Download (Fiduciary) Fund

Chapter 19
Governmental Entities:
Proprietary Funds,
Fiduciary Funds,&
Comprehensive Annual
Financial Report
Proprietary Funds
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Enterprise Funds
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Internal Service Funds
Enterprise Funds
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Account for commercial-type activities of a
governmental entity .
Are used to account for operations that are
financed and operated in a manner similar to
private business enterprises.
Examples are: Public Utilities (water
companies and electric companies), Airports,
Public Hospitals, Transportation systems.
Accounting and Reporting for
Enterprise Funds
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Enterprise use the accrual basis of accounting.
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Neither budgetary accounts nor encumbrances
are recorded in enterprise fund.
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Enterprise fund must be accounted for in the
same manner as a privately owned commercial
business.
Accounting and Reporting for
Enterprise Funds
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Among the ways in which financial statements of a
governmental entity's enterprise fund differ from
financial statements of a business enterprise are
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the absence of property taxes expense
the absence of capital stock
the presence of restricted assets (segregated from Current
Assets)
the presence of liabilities payable from restricted assets.
Accounting and Reporting for
Enterprise Funds
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The operating transfers section of an
enterprise fund's statement of revenues,
expenses, and changes in retained earnings
includes subsidy-type transfers to the
governmental entity's general fund, and the
Accounting and Reporting for
Enterprise Funds
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Statement of cash flows for an enterprise fund has
four categories of cash flows.
1.
From operating activities
2.
From non capital financing activities
3.
From capital and related financing activities.
4.
From Investing activities.
Accounting and Reporting for
Enterprise Funds
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Operating income, rather than increase (decrease) in
net assets is reconciled to net cash provided by
operating activities.
Non capital financing activities cash flows include
operating grants from other governmental entities and
operating transfers to or from other funds of the
governmental entities.
Temporary investments of cash received from
borrowings for plant assets are reported as cash flow
from capital and related financing activities, rather
than with cash flows from investment activities.
Internal Service Funds
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Internal service funds are established to
finance and account for services and supplies
provided exclusively to other government
entity.
This fund is created to ensure uniformity and
economies in the procurement of supplies and
services for the governmental entity as a whole
Internal Service Funds.
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Examples are:
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Central Garage and motor pools
Central Printing and duplicating services
Central Repair shops
The operational of internal service funds
resemble those of a business enterprise,
except that internal service funds are not profit
motivated.
Accounting of Internal Service
Funds
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Financial statements of internal service funds
are nearly identical in form and content to
financial statements of business enterprises
because internal service funds do not issue
revenue bonds or receive contributions or
deposits from customers, as do enterprise
funds
Accounting and Reporting for
Internal Service Funds
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
This fund use the accrual basis of accounting.
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Neither budgetary accounts nor encumbrances
are recorded in this fund.
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Internal Service fund must be accounted for in
the same manner as a privately owned
commercial business.
Accounting and Reporting of
Internal Service Funds
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Similar to Enterprise Funds, internal service
funds do not have owner’s equity in their
statement of new assets.
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A net assets ledger account balance typically
supports that amount in the liabilities and net
assets section of the statement of new assets
for an internal service fund.
Financial Statements of Internal
Service Funds
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Balance Sheet
Income Statement- Statement of Revenues
and Expenses
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Statement of Cash Flows
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Footnotes
Applicability of FASB Pronouncements
to Proprietary Funds
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GASB Statement No. 20, "Accounting and
Financial Reporting for Proprietary Funds . . ., "
provided temporary guidance to governmental
entities for applying business enterprise-type
accounting standards, as appropriate, to their
proprietary funds.
Fiduciary Fund
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Fiduciary Fund consists of
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agency funds
private-purpose trust funds
pension trust funds and
investment trust funds
The position of a governmental entity with
respect to fiduciary funds is that of a custodian
or trustee rather than an owner.
Accounting of Fiduciary Fund
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
Fiduciary Fund use the accrual basis of accounting.
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Neither budgetary accounts nor encumbrances are
recorded in enterprise fund.
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For Fiduciary Fund, GASB has mandated preparation
of a statement of fiduciary net assets and a
statement of changes in fiduciary net assets.
Accounting and Reporting of
Agency Funds
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Agency funds are of short duration.
Agency Funds are used to accounts for sales
taxes collected by a state government on
behalf of municipalities and townships of state.
Do not have operations during a fiscal year.
Only a statement of fiduciary assets and a
statement of changes in fiduciary assets are
issued for agency funds.
Financial statements of Fiduciary
Fund
Statement of Fiduciary Assets.
Assets
Cash
xxx
Liabilities
Vouchers Payable
xxx
-----------------------------------------------------------------------------------------------------Statement of Changes in Assets & Liabilities
Open.Bal
Additions
Deductions
Cl.Balance
Assets
xxx
xxx
xxx
xxx
Liabilities xxx
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xxx
xxx
xxx
Private Purpose Trust Fund
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1.
2.
3.
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Both a statement of fiduciary net assets and a
statement of changes in fiduciary net assets
are issued for private-purpose trust funds
There are three types of trust funds:
Pension Trust funds
Nonexpendable Trust funds
Expendable Trust funds
Expendable and Nonexpendable
Private Purpose Trust
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Expendable: An expendable private-purpose trust fund
is one whose principal and income both may be
expended to achieve the objectives of the trust.
It is classified further as a permanent (governmental)
fund, in which the agreement must specify the income
from the investment of assets be utilized for benefit of
government and its citizens as a whole.
Principal of the assets in the fund is legally restricted
and cannot be expended.
Expendable and Nonexpendable
Private Purpose Trust
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Non Expendable:
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Only the revenues of a non-expendable private-purpose trust
fund may be expended;
the principal of such a fund must be maintained intact.
Accordingly, a nonexpendable private-purpose trust fund
requires two separate accounting unitsone for principal and
one for revenues.
It is classified as a Proprietary (Fiduciary) Fund in which the
agreement specifies the principal and/or income for the benefit
of individuals, private organizations , or other governments.
Pension Trust Funds
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Pension Trust Fund use the accrual basis of
accounting. (no budget and no encumbrances are
used)
Pension trust funds account for assets, liabilities, and
net assets reserves of defined benefit pension plans of
governmental entities, which require actuarial
assumptions as to life expectancies of governmental
entity employees and rates of earnings on pension
trust fund assets
Financial Statements of Pension
Trust Funds
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
Statement of Plan Net Assets
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Statement of Changes in Plan Net Assets
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Schedule of Funding Progress
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Statement of Cash Flow (optional)
Investment Trust Funds
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Sponsoring governments are required by
GASB Statement No. 31, “Accounting and
Financial Reporting for . . . External Investment
Pools,”
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to establish investment trust funds for investments
of smaller governmental entities entrusted to the
sponsoring government for investments in higheryielding financial instruments than the smaller
governmental entities have the capacity to acquire.
Financial Statements of Investment
Trust Funds
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Statement of Plan Net Assets
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Statement of Changes in Plan Net Assets
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Schedule of Funding Progress
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Statement of Cash Flow (optional)
Comprehensive Annual Financial
Report
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Components of the comprehensive annual financial
report issued by state and local governmental entities
are
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an introductory section;
a management discussion and analysis;
basic financial statements;
required supplementary information; and
combining and individual fund statements, schedules, narrative
explanations, and statistical section.