureanddirec=onofthebusinessandthatserveasaguidefordecisionmaking
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ManagementProcessOverviewofthePlanningFramework
• TacKcalObjecKves:Mid-termgoalsforposi=oningtheorganiza=ontoachieveitslong-termstrategies.
• OperaKngObjecKves:Short-termgoalsthatoutlineexpecta=onsforperformanceofday-to-dayopera=ons
• BusinessPlan:Acomprehensivestatementofhowtheorganiza=onwillachieveitsobjec=ves
• Budgets:Expressionsofthebusinessplaninfinancialterms.
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ManagementCycle
Plan
Perform
Evaluate
Communicate
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ManagerialReporKng
• ManagementorManagerialAccoun=ngcanuseinnova=veanalysesandpresenta=ontechniquestoenhancetheusefulnessofinforma=ontopeoplewithinthegovernmenten=ty.
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ManagementVs.FinancialAccounKng
ManagementAccounKng FinancialAccounKng
PrimaryUsers Managers,employees Lenders,governmental agencies,public
ReportFormat Flexible,drivenbyuser's BasedonGAAP
needs
PurposeofReports Provideinforma=onfor Reportonpast planning,control, performance
performancemeasurement &decisionmaking
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ManagementVs.FinancialAccounKngManagementAccounting FinancialAccounting
Natureof Objectiveandverifiablefor ObjectiveandInformation decisionmaking;more verifiable
subjectiveforplanning(reliesonestimates)
UnitsofMeasure Monetaryathistoricalor Monetaryathistoricalcurrentmarketor andcurrentmarketprojectedvalues;physical valuesmeasuresoftimeornumberofobjects
Frequencyof Preparedasneeded;mayor PreparedonaperiodicReports maynotbeonaperiodic basis
basis
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AnalysisforDecisionMaking
• Short-runDecisionAnalysisisthesystema=cexamina=onofanymanagementdecisionwhoseeffectswillbefeltoverthecourseofthenextyear.– Planning:
◊ Discovertheproblemorneed◊ Iden=fyallreasonablecoursesofac=onthatcansolvetheproblemormeettheneed
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ConKnue:Short-RunDecisionAnalysis
– Planning◊ Prepareathoroughanalysisofeachpossiblesolu=onandiden=fyitstotalcosts,savings,otherfinancialeffects,andanyqualita=vefactors.
◊ Selectthebestcourseofac=on
◊ Con=nuethroughthemanagementcycle.
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IncrementalAnalysisforShort-RunDecisions
• IrrelevantCostsandRevenuesarethosethatwillnotdifferbetweenthealterna=ves.
• DifferenKalCostsandRevenues(incrementalcosts)arethosethatchangebetweenalterna=ves.
• Firststepinincrementalanalysisistoeliminateanyirrelevantrevenuesorcosts.
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IncrementalAnalysisforShort-RunDecisions
• OpportunityCostsarethebenefitsthatareforfeitedorlostwhenonealterna=veischosenoveranother.
• Outsourcingistheuseofsuppliersoutsidetheorganiza=ontoperformservicesorproducegoodsthatcouldbeperformedorproducedinternally.
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• KeeporDropunprofitable(unproduc=ve,under-achieving)segments,divisions,orservices.
• SellorProcess-Furtherisadecisionaboutwhethertosellajointproductatthesplit-offpointorsellita+erfurtherprocessing.Ingovernment,thisisnotsomuchasselling,butprovidingtheservice.
IncrementalAnalysisforShort-RunDecisions
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CapitalInvestmentAnalysis
• Processofmakingdecisionsaboutcapitalinvestments.Consistsofiden=fyingtheneed,analyzingcoursesofac=ontomeetthatneed,preparingreportsformanagers,choosingthebestalterna=ve,andalloca=ngfundsamongcompe=ngneeds.
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MeasuresUsedinCapitalInvestmentAnalysis
• NetIncomeandNetCashInflowsareameanstomeasurethebenefitifinvolvescashreceipts.
• CostSavingsmeasurethebenefits,suchasreducedcosts,fromproposedcapitalinvestments.
• TimeValueofMoneyshouldbeusedindecisionmaking(PresentValueandFutureValue)
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MeasuresUsedinCapitalInvestmentAnalysis
• PaybackPeriodMethoddeterminestheminimum=meitwilltaketorecovertheini=alinvestment.
– Paybackperiod=CostofInvestment
– AnnualNetCashInflows
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HelpfulWebsites
• GovernmentalAccoun=ngStandardsBoardhcp://gasb.org/
• GovernmentFinanceOfficersAssocia=on hcp://www.gfoa.org/
• ColoradoGovernmentFinanceOfficerAssocia=onhcp://www.cgfoa.org/