GOVERNMENTAL & NONPROFIT ENTITIES

An Overview of Accounting & Reporting

DISTINGUISHING CHARACTERISTICS - -OF GOVERNMENTAL AND NOT FOR

PROFIT ENTITIES

R eceipts of significant amounts of resources from resource providers who do not expect to

receive either repayment or economic benefits propotionate to the resources;provided

O perating purposes that are other than to provide goods or services at a profit or profit

, ;equivalent and A bsense of defined ownership interests that

, , , can be sold transferred or redeemed or that convey entitlement to a share of a residual

distribution of resources in the event of .liquidation of the organization

D -ISTINCTION BETWEEN FOR PROFIT AND NOTPROFIT

ORGANZATIONS

I n case of profitable organizations performance is measured in terms of

. - - profitibility In case of not for profit, organizations the performance measurement

.is more sujective N .umber of reporting Budget Audit

DEFINITION OF GOVERNMENTACCOUNTING

Government Accounting deals with the, ( collection measurement classification and), , valuation communication control and

, stewardship of receipts expenditures and .related activities in the government sector

PURPOSES OF GOVENRMENTACCOUNTING

T , o comply with the constitutional statutory ;and other legal requirements of the country

R ;elated to budget classifications I dentify the objects and purposes for which

;funds have been received and expended F acilitate audit by audit by external review

;authorities P ermit effective administraive control of funds

, and operations programme management and ;internal audit

PURPOSES OF GOVENRMENTACCOUNTING

E ffectively disclose the economic and ;financial results of programme operations

C apable of serving the basic financial information needs of development planning

, and programming and the review and appraisal of performance in physical and

;financial terms P rovide financial data useful for economic

.analysis

STANDARD SETTING IN THE GOVERNMENTAL & NONPROFIT

SECTOR

1948- A committee was formed by the ( ) Municipal Finance Officers Association MFOA

to follow up on earlier recommendations the .MFOA had made

1968- , , Governmental Accounting Auditing and ( ). Financial Reporting GAAFR S erved as the

primary guide for accounting and financial.reporting

1979- National Council on Governmental 1968 .Accounting to update GAAFR

1984- Governmental Accounting Standards ( ) Board GASB

STANDARD SETTING IN THE GOVERNMENTAL & NONPROFIT

SECTOR

T he GASB has the responsibility for establishing accounting and financial

- - reporting standards for not for profit organizations which are considered to be

, ;governmentally related and

T he FASB has the responsibility for establishing accounting and financial

-reporting standards for nongovernmental not- . for profit organizations

OBJECTIVES OF FINANCIAL: REPORTING CONCEPTS

. 1STATEMENT NO

U NDERLYING CONCEPTS

Accountability Interperiod equity

ACCOUNTABILITY

“ governmental financial repoting should ( ) provide information to assist users in a

( ) assessing accountability and b making, .”economic social and political decisions

:Accountability implies P roviding infromation about decisions and actions

;taken during the course of operating an entity H ;aving external parties review the informations T .aking corrective action where necessary

INTERPERIOD EQUITY “ extent to which the services which the

constituency existing during a particular repoting period has paid for the services

which the constituency used during the.”period

I –t is considered by R ;equiring balanced budgets R equiring that any deficit generated in one period

; be made up in the subsequent year or E , stablishing limited time periods for debt issues

forcing a given generation to repay the debt .incurred for the assets it uses

U SES OF FINANCIAL REPORTS

T o compare actual financial results with the ;legally adopted budget

T o assist in determining compliance with- , , ;finance related laws rules and regulations

T o assess financial condition and results of, ;operations and

T o assist in evaluating efficiency and.effectiveness

THE GASB OBJECTIVES

F inancial reporting should be assist in fulfilling’ government s duty to be publicly accountable

and should enable users to assess thataccountability

F inancial reporting should assist users in evaluating the operating results of the

governmental entity for the year F inancial reporting should assist the users in

assessing the level of services that can be provided by the governmental entity and its

ability to meet its obligations as they become.due

F INANCIAL REPORTING SHOULD BE ASSIST IN ’ FULFILLING GOVERNMENT S DUTY TO BE PUBLICLY

ACCOUNTABLE AND SHOULD ENABLE USERS TO ASSESS THAT ACCOUNTABILITY

T o determine whether current year revenues - were sufficient to pay for current year

.services W hether resources were obtained and used in

’ accordance with the entity s legally adopted.budget

P rovide information to assist the users in , , assessing the service efforts costs and

.accomplishments of the governmental entity

F INANCIAL REPORTING SHOULD ASSIST USERS IN EVALUATING THE OPERATING RESULTS OF THE

GOVERNMENTAL ENTITY FOR THE YEAR

P rovide information .about sources and uses of financial resources about how the governmental entity financed its

activities and met its cash requirements ’ to determine whether the entity s financial

position improved or deteriorated as a result of ’ .the year s operations

F INANCIAL REPORTING SHOULD ASSIST THE USERS IN ASSESSING THE LEVEL OF SERVICES THAT CAN BE PROVIDED BY THE GOVERNMENTAL ENTITY AND ITS ABILITY TO MEET ITS OBLIGATIONS AS THEY

BECOME DUE

Provide information about the financial position and condition of a governmental

.entity P rovide information about a governmental

’ entity s physical and other nonfinancial resources having useful lives that extend

.beyond the current year D isclose legal or contractual restrictions on

resources and risks of potential loss of.resources

CONTEXT FOR THE GASBOBJECTIVES

Citizens Governmental Entities ’ Governmental entity s budget ’ Government s services