17.2 Government-wide and Fund Financial Statements
4 min read•july 30, 2024
Government-wide and are crucial tools in governmental accounting. They offer different perspectives on a government's financial health, with government-wide statements providing a broad overview and fund statements diving into specific activities.
Understanding these statements is key to grasping governmental finances. Government-wide statements use accrual accounting and include all assets and liabilities, while fund statements focus on current resources and use modified accrual accounting for governmental funds.
Government-wide financial statements
Overview and purpose
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- Provide a broad overview of a government's finances, including all activities and functions, regardless of fund type or category
- Focus on the government as a whole, except for fiduciary activities
- Include both governmental activities (generally supported by taxes and grants) and business-type activities (supported by fees and charges)
Required statements and their components
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- Presents information on all assets, deferred outflows of resources, liabilities, deferred inflows of resources, and net position as of a specific date
- Uses and accrual basis of accounting
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- Presents information showing how the government's net position changed during the most recent fiscal year
- Focuses on the net (expense) revenue of each of the government's functions
- Demonstrates the degree to which direct expenses of a given function are offset by program revenues
Government-wide vs fund statements
Differences in focus and level of detail
- Government-wide statements focus on the government as a whole, while fund statements provide more detailed information about individual funds
- Government-wide statements provide information about overall financial position and results of operations, while fund statements focus on the flow of current financial resources and compliance with finance-related legal requirements
Differences in measurement focus and basis of accounting
- Government-wide statements use economic resources measurement focus and accrual basis of accounting for all activities
- Governmental fund statements use and of accounting
- Revenues recognized when measurable and available to finance current period expenditures
- Expenditures generally recognized when related liability is incurred, except for long-term liabilities recognized when due
Treatment of capital assets and long-term liabilities
- Government-wide statements include capital assets and long-term liabilities
- Governmental fund statements generally exclude these items and focus on near-term inflows, outflows, and balances of spendable resources
- Reconciliation required between government-wide and fund statements due to differences in measurement focus and basis of accounting
Governmental fund statements
Types of governmental funds and their purposes
- Account for activities primarily supported by taxes, grants, and similar revenue sources
- Examples include , Special Revenue Funds (grants), Capital Projects Funds, and Debt Service Funds
Balance Sheet
- Reports information about current financial resources (assets, liabilities, deferred inflows, and fund balances) of each major governmental fund and all nonmajor governmental funds in aggregate as of the end of the fiscal period
- Prepared using current financial resources measurement focus and modified accrual basis of accounting
Statement of Revenues, Expenditures, and Changes in Fund Balances
- Reports information about inflows, outflows, and balances of current financial resources of each major governmental fund and all nonmajor governmental funds in aggregate
- Prepared using current financial resources measurement focus and modified accrual basis of accounting
- Fund balance represents the fund's spendable resources (difference between assets plus deferred outflows and liabilities plus deferred inflows)
Reconciliation of financial statements
Reasons for reconciliation
- Differences in measurement focus and basis of accounting between government-wide and fund statements
- Explains the relationship between the two sets of financial statements
Reconciliation of the governmental fund balance sheet to the government-wide statement of net position
- Focuses on capital assets, long-term liabilities, and deferred outflows/inflows of resources
- Capital assets not reported in governmental funds but reported in government-wide statement of net position
- Long-term liabilities not reported in governmental funds but reported in government-wide statement of net position
Reconciliation of the governmental fund statement of revenues, expenditures, and changes in fund balances to the government-wide statement of activities
- Focuses on differences in reporting capital asset and long-term debt transactions
- Governmental funds report capital outlays as expenditures, while government-wide statement reports depreciation expense
- Repayment of long-term debt principal is an expenditure in governmental funds but reduces the liability in government-wide statement of net position
- Reconciliations provide a bridge between the two sets of statements, allowing users to understand how current-year activities impacted overall financial position
Key Terms to Review (16)
Accountability: Accountability refers to the obligation of individuals or organizations to report, explain, and be answerable for the consequences of their actions. It involves a relationship where an entity is required to justify its decisions and is held responsible for the outcomes, especially in managing public resources and finances.
Budgetary comparisons: Budgetary comparisons are tools used by governments and other entities to evaluate the differences between the budgeted amounts and the actual financial results. These comparisons help assess financial performance and accountability, ensuring that resources are allocated effectively and used as intended. They also provide transparency to stakeholders about how funds were spent compared to the initial budget expectations.
Capital projects fund: A capital projects fund is a type of governmental fund used to account for financial resources that are designated for the acquisition or construction of major capital assets, such as buildings, infrastructure, and other long-term assets. These funds are essential for tracking the funding and expenditures related to significant projects undertaken by government entities, ensuring accountability and proper resource allocation.
Current financial resources measurement focus: Current financial resources measurement focus is an accounting approach used primarily in governmental and not-for-profit entities that emphasizes the flow of current financial resources available for spending in the near term. This focus assesses the inflows and outflows of financial resources, such as cash and receivables, rather than the overall economic resources of an entity, leading to a unique presentation of financial statements that aids in understanding short-term fiscal health.
Economic resources measurement focus: The economic resources measurement focus refers to the approach used in accounting to assess and report the financial position of an entity based on its economic resources, including assets, liabilities, and net position. This focus emphasizes the importance of measuring the value of resources available for use and the obligations that exist, which is particularly significant in the context of how government entities manage and report their financial activities.
Financial statement disclosures: Financial statement disclosures are the notes and additional information provided in financial statements that give context, explanations, and details about the financial data presented. These disclosures are crucial for enhancing transparency, allowing users to understand the financial condition and results of operations of an entity, especially in government-wide and fund financial statements.
Full accrual basis: The full accrual basis is an accounting method where revenue and expenses are recognized when they are earned or incurred, regardless of when cash transactions occur. This approach provides a more accurate picture of a government’s financial position and performance over time, as it matches income with related expenses within the same accounting period, enabling better decision-making and accountability in financial reporting.
Fund financial statements: Fund financial statements are specialized financial reports that focus on the financial position and results of operations of individual funds used by governmental entities. These statements provide detailed information about how resources are allocated and utilized within specific funds, allowing stakeholders to assess the fiscal accountability and operational efficiency of government activities.
GASB 34: GASB 34, or Statement No. 34, is a set of guidelines established by the Governmental Accounting Standards Board that aims to improve the financial reporting of state and local governments. It introduced a new model for government-wide financial statements, requiring the presentation of a comprehensive set of financial statements that include both government-wide and fund financial statements. This shift emphasizes accountability and transparency in public sector financial reporting.
GASB 63: GASB 63, or Statement No. 63 by the Governmental Accounting Standards Board, is a guideline that establishes how governmental entities should report deferred outflows of resources and deferred inflows of resources in their financial statements. This statement aims to enhance the clarity of financial reporting and improve the understanding of financial position by providing a better representation of both the economic resources available to an entity and its obligations.
General fund: The general fund is the primary operating fund used by government entities to account for all financial resources that are not required to be accounted for in another fund. It serves as the main source of funding for government services and activities, covering a wide range of expenditures including public safety, education, and infrastructure. This fund plays a crucial role in maintaining transparency and accountability in government financial reporting.
Government-wide financial statements: Government-wide financial statements provide an overview of a government's financial position and activities as a single entity, focusing on the government as a whole rather than individual funds. These statements are designed to present a comprehensive picture of the financial health of the government, consolidating all its activities and reporting on its long-term financial position, including assets, liabilities, and net position.
Modified accrual basis: The modified accrual basis is an accounting method that combines aspects of both cash and accrual accounting, primarily used in government financial statements. Under this method, revenues are recognized when they become measurable and available, while expenditures are recognized when the related liability is incurred. This approach helps to provide a more accurate representation of a government's financial status by focusing on short-term financial performance and ensuring that resources are accounted for when they are expected to be available for use.
Statement of activities: A statement of activities is a financial report used primarily by not-for-profit organizations to summarize their revenues, expenses, and changes in net assets over a specific period. This statement provides insight into the organization's financial performance and is crucial for assessing how resources are allocated and whether the organization is fulfilling its mission. It helps stakeholders understand the operational results and financial position in terms of funding sources and program expenses.
Statement of Net Position: The statement of net position is a financial statement that presents the assets, liabilities, and net position of a government entity at a specific point in time. This statement is crucial for assessing the financial health of governmental organizations, providing stakeholders with insight into what the government owns and owes. It is a foundational component of government-wide financial statements, integrating information from various funds to offer a comprehensive view of the entity's overall financial condition.
Transparency: Transparency refers to the openness and clarity with which information is presented, allowing stakeholders to understand financial data and decisions. It is crucial for building trust, ensuring accountability, and promoting informed decision-making, especially in financial reporting and governance. Transparency helps identify errors, enhances the reliability of financial statements, and fosters ethical practices in accounting.