Financial Reporting: Deriving Government-Wide Financial Statements and Required Reconciliations
ANSWERS TO QUESTIONS
Most of the information required for fund financial statements is captured and recorded in the accounts of the various funds as transactions occur throughout a fiscal year. Adjustments for accruals, deferrals, and so on are required at year end even if a government keeps its books on the GAAP basis for the particular fund as assumed in the illustrations in the text. However, as discussed in Chapter 2, governments should, and most do, maintain their accounts on their budgetary basis of accounting during the year. For the many governments that have a budgetary basis different than GAAP, additional modifications—typically in the form of worksheet adjustments—are required to develop the GAAP fund financial statements.
Government-wide financial statements present a government’s financial information at a different level of aggregation and, for many activities, using a different basis of accounting than that used for budgetary and for other internal decision-making purposes during a fiscal year. Few, if any, governments attempt to maintain information in their accounts that is designed primarily to provide data for the government-wide financial statements. Instead, governments use the accounts and balances of the fund financial statements as the starting point from which to derive the information reported in the government-wide financial statements. The process of deriving government-wide financial statement information for governmental activities in particular involves an extensive, but workable, data conversion process that can be done efficiently using worksheets. No formal journal entries are required.
The total column of the governmental funds financial statements are used as the starting points for deriving the governmental activities information for the government-wide financial statements. The total column from the governmental funds Balance Sheet is the starting point for the balance sheet conversion worksheet. Details about the fund balance account—reserves, designations, and unreserved fund balance are not necessary; we use only the total fund balance amount as a balancing point for the work done on the conversion worksheet. Similarly, the total column from the governmental funds Statement of Revenues, Expenditures, and Changes in Fund Balance is the starting point for the operating statement conversion worksheet. However, account titles and balances on this statement are only required through the Change in Fund Balance line. Information below that point—beginning fund balance, any corrections, and ending fund balance—is not required.
a. Most activities reported in governmental activities are accounted for and reported through governmental funds in the fund financial statements.
b. Fiduciary funds are not reported in government-wide financial statements.
c. Most activities reported in business-type activities are accounted for and reported through Enterprise Funds in the fund financial statements. Indeed, the Enterprise Funds financial statement information and that reported for business-type activities are often only minimally different.
d. Internal Service Funds will be reported as governmental activities or as business-type activities depending upon the circumstances. Internal Service Funds that provide the majority of their services to governmental fund departments are included in governmental activities; those that provide the majority of their services to Enterprise Fund departments are reported as part of business-type activities.
e. General Capital Assets accounts are reported as part of governmental activities.
f. General Long-Term Liabilities accounts are reported as part of governmental activities.
The adjustments typically required to adjust for the absence of general capital assets and general long-term