Basics of Governmental

Financial Reporting

Rodeo Sanitary District Board Presentation

January 25, 2012

Justin Williams, CPA, CVA

FUND ACCOUNTING

What is Fund Accounting?

Fund accounting groups financial data together into funds or accounts that share a similar purpose.

TYPES OF FUNDS

Governmental Funds

Proprietary Funds

Fiduciary Funds

GOVERNMENTAL FUNDS

Governmental Funds

Used by the government to account for tax supported activities.

General Fund, Special Revenue Funds, Capital Project Funds, Debt Service Funds, and Permanent Funds

Chief operating fund of a local government. Used to account for all financial resources except those required to be accounted for in a different fund

Used to account for revenues raised for a specific purpose. Examples include Gas Tax fund and grant funds.

General Fund

Special Revenue Funds

Capital Projects Funds

Debt Service Funds

Permanent Funds

Used to report major capital acquisitions separately from ongoing operating activities

Used to account for the accumulation of resources for payment of long-term debt and interest

First Introduced as part of GASB 34 reporting model

GOVERNMENTAL FUNDS (CONTINUED)

PROPRIETARY FUNDS

Proprietary Funds

Used to account for the type activities (activities supported,

at least in part, by fees or charges).

Enterprise funds (Rodeo) and Internal Service funds

Used to report any activity for which a fee is charged to external users for goods and services

Used to account for the allocation of services between funds

Enterprise Funds

Internal Service Funds

Used to report assets held in a trustee or agencycapacity for others and therefore cannot be used tosupport the governments own operations.

Examples: Pension and employee benefit trust funds,investment trust funds (pooled with other entities), agencyfunds.

FIDUCIARY FUNDS

RODEO SANITARY DISTRICT

Financial Statements

Independent Auditor’s Report

Managements Discussion and Analysis (MD&A)

Financial Statements

Supplementary Information

Other Reports

INDEPENDENT AUDITOR’S REPORT

Auditor’s responsibility is to express an opinion on the financial statements.

Types of Opinions: Unqualified

Qualified

Adverse

Disclaimer

MANAGEMENT’S DISCUSSION

& ANALYSIS

Prepared by management to provide users with anarrative introduction, overview and analysis of thefinancial statements.

Contents of MD&A:

Discussion of financial statements

Condensed comparative data

Overall analysis

Capital asset and long-term liability activity

Statement of Net Assets

Statement of Revenues, Expenses and Changes in Net Assets

Statement of Cash Flows

FINANCIAL STATEMENTS

3 Basic Financial Statements

for Proprietary Funds

STATEMENT OF NET ASSETS

“Balance sheet”

Presented at a single moment in time: June 30, 2011.

Assets – Liabilities = Net Assets

Classified format- Current and non-current separated

Net assets classified as restricted and unrestricted

STATEMENT OF REVENUES,

EXPENSES, & CHANGES IN NET ASSETS

“Income Statement”

Presents activity over a period of time:

The year ended June 30, 2011

Revenue – Expenses = Changes in net assets

Separate between operating and non-operating

Capital Contributions

STATEMENT OF CASH FLOWS

Required for Proprietary Funds only

Format classified into four categories:

Cash flows from operating activities

Cash flows from noncapital financing activities

Cash flows from capital and related financing activities

Cash flows from investing activities

Cash Flows from

Noncapital Financing

Activities

Cash Flows from Capital

& Related Financing

Activities

Cash Flows from

Investing Activities

Generally include all cash flows related to transactions and events included in operating income in the Statement of Revenues, Expenses, and Changes in Net Assets

Include borrowing and repayments of debt that is not clearly attributable to capital purposes

Include the repayment of debt that is attributable to capital assets, and the purchase of capital assets

Include receipt of interest and proceeds from investment sales

STATEMENT OF CASH FLOWS (CONTINUED)

Cash Flows from

Operating Activities

RECONCILIATION OF OPERATING INCOME TO CASH FLOWS FROM OPERATING ACTIVITIES

Illustrates the difference between operating income reported on the Statement of Revenues, Expenses, and Changes in Net Assets and net cash provided by operating activities included in the Statement of Cash Flows.

NOTES TO THE FINANCIAL STATEMENTS

Summary of Significant Accounting Policies

Cash and Investments

Other Receivable

Capital Assets

Long-Term Liabilities

Retirement Plan

Insurance

SUPPLEMENTARY INFORMATION

Combining Schedule of Net Assets

Combining Schedule of Revenues, Expenses andChanges in Net Assets

Schedule of Operating Expenses

REPORT ON INTERNAL CONTROL

Any compliance findings or significant control deficiencies would be included in this report.

over Financial Reporting and on Compliance and Other

Matters Based on an Audit of Financial Statements

Performed in Accordance with Government Auditing

Standards

INTERNAL CONTROL DEFICIENCY

Material Weakness

Significant Deficiencies

Control Deficiency

MATERIAL WEAKNESS

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s financial statements will not be prevented, or detected and corrected on a timely basis.

SIGNIFICANT DEFICIENCY

A significant deficiency is a deficiency, or a combination of

deficiencies, in internal control over financial reporting that is less severe

than a material weakness, yet important enough to merit attention

by those charged with governance.

CONTROL DEFICIENCY

A deficiency in internal control over financial reporting exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis.

SCHEDULE OF FINDINGS

Parts required by Government Auditing Standards

Criteria, Condition, Cause, Recommendation, Management’s Response, Status

End of Presentation

QUESTIONS?

Sacramento Office

2515 Venture Oaks, Suite 135

Sacramento, CA 95833

Tel (916) 929-0540

Fax (916) 929-0541

www.muncpas.com

Justin J. Williams, CPA, CVA – Partner

jjw@muncpas.com

PRESENTER

MANN • URRUTIA • NELSON CPAS & ASSOCIATES, LLP