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    Accounting For Governmental & Nonprofit Entities

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    Hibaaq Axmed
    This document discusses accounting and financial reporting standards for governmental and nonprofit entities. It outlines the key standards-setting bodies for different types of organizations, and explains the objectives of financial reporting for governments and nonprofits which focus on accountability, fiscal responsibility, and assessing economic resources and performance. The document also describes the minimum requirements for general purpose external financial reporting by governments, including government-wide and fund financial statements, as well as the typical sections of a comprehensive annual financial report.

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    Accounting For Governmental & Nonprofit Entities

    Uploaded by

    Hibaaq Axmed
    315 views24 pages
    This document discusses accounting and financial reporting standards for governmental and nonprofit entities. It outlines the key standards-setting bodies for different types of organizations, and explains the objectives of financial reporting for governments and nonprofits which focus on accountability, fiscal responsibility, and assessing economic resources and performance. The document also describes the minimum requirements for general purpose external financial reporting by governments, including government-wide and fund financial statements, as well as the typical sections of a comprehensive annual financial report.

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    This document discusses accounting and financial reporting standards for governmental and nonprofit entities. It outlines the key standards-setting bodies for different types of organizations, and explains the objectives of financial reporting for governments and nonprofits which focus on accountability, fiscal responsibility, and assessing economic resources and performance. The document also describes the minimum requirements for general purpose external financial reporting by governments, including government-wide and fund financial statements, as well as the typical sections of a comprehensive annual financial report.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    315 views24 pages

    Accounting For Governmental & Nonprofit Entities

    Uploaded by

    Hibaaq Axmed
    This document discusses accounting and financial reporting standards for governmental and nonprofit entities. It outlines the key standards-setting bodies for different types of organizations, and explains the objectives of financial reporting for governments and nonprofits which focus on accountability, fiscal responsibility, and assessing economic resources and performance. The document also describes the minimum requirements for general purpose external financial reporting by governments, including government-wide and fund financial statements, as well as the typical sections of a comprehensive annual financial report.

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    © All Rights Reserved
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    of 24

    JACQUELINE L.

    RECK
    SUZANNE L. LOWENSOHN

    Accounting for
    Governmental
    & Nonprofit
    Entities 17/e

    1-
    1
    C
    H

    Introduction to
    A
    Accounting and
    Financial Reporting for P
    Governmental and
    Not-for-Profit Entities
    T

    E 1-2
    Learning Objectives

    1. Identify and explain the characteristics that


    distinguish governmental and not-for-profit
    entities from for-profit entities
    2. Identify the authoritative bodies responsible for
    setting GAAP and financial reporting
    standards for all governmental and not-for-
    profit organizations
    3. Contrast and compare the objectives of
    financial reporting for state and local
    governments, the federal government, and not-for-
    profit organizations
    1-3
    Learning Objectives

    4. Explain the minimum requirements for general


    purpose external financial reporting of state and
    local governments and how they relate to
    comprehensive annual financial reports
    5. Identify and describe the required financial
    statements for the federal government, and not-for-
    profit organizations

    1-4
    Types of Governments

    • Federal government, state


    General purpose governments, cities,
    governments towns, townships, villages,
    provide a broad counties, boroughs,
    array of services.

    Special purpose • Independent school


    governments systems, public colleges
    usually provide and universities, public
    only a single or hospitals, fire protection
    just a few districts, and many others
    services.

    1-5
    Not-for-Profit Organizations

    Not-for-profit organizations are legally separate


    organizations which are usually exempt from
    federal, state, and local taxation.

    1-6
    Government & Not-for-Profit Accounting
    Practices Differ from Business

    Management has a
    special duty to be
    They have different accountable for
    purposes in how resources are
    society used in providing
    services

    They are financed by


    resource providers who do
    not expect benefits
    proportional to the
    resources they provide

    1-7
    Characteristics of Government
    Organizations

    Power ultimately rests in the hands of the people


    People delegate power to public officials through
    the election process
    Empowered by and accountable to a higher level
    government

    The organization has the power to tax

    1-8
    Sources of GAAP and
    Financial Reporting Standards

    • Business organizations
    FAS • Nongovernmental not-for-profits
    B
    • State and local governmental
    GASB organizations
    • Governmental not-for-profits

    • Federal government and its agencies


    FASA and departments
    B
    1-9
    Objectives of Financial Reporting

    “Accountability is the cornerstone of all financial


    reporting in government… Accountability requires
    governments to answer to the citizenry—to
    justify the raising of public resources and the
    purposes for which they are used.”
    -GASB Concepts Statement No. 1

    1-10
    Objectives of Financial Reporting

    Interperiod equity is a government’s obligation to


    disclose whether current-year revenues were
    sufficient to pay for current-year benefits—or will
    future taxpayers be required to pay for them
    instead?

    1-11
    Objectives of Financial Reporting for
    State and Local Governments

    Governmental financial reports are


    used primarily to
    Compare Assist in
    actual Assess determining
    financial financial compliance Assist in
    results with conditions with finance- evaluating
    legally and results of related efficiency and
    adopted operations laws, rules effectiveness
    budget and
    regulations

    1-12
    Objectives of Financial Reporting for
    Not-for-Profit (NFP) Organizations

    NFP financial reporting should provide


    information useful in
    Assessing
    Assessing Assessing economic
    Making resources,
    services and management
    resource obligations,
    the ability to stewardship
    allocation net resources,
    provide and
    services performance and changes
    decisions in them

    1-13
    Minimum Requirements for General
    Purpose External Financial Reporting

    Management’s discussion and analysis

    Government-wide Fund financial


    financial statements statements

    Notes to the financial statements

    Required supplementary information


    (other than MD&A)

    1-14
    Government Financial Statements

    There are two categories of basic government


    financial statements:

    Government-wide financial statements, which


    provide an aggregated overview of a government’s
    net position and change in net position and

    Fund financial statements, which provide more


    detailed financial information about a government

    1-15
    Government-wide Financial
    Statements

    Assist in assessing operational accountability—


    whether government has used its resources efficiently
    and effectively in meeting service objectives.

    Focus on flow of economic resources

    Use the accrual basis of accounting, like business


    organizations

    1-16
    Fund Financial Statements

    For now, think of a fund as a separate set of accounts


    used to keep track of resources segregated for a
    particular purpose – more detail on funds is in Chapter 2
    Fund Financial Statements

    Assist in assessing fiscal accountability—whether


    the government raised and spent financial resources
    in accordance with budgetary, legal, and regulatory
    constraints
    Focus on short-term flow of current financial
    resources
    Use the modified accrual basis—revenues
    recognized when measurable and available for
    spending; expenditures recognized when an
    obligation is incurred that will be paid from currently
    available financial resources
    1-18
    Fund Financial Statements

    Other fund categories (see Chapter 2):


    • Proprietary funds report on business-like
    activities of the government
    • Fiduciary funds report on fiduciary (trust and
    agency) activities of the government
    • Both categories follow accounting principles
    similar to businesses

    1-19
    Comprehensive Annual Financial Report
    (CAFR)

    A Comprehensive Annual Financial Report


    (CAFR) provides more detail than the minimum
    requirements for general purpose financial reporting

    While not required to prepare a CAFR, most


    governments do so

    CAFR is prepared in conformity with GASB


    standards
    1-20
    Comprehensive Annual Financial Report
    (CAFR)

    A CAFR prepared according to GASB


    standards should contain three sections.

    Introductory Section

    Financial Section

    Statistical Section

    1-21
    CAFR - Introductory Section

    Title page

    Contents page

    Letter of transmittal

    Other (as desired by management)

    1-22
    CAFR - Financial Section

    The financial section should contain sufficient


    information to disclose fully and present fairly the
    financial position and results of financial operations
    during the fiscal year. Items included in the financial
    section are:
     Auditor’s report
     Management’s discussion and analysis (MD&A)
     Basic financial statements (and notes thereto)
     Required supplementary information (RSI)(other
    than MD&A)
     Combining and individual fund statements and
    schedules 1-23
    CAFR - Statistical Section

    The statistical section typically presents tables and


    charts showing demographic and economic data,
    financial trends, fiscal capacity, and operating
    information of the government in the detail needed by
    readers who are more than casually interested in the
    activities of the government.

    1-24

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