INTERMEDIATE GOVERNMENTAL ACCOUNTING

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INTERMEDIATE GOVERNMENTAL

ACCOUNTING

FUND CLASSIFICATIONS AND

USE OF CONVERSION FUNDS

FUND ACCOUNTING

◼ Fund accounting is a traditional method of accounting used by state and local governments Each fund is a separate fiscal and accounting entity

Each fund reports its own assets, liabilities, equity, revenues and expenditures/expenses

Used to demonstrate legal compliance

Used to segregate resources

◼ Each fund maintains its own accounting equation A=L+E

A-L=E

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FUND ACCOUNTING

◼ Determines design of accounting system Separate data for each fund in the accounting system

Certain capital assets and long-term debt should be recorded in separate funds

◼ Minimum number of funds principal Need for separate accounting

May not need for separate reporting◼ Reported as a subfund of another fund

◼ Consolidate funds for reporting

◼ Consolidation versus disaggregation

FUND CLASSIFICATIONS

◼ Three broad fund categories

Governmental

◼ General governmental revenues and expenditures

◼ Generally nonexchange transactions

Proprietary

◼ Generally exchange transactions

Fiduciary

◼ Not our money

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◼ Eight generic fund types (or 11)Five Governmental

Two Proprietary

Four Fiduciary

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◼ GASB Statement No. 54 defines the 5 governmental fund

types in use today

General

Special Revenue

Debt Service

Capital Projects

Permanent


◼ General Fund

A government’s primary operating fund

To account for all financial resources not

accounted for in another fund

◼ Only one general fund permitted to be reported on

GAAP based statements

Sub funds or schedules for more than one

◼ Almost all governments should have one

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◼ General Fund

Garbage can fund

Why can’t we account for a particular transaction, service,

activity or revenue source in the general fund?

◼ GAAP requirements (rarely)

◼ Legal requirements (sometimes)

◼ Sound financial administration suggests separate

accounting

◼ Someone wants a separate fund


◼ Special Revenue Fund

Used to account for and report the proceeds of specific

revenue sources that are restricted or committed to

expenditure for specified purposes other than debt service

or capital projects

◼ One or more specific restricted or committed revenue

sources

Constraint on purpose of spending is not sufficient

Must have a specific revenue source(s)

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Restricted is defined as an “external” enforceable legal

restriction

◼ Enforceable legal restriction

External third party can compel or require compliance

◼ External means persons (e.g., bondholders) or bodies

(higher levels of government) outside of your

government

◼ Constitutional provisions

◼ Enabling legislation



Enabling legislation

◼ Enabling legislation authorizes a government to assess,

levy, charge, or otherwise mandate payment of

resources (from external resource providers) and

includes a legally enforceable requirement that those

resources be used only for the specific purposes

stipulated in the legislation

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Committed

◼ Committed is defined as constrained by limitations that

the government imposes upon itself by formal action

at its highest level of decision making and that

remains binding unless removed in the same manner.

Self-imposed

Formal action

Highest level of decision making authority

◼ Differentiate from enabling legislation

Lack of an external legal enforceability



Substantial portion of revenue source in the fund not from

restricted or committed revenues

◼ Not a special revenue fund

◼ Part of the general fund

◼ Substantial not defined

Other resources (e.g., transfers, investment income,

miscellaneous) can also be in the fund if not substantial

◼ Assigned is assumed in a separate fund

Expenditures must be reported in the fund

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Impact of definition

◼ MFT, restricted grants meet the definition

◼ Restricted property tax levies generally meet the

definition

◼ User fee/charges for service supported may not meet the

definition

Governing board may need to “commit” user fees to the

specified purpose

Annual fee ordinance

◼ Other uses may not meet the definition


◼ Special Revenue Funds

What activities does your government report in

special revenue funds?

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GASB Statement No. 10

◼ Tort or liability insurance funds

General or internal service fund

GASB Statement No 66, Technical Corrections—

an amendment of GASB Statements No. 10 and 62

◼ Follow GASB S-54 definitions

◼ Can report the tort levy in a special revenue fund


◼ Debt Service Funds

Used to account for and report financial resources

that are restricted, committed, or assigned to

expenditure for principal and interest

Does not apply to debt repaid by proprietary funds

Debt service funds should be used to report

resources if legally mandated.

Financial resources that are being accumulated for

principal and interest maturing in future years

should be reported in debt service funds

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◼ Debt Service Funds

Restricted, committed same definitions as special revenue

funds

Assignment of funds

◼ Earmarking or intent

◼ Authority to assign funds

Budget officer? Board?

Use of separate funds

Accounting versus reporting


◼ Capital Projects Fund

Used to account for and report financial resources that are

restricted, committed or assigned to expenditure for

capital outlays including the acquisition or construction of

capital facilities and other capital assets, excluding those

types of capital related outflows financed by proprietary

funds

◼ Expands definition in line with practice

◼ Restricted, committed same definition as special

revenue funds

◼ Exclusion for proprietary fund capital assets

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◼ Permanent Funds

To report resources that are legally restricted by an external third party to the extent that only earnings, and not principal, may be used for purposes that support the government’s programs

Created by GASB Statement No. 34

Formerly expendable and/or nonexpendable trust

Can’t spend any for your programs, not a permanent fund

Common examples◼ Endowments

◼ Working cash (other than school districts)

PROPRIETARY FUND TYPES

◼ Business-type activities

◼ Enterprise Funds

◼ Internal Service Funds

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ENTERPRISE FUNDS

◼ Used to account for the total cost of providing a service Governmental funds generally account for the operating cost of

providing a service

◼ Fee charged to external users May or may not recover total cost of providing services

Assists in determining the extent any subsidy

◼ Use is not mandatory except in certain instances

ENTERPRISE FUNDS

◼ Use is mandatory State unemployment compensation trust

Public entity risk pools (with transfer of risk) (GASB S-10)◼ IRMA, IPBC

When debt is issued that is backed solely by fees and charges (i.e.,revenue bonds, IEPA Loans)◼ Does not apply to GO or GOARS bonds

Legal requirement to recover total cost or to measure total cost

Government’s policy is to recover the costs of providing a servicethrough user fees, whether or not achieving the policy

◼ Sample enterprise funds

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INTERNAL SERVICE FUNDS

◼ To account for any activities that provide goods orservices to other funds, departments, or agencieson a cost-reimbursement basis

Internal cost allocations or pools

Cost reimbursement basis◼ No ongoing deficits

◼ No ongoing surpluses

INTERNAL SERVICE FUNDS

◼ GASB S-34 impacts the use of internal service

funds in practice

Need to differentiate between governmental and

business type for consolidating at entity-wide

Some should be for governmental funds only (or

primarily)

◼ Inventory, equipment replacement

◼ Accounting versus reporting

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FIDUCIARY FUNDS

(not our assets)

◼ Used to account for assets held in a trustee or agent capacity on behalf of others Pension Trust Funds (and OPEB Trust Funds)

Investment Trust Funds

Private-Purpose Funds

Agency Funds

PENSION (AND OPEB) TRUST FUNDS

◼ To report resources that are required to be held in trust for the members and beneficiaries of defined benefit pension plans, defined contribution pension plans, other post-employment benefit plans, and other employee benefit plans.

◼ Separate fund for each pension plan.

◼ Separate plan for post-employment health care plan(GASB S-43)

◼ Single employer Police and Fire pension Plans in Illinois Pension trust fund in the employers financial statement

◼ Multiple employer pension plan IMRF

Teachers Retirement System

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INVESTMENT TRUST FUNDS

◼ To account for arrangements in which legally

separate governments commingle or pool their

resources in an investment portfolio for all

participants

◼ To account for one government holding investments

on behalf of units outside the government (individual

investment accounts) Illinois Funds in the State of Illinois CAFR

IMET separate CAFR

PRIVATE-PURPOSE TRUST FUNDS

❑ To report any trust arrangement not properly reported in a pension trust fund or an investment trust fund under which principal and income benefit individuals, private organizations, or other government

❑ Resources can’t be used for your government or its programs

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AGENCY FUNDS

◼ To account for situations where the government’s role is purely custodial, such as the receipt, temporary investment, and remittance of resources to individuals, private organizations, or other governments

◼ No trust agreement involved

◼ Assets = liabilities, no net position

◼ Only changes in assets and liabilities

No changes in net position

FIDUCIARY FUNDS

◼ GASB Statement No 84, Fiduciary Activities

◼ Define when to use a fiduciary fund

◼ Replace agency funds Custodial funds

Full statement of net position (NP), changes in NP

◼ Effective for fiscal years ending December 31, 2019 and thereafter

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SPECIAL ASSESSMENT FUNDS

◼ Used to be 5th governmental fund type

◼ GASB Statement No. 6 did away with this fund type

◼ Applies to special service areas in Illinois

◼ Service or maintenance type

General, special revenue, enterprise

◼ Capital oriented

Capital projects or enterprise

SPECIAL ASSESSMENT FUNDS

◼ Repayment of debt Obligated in some manner for repayment

◼ Bond repayment in a debt service fund

◼ Debt in the GLTDAG

Not obligated in any manner for repayment◼ Bond repayment in an agency fund

◼ Debt in the notes to financial statements

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ACCOUNT GROUPS

◼ Two (2) used in practice GFAAG (GCAAG)

GLTDAG

◼ Home for wayward debits and credits

◼ Offset by asset or equity accounts

◼ No longer reported as part of financial statements Needed for reporting at entity-wide

Interactive account groups (smart account groups)

◼ Capture CA and LT debt for reporting at entity-wide

◼ Capture conversion entries related to MFBA

CONVERSION ENTRIES

GCAAG95.000.1900 108,500.00 Capital Asset Additions Land FY '18

95.000.1901 70,000.00 Capital Asset Additions Equipment FY '18

95.000.1904 - Capital Asset Additions Buildings FY '18

95.000.1905 - Capital Asset Additions ROW FY '18

95.000.1906 1,960,217.45 Capital Asset Additions Infrastructure FY '18

95.000.1921 77,001.15 Capital Asset Additions Sewer Lines FY '18

95.000.1950 - Capital Asset Additions Const. in Progress FY '18

95.000.1955 - Capital Asset Additions Public Const. in Prog FY '18

95.385.3820 820,642.08 Purchases - Capital Contributions

95.385.3821 99,500.00 Purchases - Gen Govt

95.385.3822 - Purchases - Public Safety

95.385.3823 1,295,576.52 Purchases - Public Works

95.385.3824 - Purchases - Sanitation

Capital Asset Additions

95.000.1906 1,641,006.15 R/C CIP to Infrastructure

95.000.1950 1,641,006.15 R/C CIP to Infrastructure

95.000.1964 Building Disposals FY '18



95.000.1961 - Equipment Disposals FY '18

95.385.3875 Equipment Disposals FY '18

95.000.1901 - Equipment Disposals FY '18

95.000.1966 1,130,242.33 Infrastructure Disposals FY '18

95.385.3875 - Infrastructure Disposals FY '18

95.000.1906 1,130,242.33 Infrastructure Disposals FY '18

Capital Asset Disposals

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CONVERSION ENTRIES

GCAAG

95.490.4853 229,065.00 FY '18 Depreciation Sewer Lines - Storm

95.000.1981 229,065.00 FY '18 Depreciation Sewer Lines - Storm

95.490.4854 339,824.00 FY '18 Depreciation Sewer Lines - Sanitary

95.000.1981 339,824.00 FY '18 Depreciation Sewer Lines - Sanitary

95.490.4851 224,652.32 FY '18 Depreciation General Govt

95.490.4852 489,320.26 FY '18 Depreciation Public Safety

95.490.4853 1,975,571.85 FY '18 Depreciation Public Works

95.000.1961 64,855.14 FY '18 Depreciation Equipment

95.000.1964 452,997.09 FY '18 Depreciation Buildings

95.000.1966 2,171,692.20 FY '18 Depreciation Infrastructure

Current Year Depreciation

CONVERSION ENTRIES

GLTDAGGov Entries

96.000.2080 11,057.29 Adj Int. Payable

96.490.4706 11,057.29 Adj Int. Payable

96.000.2701 920,000.00 Adj GO Bonds Payable Payments

96.490.4705 920,000.00 Adj GO Bonds Payable Payments

96.000.2707 5,679.41 Amortize 2009 Bond Premium


96.490.4707 8,548.75 Amortize 2009 Loss on Refunding






983,187.16 983,187.16

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Documents

INTERMEDIATE GOVERNMENTAL ACCOUNTING