2012 GovernmentalAccountingAuditinga
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- (GFOA, 2012) ⇒ Government Finance Officers Association. (2012). “Governmental Accounting, Auditing, and Financial Reporting." Government Finance Officers Association. ISBN:9780891252757
Subject Headings: Governmental Accounting, Governmental Auditing, Governmental Financial Reporting.
Notes
- It is known as The Blue Book.
- It can be accompanied by a GAFFR Supplemental Book.
Cited By
Table of Contents
PART 1: BACKGROUND AND FRAMEWORK
Section A: Basic Background
1. Accounting, Financial Reporting, and the Financial Statement Audit: An Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Financial reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Internal financial reporting . . . . . . . . . . . . . . . . . . . . . . . . 2 Special purpose external financial reporting . . . . . . . . . . . . . . 3 General purpose external financial reporting. . . . . . . . . . . . . . 3 Display. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Supporting information . . . . . . . . . . . . . . . . . . . . . . . 6 Essential characteristics of accounting data . . . . . . . . . . . . 6 The financial statement audit . . . . . . . . . . . . . . . . . . . . . . . . . 7 Chapter in brief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2. The Government Environment and Its Impact on Accounting and Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 The structure of state and local government . . . . . . . . . . . . . . . . 13 Key environmental differences . . . . . . . . . . . . . . . . . . . . . . . 14 Profit motive v. service motive . . . . . . . . . . . . . . . . . . . . . 14 Return on investment v. stewardship . . . . . . . . . . . . . . . . . 14 Appropriated budget v. financial plan. . . . . . . . . . . . . . . . . 15 Impact of environmental differences . . . . . . . . . . . . . . . . . . . . 15 The use of more than one measurement focus . . . . . . . . . . . . 15 Fund accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Budgetary reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Chapter in brief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3. Sources of Governmental GAAP . . . . . . . . . . . . . . . . . . . . . . . 21 The nature and purpose of GAAP. . . . . . . . . . . . . . . . . . . . . . 21 The legal authority to set financial reporting standards. . . . . . . . . . 22 The development of GAAP. . . . . . . . . . . . . . . . . . . . . . . . . . 23 The structural framework for standard setting. . . . . . . . . . . . . . . 25 Due process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 The GAAP hierarchy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Defining a state or local government . . . . . . . . . . . . . . . . . . . . 30 Original pronouncements v. codification . . . . . . . . . . . . . . . . . . 32 Chapter in brief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Section B: The Governmental Financial Reporting Model
4. Funds, Fund Types, and Interfund Activity . . . . . . . . . . . . . . . . . 37 Nature and purpose of fund accounting . . . . . . . . . . . . . . . . . . 37 Number of Funds principle . . . . . . . . . . . . . . . . . . . . . . . . . 38 Fund categories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Fund types . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Governmental funds . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Proprietary funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Fiduciary funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Interfund activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Reciprocal interfund activity . . . . . . . . . . . . . . . . . . . . . . 49 Nonreciprocal interfund activity . . . . . . . . . . . . . . . . . . . . 51 Chapter in brief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
5. Government-wide Financial Reporting. . . . . . . . . . . . . . . . . . . . 61 Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 The relationship between fund financial statements and government-wide financial statements . . . . . . . . . . . . . . . . . 62 From funds to activities . . . . . . . . . . . . . . . . . . . . . . . . . 62 From one measurement focus and basis of accounting to another . 63 From aggregation to consolidation . . . . . . . . . . . . . . . . . . . 64 Focus on direct cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Chapter in brief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
6. The Primary Government and Its Component Units . . . . . . . . . . . . 73 Overview of the financial reporting entity . . . . . . . . . . . . . . . . . 73 The primary government. . . . . . . . . . . . . . . . . . . . . . . . . . . 73 Identifying component units . . . . . . . . . . . . . . . . . . . . . . . . . 74 Fiscal dependence (as evidence of financial accountability) . . . . . 75 Board appointment (as evidence of financial accountability) . . . . 76 Misleading to exclude . . . . . . . . . . . . . . . . . . . . . . . . . . 78 Use of fiduciary funds for organizations that do not qualify as component units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 Potential for dual inclusion. . . . . . . . . . . . . . . . . . . . . . . . . . 79 Presenting component units . . . . . . . . . . . . . . . . . . . . . . . . . 79 Blended component units . . . . . . . . . . . . . . . . . . . . . . . . 80 Discretely presented component units . . . . . . . . . . . . . . . . . 82 Component units with different fiscal year ends. . . . . . . . . . . . . . 86 Transactions v. interfund activity . . . . . . . . . . . . . . . . . . . . . . 86 Separate reporting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 Chapter in brief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 Section C: Basic Recognition Principles
7. Measurement Focus and Basis of Accounting . . . . . . . . . . . . . . . . 95 Measurement focus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 Statement of financial position . . . . . . . . . . . . . . . . . . . . . 96 Statement of resource flows . . . . . . . . . . . . . . . . . . . . . . . 96 Basis of accounting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 Application to specific sets of financial statements . . . . . . . . . . . . 101 Chapter in brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
8. Categories of Transactions and Events and Their Recognition . . . . . 109 Exchange and exchange-like transactions . . . . . . . . . . . . . . . . . 109 Nonexchange transactions . . . . . . . . . . . . . . . . . . . . . . . . . 110 Derived tax revenues . . . . . . . . . . . . . . . . . . . . . . . . . . 110 Imposed nonexchange revenues. . . . . . . . . . . . . . . . . . . . 111 Government-mandated nonexchange transactions . . . . . . . . . 112 Voluntary nonexchange transactions . . . . . . . . . . . . . . . . . 113 Provider reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 Extraordinary items and special items. . . . . . . . . . . . . . . . . . . 114 Direct changes to net position . . . . . . . . . . . . . . . . . . . . . . . 115 Chapter in brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
PART 2: FUND ACCOUNTING AND THE BASIC FINANCIAL STATEMENTS
Section A: Governmental Funds
9. Revenue Recognition in Governmental Funds. . . . . . . . . . . . . . . 123 Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123 General application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124 Availability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124 Refunds and uncollectibles. . . . . . . . . . . . . . . . . . . . . . . 126 Initial journal entries . . . . . . . . . . . . . . . . . . . . . . . . . . 127 Prepayments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128 Application to miscellaneous revenues. . . . . . . . . . . . . . . . 128 Specific applications to derived tax revenues . . . . . . . . . . . . . . . 128 Sales taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128 Income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 Specific applications to imposed nonexchange revenues . . . . . . . . 129 Property taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
and forfeitures . . . . . . . . . . . . . . . . . . . . . . . . . . 130 Escheat property . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130 Specific applications to government-mandated nonexchange transactions and voluntary nonexchange transactions . . . . . . . . 130 Intergovernmental revenues. . . . . . . . . . . . . . . . . . . . . . 131 Payments in lieu of taxes (PILOTs) . . . . . . . . . . . . . . . . . . 132 Pass-through grants. . . . . . . . . . . . . . . . . . . . . . . . . . . 132 “On-behalf” payments of salaries and benefits . . . . . . . . . . . 132 Federal “food stamp” program . . . . . . . . . . . . . . . . . . . . 132 Contributions of agricultural commodities to school lunch programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 Endowments and similar arrangements . . . . . . . . . . . . . . . 133 Receipt of donated capital assets . . . . . . . . . . . . . . . . . . . 133 Specific applications to exchange and exchange-like transactions . . . 133 Investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 Special assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . 134 Lease revenues (capital leases). . . . . . . . . . . . . . . . . . . . . 134 Research grants that result in the transfer of rights to the grantor . 134 Chapter in brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
10. Expenditure Recognition in Governmental Funds. . . . . . . . . . . . . 143 Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143 Basic rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144 Exceptions to the basic rule . . . . . . . . . . . . . . . . . . . . . . . . . 144 Exception for debt service . . . . . . . . . . . . . . . . . . . . . . . 144 Exception for certain specified accrued liabilities . . . . . . . . . . 146 Exception for pensions and OPEB. . . . . . . . . . . . . . . . . . . 147 Exception for operating leases with scheduled rent increases . . . 147 Exception for inventories of supplies . . . . . . . . . . . . . . . . . 148 Exception for prepaids . . . . . . . . . . . . . . . . . . . . . . . . . 149 Chapter in brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152
11. Other Financing Sources and Uses. . . . . . . . . . . . . . . . . . . . . . 155 Nature and purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155 Other financing sources . . . . . . . . . . . . . . . . . . . . . . . . . . . 155 Issuance of long-term debt (face amount and premium) . . . . . . 156 The inception of a capital lease . . . . . . . . . . . . . . . . . . . . 158 Debt service on demand bonds reported as fund liabilities . . . . 159 Sales of capital assets . . . . . . . . . . . . . . . . . . . . . . . . . . 160 Insurance recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . 160 Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161 Other financing uses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161 Original issue discount on debt . . . . . . . . . . . . . . . . . . . . 162 Payments to advance refunding escrow agent. . . . . . . . . . . . 162 Reclassification of demand bonds as fund liabilities . . . . . . . . 162 Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162 Chapter in brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166
12. Asset and Liability Recognition and Measurement in Governmental Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169 Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169 Governmental fund assets . . . . . . . . . . . . . . . . . . . . . . . . . 169 Receivable for property and similar ad valorem taxes . . . . . . . 170 Receivable for debt proceeds . . . . . . . . . . . . . . . . . . . . . 170 Receivable for a guaranteed deficit . . . . . . . . . . . . . . . . . . 170 Receivable for unallowable costs . . . . . . . . . . . . . . . . . . . 171 Pending contribution to an endowment (not a receivable) . . . . . 171 Receivable for an operating lease with scheduled rent increases . 171 Inventories of supplies . . . . . . . . . . . . . . . . . . . . . . . . . 172 Capitalization contributions to public-entity risk pools. . . . . . . 172 Investments in joint ventures . . . . . . . . . . . . . . . . . . . . . 173 Assets acquired for sale . . . . . . . . . . . . . . . . . . . . . . . . 173 Governmental fund liabilities. . . . . . . . . . . . . . . . . . . . . . . . 174 Purchased interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 174 Refundable portion of income taxes and escheat property . . . . . 174 Anticipation notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 175 Obligations within the primary government. . . . . . . . . . . . . 175 Compensated absences. . . . . . . . . . . . . . . . . . . . . . . . . 175 Termination benefits . . . . . . . . . . . . . . . . . . . . . . . . . . 175 Postemployment benefits . . . . . . . . . . . . . . . . . . . . . . . 176 Claims and judgments . . . . . . . . . . . . . . . . . . . . . . . . . 176 Landfills and pollution remediation . . . . . . . . . . . . . . . . . 176 Noncancelable operating leases with scheduled rent increases . . 177 Chapter in brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180
13. Governmental Fund Financial Statements . . . . . . . . . . . . . . . . . 183 Focus on major funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183 Categorization as a major fund based on relative size . . . . . . . 184 Categorization as a major fund based on other qualitative factors. 186 Presentation of major and nonmajor funds. . . . . . . . . . . . . . 188 Basic financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . 188 Balance sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189 Statement of revenues, expenditures, and changes in fund balances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194 Budgetary comparison statement . . . . . . . . . . . . . . . . . . . 196 Chapter in brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201 Section B: Proprietary Funds
14. Enterprise Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205 Interest capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205 Private sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205 Public sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206 Capital asset impairments. . . . . . . . . . . . . . . . . . . . . . . . . . 207 Private sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207 Public sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207 Refundings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208 Private sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208 Public sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208 Compensated absences . . . . . . . . . . . . . . . . . . . . . . . . . . . 209 Private sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209 Public sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209 Postemployment benefits . . . . . . . . . . . . . . . . . . . . . . . . . . 209 Private sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209 Public sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209 Cash flows reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210 Private sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210 Public sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210 Segment reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211 Private sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211 Public sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211 Changes in net position . . . . . . . . . . . . . . . . . . . . . . . . . . . 211 Private sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211 Public sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211 Categories of net position . . . . . . . . . . . . . . . . . . . . . . . . . . 212 Private sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212 Public sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212 Transactions unique to the public sector. . . . . . . . . . . . . . . . . . 212 Connection fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212 Impact/developer fees . . . . . . . . . . . . . . . . . . . . . . . . . 212 Regulated industries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214 Chapter in brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217
15. Internal Service Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221 Cost-reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221 Identity of customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223 Interest capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224 Chapter in brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226
16. Proprietary Fund Financial Statements . . . . . . . . . . . . . . . . . . . 229 Statement of net position . . . . . . . . . . . . . . . . . . . . . . . . . . 229 Statement of revenues, expenses, and changes in net position . . . . . 235 Statement of cash flows . . . . . . . . . . . . . . . . . . . . . . . . . . . 236 Chapter in brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 245 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 247 Section C: Fiduciary Funds
17. Fiduciary Fund Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . 251 General considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . 251 The proper use of fiduciary funds. . . . . . . . . . . . . . . . . . . 251 The government as trustee v. the government as agent . . . . . . . 252 Liabilities v. net assets . . . . . . . . . . . . . . . . . . . . . . . . . 252 viii GOVERNMENTAL ACCOUNTING, AUDITING, AND FINANCIAL REPORTING Practical applications . . . . . . . . . . . . . . . . . . . . . . . . . . . . 253 Private-purpose trust funds . . . . . . . . . . . . . . . . . . . . . . 253 Pension (and other employee benefit) trust funds. . . . . . . . . . 254 Investment trust funds . . . . . . . . . . . . . . . . . . . . . . . . . 254 Agency funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255 Chapter in brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 257 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 258
18. Fiduciary Fund Financial Statements . . . . . . . . . . . . . . . . . . . . 261 General formatting issues . . . . . . . . . . . . . . . . . . . . . . . . . . 261 Statement of fiduciary net position. . . . . . . . . . . . . . . . . . . . . 262 Statement of changes in fiduciary net position . . . . . . . . . . . . . . 263 Chapter in brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 265 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 266 Section D: Government-wide Financial Statements
19. Converting and Consolidating Fund Data . . . . . . . . . . . . . . . . . 269 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 269 Conversion of governmental fund data . . . . . . . . . . . . . . . . . . 269 Adjustments for measurement focus – statement of financial position (overview) . . . . . . . . . . . . . . . . . . . . . . . . . 270 Adjustments for measurement focus – statement of resource flows (overview). . . . . . . . . . . . . . . . . . . . . . . . . . . 270 Adjustments worksheet . . . . . . . . . . . . . . . . . . . . . . . . 271 Worksheet adjustments for measurement focus . . . . . . . . . . . 272 Worksheet adjustments for basis of accounting . . . . . . . . . . . 278 The effect of worksheet adjustments on the general ledger. . . . . 283 Consolidation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283 Consolidation of internal service funds. . . . . . . . . . . . . . . . 283 Intra-activity balances . . . . . . . . . . . . . . . . . . . . . . . . . 285 Intra-activity transfers . . . . . . . . . . . . . . . . . . . . . . . . . 286 (Dis)allocation – governmental activities . . . . . . . . . . . . . . . . . 287 Disallocation of indirect costs charged to functions reported as governmental activities . . . . . . . . . . . . . . . . . . . . . 287 Allocation of direct costs associated with functions reported as governmental activities . . . . . . . . . . . . . . . . . . . . . 287 Chapter in brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 289 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 293
20. Government-wide Financial Statements . . . . . . . . . . . . . . . . . . 295 Scope of reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 295 Government-wide statement of net position . . . . . . . . . . . . . . . 296 Government-wide statement of activities . . . . . . . . . . . . . . . . . 305 Chapter in brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 317 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320
Section E: Disclosure
21. Summary of Significant Accounting Policies. . . . . . . . . . . . . . . . 323 Description of the government-wide financial statements (exclusion of fiduciary activities and similar component units) . . . . . . . . . 324 A brief description of the component units of the financial reporting entity and their relationships to the primary government . . . 324 Basis of presentation – government-wide financial statements . . . . . 325 Basis of presentation – fund financial statements. . . . . . . . . . . . . 327 Basis of accounting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 329 Budgetary data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 329 Assets, liabilities, deferred outflows/inflows of resources, and net position/fund balance described in the order of their appearance in the statements of net position/balance sheet . . . . . 331 Revenues, expenditures/expense. . . . . . . . . . . . . . . . . . . . . . 336 Chapter in brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 342
22. Detailed Note Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . 345 Summary of significant accounting policies. . . . . . . . . . . . . . . . 346 Details of reconciliation . . . . . . . . . . . . . . . . . . . . . . . . . . . 346 Stewardship, compliance, and accountability. . . . . . . . . . . . . . . 347 Violations of legal or contractual provisions . . . . . . . . . . . . . 347 Deficit in individual funds . . . . . . . . . . . . . . . . . . . . . . . 348 Accounting changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 348 Prior period adjustments. . . . . . . . . . . . . . . . . . . . . . . . 348 Changes in accounting principles . . . . . . . . . . . . . . . . . . . 348 Changes in estimate. . . . . . . . . . . . . . . . . . . . . . . . . . . 348 Changes in entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 348 Bankruptcies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 349 Detailed notes on all activities and funds . . . . . . . . . . . . . . . . . 349 Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 349 Cash deposits with financial institutions . . . . . . . . . . . . 349 Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 351 Derivative instruments . . . . . . . . . . . . . . . . . . . . . . 361 Reverse repurchase agreements . . . . . . . . . . . . . . . . . 364 Securities lending transactions . . . . . . . . . . . . . . . . . . 365 Receivable balances . . . . . . . . . . . . . . . . . . . . . . . . 366 Capital assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 366 Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 366 Impairments and insurance recoveries . . . . . . . . . . . . . 367 Sponsor disclosures for external investment pools . . . . . . . 367 Lease receivables. . . . . . . . . . . . . . . . . . . . . . . . . . 367 Right to service mortgage loans . . . . . . . . . . . . . . . . . 368 Asset valuation allowances . . . . . . . . . . . . . . . . . . . . 368 Deferred outflows of resources . . . . . . . . . . . . . . . . . . . . 368 Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 368 Payable balances . . . . . . . . . . . . . . . . . . . . . . . . . . 368 Pension plan obligations and postemployment benefits other than pension benefits . . . 368 Termination benefits. . . . . . . . . . . . . . . . . . . . . . . . 372 Construction and other significant commitments . . . . . . . 372 Claims and judgments. . . . . . . . . . . . . . . . . . . . . . . 372 Lease obligations (capital and operating) . . . . . . . . . . . . 373 Short-term debt and liquidity. . . . . . . . . . . . . . . . . . . 374 Long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . 375 Landfill closure and postclosure care . . . . . . . . . . . . . . 379 Pollution remediation obligations . . . . . . . . . . . . . . . . 379 Deferred inflows of resources . . . . . . . . . . . . . . . . . . . . . 380 Net position/fund balance . . . . . . . . . . . . . . . . . . . . . . . 380 Net position. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 380 Fund balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 380 Interfund receivables and payables and interfund eliminations . . 381 Revenues and expenditures/expenses . . . . . . . . . . . . . . . . 381 Discounts and allowances. . . . . . . . . . . . . . . . . . . . . 381 Interest expense included in direct expense. . . . . . . . . . . 381 Future revenues that have been sold. . . . . . . . . . . . . . . 382 On-behalf payments for fringe benefits and salaries . . . . . . 382 Transactions that would be reported as special items had they been within the control of management . . . . . . . . 382 Significant transactions involving major discretely presented component units . . . . . . . . . . . . . . . . . . 382 Transactions not reported because not measurable. . . . . . . 382 Foreign currency transactions . . . . . . . . . . . . . . . . . . 382 Nonmonetary transactions . . . . . . . . . . . . . . . . . . . . 382 Retail land sales . . . . . . . . . . . . . . . . . . . . . . . . . . 383 Contracts to perform research and development . . . . . . . . 383 Service concession arrangements . . . . . . . . . . . . . . . . . . . 383 Donor-restricted endowment disclosures . . . . . . . . . . . . . . 383 Interfund transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . 384 Segment information for enterprise funds. . . . . . . . . . . . . . . . . 384 Individual major discretely presented component unit disclosures . . 386 The nature of the primary government’s accountability for related organizations . . . 387 Joint ventures and jointly governed organizations . . . . . . . . . . . . 387 Related-party transactions . . . . . . . . . . . . . . . . . . . . . . . . . 388 Summary disclosure of significant contingencies. . . . . . . . . . . . . 388 Loss contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . 388 Contingent liability for debt . . . . . . . . . . . . . . . . . . . . . . 389 Gain contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . 389 Significant effects of subsequent events . . . . . . . . . . . . . . . . . . 389 Going-concern considerations . . . . . . . . . . . . . . . . . . . . . 390 Chapter in brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 391 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 394
PART 3: SPECIALIZED ACCOUNTING APPLICATIONS
23. Pension Benefits, Other Postemployment Benefits (OPEB), and Termination Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 397 Pensions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 397 Types of pension plans . . . . . . . . . . . . . . . . . . . . . . . . . 398 Pension expense v. pension expenditures. . . . . . . . . . . . . . . . 399 Actuarial valuations . . . . . . . . . . . . . . . . . . . . . . . . . . 403 Pension-related debt . . . . . . . . . . . . . . . . . . . . . . . . . . 407 Pension obligation bonds. . . . . . . . . . . . . . . . . . . . . . . . 407 Special funding situations . . . . . . . . . . . . . . . . . . . . . . . 407 Recipients of on-behalf benefits . . . . . . . . . . . . . . . . . . . . 408 OPEB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 408 Substantive plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 408 Implicit rate subsidy . . . . . . . . . . . . . . . . . . . . . . . . . . 408 Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 410 Actuarial valuations . . . . . . . . . . . . . . . . . . . . . . . . . . 411 Termination benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 413 Distinguishing termination benefits from unemployment benefits 413 Cost measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . 413 Accrual recognition . . . . . . . . . . . . . . . . . . . . . . . . . . . 414 Pending changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 415 Single-employer and agent multiple-employer defined benefit plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 415 Cost-sharing defined benefit plans . . . . . . . . . . . . . . . . . . 419 Special funding situations . . . . . . . . . . . . . . . . . . . . . . . 421 Chapter in brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 423 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 427
24. Budgetary Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 429 Nature and purpose of budgetary integration . . . . . . . . . . . . . . 429 Budgetary accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 430 Budgetary journal entries . . . . . . . . . . . . . . . . . . . . . . . . . . 432 Chapter in brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 435 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 437
25. Capital Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 439 Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 439 Basic accounting and financial reporting . . . . . . . . . . . . . . . . . 439 Major asset classes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 442 Capitalizable costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 444 Improvements v. repairs . . . . . . . . . . . . . . . . . . . . . . . . . . 450 Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 451 Impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 452 Depreciation/amortization . . . . . . . . . . . . . . . . . . . . . . . . . 458 Replacements and retirements . . . . . . . . . . . . . . . . . . . . . . . 460 Chapter in brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 462 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 465
26. Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 469 Basic accounting for debt . . . . . . . . . . . . . . . . . . . . . . . . . . 469 Deep discount debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 470 Refundings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 471 Demand bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 474 Special assessment debt . . . . . . . . . . . . . . . . . . . . . . . . . . . 476 Conduit debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 478 Long-term borrowings within the primary government . . . . . . . . 479 Proprietary fund debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 479 Rebatable arbitrage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 480 Chapter in brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 481 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 483
27. Derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 485 Definition and use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 485 Essential characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . 486 Hedging. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 488 Reporting derivatives in the statement of financial position . . . . . . 489 Reporting derivatives in the statement of resource flows . . . . . . . . 489 Embedded derivatives. . . . . . . . . . . . . . . . . . . . . . . . . . . . 495 Chapter in brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 496 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 498
28. Landfill Closure and Postclosure Care Costs and Pollution Remediation Obligations . . . . . . . . . . . . . . . . . . . . . . . . . 501 Landfill closure and postclosure care costs . . . . . . . . . . . . . . . . 501 Pollution remediation obligations . . . . . . . . . . . . . . . . . . . . . 505 Chapter in brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 512 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 514
29. Risk Financing and Insurance . . . . . . . . . . . . . . . . . . . . . . . . 517 Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 517 Basic accounting for claims and judgments . . . . . . . . . . . . . . . . 517 Risk financing activities in fund financial statements . . . . . . . . . . 519 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 520 Participation in a public-entity risk pool. . . . . . . . . . . . . . . . . . 522 Chapter in brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 524 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 526
30. Other Specialized Applications . . . . . . . . . . . . . . . . . . . . . . . 529 Compensated absences . . . . . . . . . . . . . . . . . . . . . . . . . . . 529 Grants (recipient perspective) . . . . . . . . . . . . . . . . . . . . . . . 533 Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 537 Lease accounting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 543 Special assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 545 Sales and pledges of receivables . . . . . . . . . . . . . . . . . . . . . . 546 Joint ventures and similar arrangements . . . . . . . . . . . . . . . . . 548 Sales and pledges of future revenues (securitization) . . . . . . . . . . 550 Escheat property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 551 Service concession arrangements. . . . . . . . . . . . . . . . . . . . . . 552 Bankruptcies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 555 Chapter in brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 557 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 562
PART 4: REPORTING BEYOND THE BASIC FINANCIAL STATEMENTS
Section A: Required Supplementary Information (RSI)
31. Management’s Discussion and Analysis . . . . . . . . . . . . . . . . . . 567 Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 567 Content . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 568 Component units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 571 Relationship to the letter of transmittal . . . . . . . . . . . . . . . . . . 572 Relationship to the financial statement audit . . . . . . . . . . . . . . . 572 Chapter in brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 573 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 574
32. Other RSI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 577 Budgetary reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 578 Infrastructure condition and maintenance data. . . . . . . . . . . . . . 580 Trend data on postemployment data . . . . . . . . . . . . . . . . . . . 581 Trend data on revenue and claims development . . . . . . . . . . . . . 584 Chapter in brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 586 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 587 Section B: The Comprehensive Annual Financial Report (CAFR)
33. Structure and Contents of the Comprehensive Annual Financial Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 589 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 589 Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 590 Contents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 590 GFOA Certificate of Achievement for Excellence in Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600 Chapter in brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 603 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 604
34. Supplementary Budgetary Reporting Within the CAFR . . . . . . . . . 607 Scope of supplementary budgetary comparisons. . . . . . . . . . . . . 607 Mandatory comparison v. supplementary comparisons: similarities and differences . . . 608 Legal level of budgetary control . . . . . . . . . . . . . . . . . . . . . . 609 Chapter in brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 612 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 613 35. The Statistical Section . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 615 Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 615 Information on financial trends. . . . . . . . . . . . . . . . . . . . . . . 616 Information on revenue capacity . . . . . . . . . . . . . . . . . . . . . . 620 Information on debt capacity . . . . . . . . . . . . . . . . . . . . . . . . 626 Demographic and economic information . . . . . . . . . . . . . . . . . 630 Operating information. . . . . . . . . . . . . . . . . . . . . . . . . . . . 632 Additional considerations. . . . . . . . . . . . . . . . . . . . . . . . . . 633 Chapter in brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 635 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 637
Section C: Specialized Entities
36. Postemployment Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . 643 Requirement to report individual plans separately. . . . . . . . . . . . 643 Basic financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . 644 Notes to the financial statements . . . . . . . . . . . . . . . . . . . . . . 646 Required supplementary information . . . . . . . . . . . . . . . . . . . 649 Supplementary schedules. . . . . . . . . . . . . . . . . . . . . . . . . . 651 The comprehensive annual financial report (CAFR) . . . . . . . . . . . 651 Defined contribution plans . . . . . . . . . . . . . . . . . . . . . . . . . 658 Other recommendations from the GFOA . . . . . . . . . . . . . . . . . 659 Pending changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 660 Chapter in brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 661 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 663
37. Public-entity Risk Pools . . . . . . . . . . . . . . . . . . . . . . . . . . . . 665 Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 665 Types of public-entity risk pools . . . . . . . . . . . . . . . . . . . 665 Accounting and financial reporting . . . . . . . . . . . . . . . . . . . . 666 Pools that result in the transfer or pooling of risk . . . . . . . . . . 666 Pools that do not result in the transfer or pooling of risk . . . . . . 673 Chapter in brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 675 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 677
38. School Districts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 679 Reporting entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 679 Basic financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . 680 Comprehensive annual financial report . . . . . . . . . . . . . . . . . . 683 Chapter in brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 685 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 686
39. States, Investment Pools, and Special Purpose Governments . . . . . . 689 States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 689 Investment pools. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 695 Special purpose governments. . . . . . . . . . . . . . . . . . . . . . . . 699 Chapter in brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 700 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 702 Section D: Other Reporting
40. Popular Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . . 705 Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 705 Characteristics of an effective PAFR . . . . . . . . . . . . . . . . . . . . 705 GFOA PAFR Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . 706 Chapter in brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 712 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 714 41. Performance Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . 715 Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 715 Expanding the scope of financial reporting to embrace performance measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 715 Alternative approaches to performance reporting . . . . . . . . . . . . 719 Chapter in brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 728 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 730
PART 5: INTERNAL CONTROL, AUDITING, AND ANALYSIS
Section A: Internal Control
42. The Comprehensive Framework of Internal Control . . . . . . . . . . . 733 Nature and purpose of internal control . . . . . . . . . . . . . . . . . . 733 Responsibility for internal control . . . . . . . . . . . . . . . . . . . . . 734 Inherent limitations of internal control . . . . . . . . . . . . . . . . . . 735 Comprehensive framework of internal control . . . . . . . . . . . . . . 736 From internal control to enterprise risk management . . . . . . . . . . . . 745 Chapter in brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 748 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 750
43. Monitoring and the Periodic Evaluation of Internal Control. . . . . . . 753 Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 753 Establishing and maintaining a baseline of effective internal control . 754 Periodically evaluating actual performance against the baseline . . . . 755 Resolving deficiencies identified by periodic evaluations of internal control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 756 Chapter in brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 757 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 759 Section B: Auditing and Analysis
44. The Financial Statement Audit . . . . . . . . . . . . . . . . . . . . . . . . 761 Responsibility for financial statements and the financial statement audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 761 Key concepts underlying the financial statement audit . . . . . . . . . 764 Levels of auditor responsibility. . . . . . . . . . . . . . . . . . . . . . . 766 Auditing standards: GAAS v. GAGAS . . . . . . . . . . . . . . . . . . 768 Obtaining a financial statement audit . . . . . . . . . . . . . . . . . . . 771 Chapter in brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 775 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 777
45. The Single Audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 781 Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 781 Requirement to obtain a Single Audit . . . . . . . . . . . . . . . . . . . 781 Standards applicable to Single Audits . . . . . . . . . . . . . . . . . . . 782 Scope of the Single Audit . . . . . . . . . . . . . . . . . . . . . . . . . . 782 Focus on major programs . . . . . . . . . . . . . . . . . . . . . . . . . . 783 Objectives of the Single Audit . . . . . . . . . . . . . . . . . . . . . . . 785 Reporting requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . 786 Reporting package . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 787 Chapter in brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 789 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 791
46. Internal Auditing and Performance Auditing . . . . . . . . . . . . . . . 793 Internal auditing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 793 Performance auditing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 796 Chapter in brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 798 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 799
47. Financial Statement Analysis. . . . . . . . . . . . . . . . . . . . . . . . . 801 The need for a different approach to analysis in the public sector . . . 801 Focal points for analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . 802 Types of information available in a CAFR. . . . . . . . . . . . . . . . . 803 Assessing near-term financial position . . . . . . . . . . . . . . . . . . 803 Assessing net position . . . . . . . . . . . . . . . . . . . . . . . . . . . . 806 Assessing economic condition . . . . . . . . . . . . . . . . . . . . . . . 808 Chapter in brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 810 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 812
Appendices
A. Illustrative Journal Entries . . . . . . . . . . . . . . . . . . . . . . . . . . 815 B. Illustrative Trial Balances . . . . . . . . . . . . . . . . . . . . . . . . . . . 877 C. Illustrative Adjustments Worksheet. . . . . . . . . . . . . . . . . . . . . 909 D. Illustrative Comprehensive Annual Financial Report. . . . . . . . . . . 931 E. Illustrative Accounts, Classifications, and Descriptions . . . . . . . . . 933 F. Explanations of Correct Responses to Exercises . . . . . . . . . . . . . . 985 G. Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1051 H. Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1095 I. Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1099
Quotes
Book Overview
The GAAFR (e-book) incorporates all of the guidance of the Governmental Accounting Standards Board (GASB) through GASB Statement No. 66. It offers all of the references necessary to ensure easy access to the underlying authoritative standards. Features include: a practical chapter in brief summary for each chapter; a set of exercises for each chapter (with an explanation of correct responses); a detailed index; and a comprehensive glossary. (2012. Electronic. 902 pp.)
This set also includes the GAAFR Supplement e-book - There have been several developments affecting accounting, auditing, and financial reporting for state and local governments since the release of the GAAFR in 2012. First, the Governmental Accounting Standards Board (GASB) has released four new standards. Second, the Committee of Sponsoring Organizations (COSO) of the Treadway Commission has issued a significantly expanded version of its classic Internal Control-Integrated Framework. The GAAFR Supplement contains the new material to address those developments. (2014. Electronic. 76 pp.)
References
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| Author | volume | Date Value | title | type | journal | titleUrl | doi | note | year | |
|---|---|---|---|---|---|---|---|---|---|---|
| 2012 GovernmentalAccountingAuditinga | Government Finance Officers Association | Governmental Accounting, Auditing, and Financial Reporting | 2012 |