Sagan University, a government university, had no endowments prior to September 1, 2011. The following transactions took place during the fiscal year ended August 31, 2012:
At the beginning of the year, a cash donation of $900,000 was received to establish Endowment X, and another donation of $600,000, also in cash, was received for the purpose of establishing Endowment Y. The income from these endowments is restricted for specific purposes. It was decided to invest this money immediately; to pool the investments of both endowments; and to share earnings, including any gains or losses on sales of investments, at the end of the year based on the ratio of the original contributions of each endowment.
Securities with a par value of $1,000,000 were purchased at a premium of $10,000.
Securities with a par value of $191,500 were acquired at a discount of $2,000; accrued interest at date of purchase amounted to $500.
The university trustees voted to pool the investments of a new endowment, Endowment Z, with the investments of Endowments X and Y under the same conditions as applied to the latter two endowments. The investments of Endowment Z at the date it joined the pool at midyear amounted to $290,000 at book value and $300,000 at market value. (Hereafter, the investment pool earnings are to be shared 9:6:3.)
Cash dividends received from the pooled investments during the year amounted to $70,000, and interest receipts were $5,500.
Premiums of $500 and discounts of $100 were amortized.
Securities carried at $30,000 were sold at a gain of $2,400.
Each endowment was credited with its share of the investment earnings for the year (see transactions 1 and 4).
A provision of Endowment Y is that a minimum of $75,000 each year, whether from earnings or principal or both, is to be made available for unrestricted uses.
An apartment complex comprising land, buildings, and equipment valued at $800,000 was donated to the university, distributed as follows: land, $80,000; buildings, $500,000; equipment, $220,000. The donor stipulated that an endowment (designated as Endowment N) should be established and that the income there from should be used for a restricted operating purpose.
Unrestricted resources of $150,000 were set aside by the board as a quasi-endowment (or fund functioning as an endowment) and was designated Endowment O.
A trust fund in the amount of $350,000 (cash) was set up by a donor with the stipulation that the income was to go to the university to be used for general purposes. This fund was designated Endowment P.
Prepare the necessary journal entries for Sagan University for the 2011-2012 fiscal year.
Explain how each transaction affects the net position classifications.
Final Project Part 5
The CAFR is often described as a general purpose financial report because it is designed to satisfy the information needs of a wide array of users and stakeholders.
Identify at least five user groups for the CAFR. Based on their intended use, which sections and statements are more helpful to each identified user? For the selected CAFR, identify a function or service that is or could be performed by an ONPO. Identify such an organization and obtain its financial statements. Review the financial statements and using the CAFR you selected for FairFax County as a basis for comparison with the ONPO, answer the following questions:
Could this function or service also be outsourced to a for-profit entity? Explain why or why not.
Compare and contrast the financial statements of the selected CAFR to those of the NPO. Identify the key differences in the format and content of the basic financial statements.
Given the differences in the financial reporting practices and requirements of these for-profit, not-for-profit, and governmental entities, how could stakeholders effectively compare their operating performance and service-delivery effectiveness?
Does the government list a college or university as a component unit or related affiliate in the CAFR? If so, how is the college or university presented—blended or discretely?
In your opinion, how significantly does the college support the mission of the primary government? Is this consistent with the manner in which the college is reported in the financial statements?
If there is no college reported in the CAFR, secure the financial statements of a college or university within the boundaries of the selected government. Is the college publicly or privately supported? What disclosures are made within the financial statements of the college, if any, relating to the government? Are any references made in the CAFR related to this college?
In addition, compile and submit the complete final project after incorporating your facilitator's feedback.
Accounting for endowment and Discussion on CAFR
ACC/548 Govt & Not-forProfit
GASB Statement 34 is a pretty big deal in government accounting. It mandates that governments' basic financial statements include two separate but related sets of statements.
1. What are these two separate but related sets of statements? What are their different purposes? What is the fundamental difference between the two?
2. We discussed above the different financial statements required for all the types of funds. What financial statements are required for government-wide statements?
3. How does the statement of net assets differ from the balance sheet of a business?
4. How does the Statement of Activities differ from the income statement of a business?
5. Go to the GASB website and look up Concept Statement #4. First what is the difference between a GASB Statement (like Statement 34) and a Concept Statement? What does Concept Statement 4 cover? Summarize briefly and include the link to it please.
6. Let's look at the concepts of restrictions in governmental accounting (it is slightly different in NP accounting). What do we mean by "restrictions"? What are the different GASB categories of restricted net assets? To what statements do these apply?
7. Go to a CAFR. Are there any restricted accounts noted? What are they? Where are they?
8. What is the difference between reserved funds and restricted funds? The book gives some examples of reserved funds...what are they?
9. In your own words, what are internal service funds? Give examples. Look at your CAFR and make a brief statement telling us what type of internal service funds your CAFR uses.
10. Are internal funds classified the same in fund statements as in government wide statements? How are they different?