Understanding Government Financial Statements: A Walkthrough with Laura Beltran-Schmitz

1. A Walkthrough of Government Financial Statements Presented by Laura Beltran-Schmitz for the AGA PDT 2018

2. Understanding the MD&A • Management’s Discussion & Analysis (MDA) • Required Supplementary Information (RSI) • Precedes the Basic Financial Statements • Designed to introduce the basic financial statements • A brief discussion of the financial statements • Condensed financial information derived from government-wide financial statements comparing the current year to the prior year

3. Fund Types • What is a fund? • Governmental Funds • General, Special Revenue, Capital Projects, Debt Service, Permanent • Proprietary Funds • Fiduciary Funds

4. Gov’t Fund Types, as defined by GASB 54 • General Fund - used to account for and report all financial resources not accounted for and reported in another fund • Special Revenue Funds - 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 • The restricted or committed proceeds of specific revenue sources should be expected to continue to comprise a substantial portion of the inflows reported in the fund

5. Gov’t Fund Types, as defined by GASB 54 • Capital Projects Funds - 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 • Debt Service Funds - used to account for and report financial resources that are restricted, committed, or assigned to expenditure for principal and interest.

6. Gov’t Fund Types, as defined by GASB 54 • Permanent Funds- used to account for and report resources that are restricted to the extent that only earnings, and not principal, may be used for purposes that support the reporting government's programs-that is, for the benefit of the government or its citizenry.

7. Proprietary and Internal Service Funds • Proprietary • Business type activities • Enterprise funds • NMCD – Corrections Industries • GSD – Workers’ Comp, State Transportation Pool, etc.. • Internal Service • Account for financing of goods or services provided by one dept. of a gov’t unit to other depts. within same gov’t unit • Cost reimbursement basis • Self insurance • Goal to break even (or as close as possible)

8. Fiduciary Funds • Pension (and other employee benefit) trust funds • Investment trust funds • Private-purpose trust funds • Agency funds

9. Fund Types

10. Fund Financial Statements • Where do the Fund Financial Statements Appear? • If the funds are major they appear as part of the basic financial statements, before the notes. • Non major funds appear in the supplementary section – Combining Statements – Individual Fund Statements, after the notes.

11. Fund Financial Statements • General Fund is always major • Management may designate a fund as major • Funds that meet the following criteria must also be major: • 10% & 5% test

12. Fund Financial Statements • For the Governmental Funds • Statement of Governmental Funds – Balance Sheet • Reconciliation of the Balance Sheet to the Statement of Net Position • Statement of Revenues, Expenditures and Changes in Fund Balance • Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of the Governmental Funds to the Statement of Activity

13. Fund Financial Statements • Governmental Funds, cont’d: • Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual -General Fund • Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual –Major Special Revenue Fund

14. Fund Financial Statements • Proprietary Funds • Statement of Net Position • Statement of Revenues Expenses and Changes in Fund Net Position • Statement of Cash Flows

15. Gov’t – Wide Financial Statements • Include all governmental and business-type activities, but not fiduciary activities • Statement of Net Position • Statement of Activities

16. Gov’t – Wide Financial Statements • Fund level to Gov’t Wide level • Modified Accrual to Full accrual • Reconciliation of the Balance Sheet to the Statement of Net Position – Governmental Funds • Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities

17. Financial Statements • Notes to the Financial statements • Budgetary comparisons • Schedule of Expenditures of Federal Awards (SEFA)

18. Auditors’ Reports • Types of reports • Independent Auditors’ Report • YellowBook Report (Governmental Auditing Standards) • Uniform Guidance Report (SEFA/Single Audit)

19. Laura Beltran-Schmitz, CPA, CFE, CGFM, CICA Assurance Director Laura.beltran-schmitz@claconnect.com 505-222-3526