You are the chief financial officer of a local government. You have been asked to discuss the relevance of budgeting in today's government to a group of newly elected city administrators at a national conference. Prepare a PowerPoint presentation of 10-12 slides. Your presentation should address the following points:
What is a budget? What information should it include?
Why is budgeting important to governments?
Describe the various types of budgets prepared by governmental entities and review their purpose.
Provide an overview of the budgetary accounting process (how to record budget, close entries, and so on).
Review the budgetary reporting requirements. Which statements and schedules are required by GASB?
What information can a user (public manager or policy decision maker) hope to derive by reviewing these documents?
Add additional information in the Notes section of the PowerPoint presentation.
Indicate which of the following transactions require entries to accounts used only for budgetary control purposes, even if other accounts also are involved. Prepare the general journal entries required. Assuming a beginning total fund balance of $1,000,000, what would the total fund balance be after taking into consideration the effects of these transactions?
Adopted the budget—estimated revenues of $5,000,000 and appropriations of $4,900,000.
Levied property taxes of $3,500,000. One percent has been uncollectible historically.
Paid salaries of $2,700,000.
Hired a new director of public works at an agreed salary of $60,000.
Ordered materials and supplies expected to cost $103,000.
Amended the appropriation for public works to increase it by $10,000.
Received half of the materials and supplies order at an actual cost of $51,500.
Final Project Part 3 (of 5)
Review the CAFR you selected Fairfax County. Based on your review, answer the following questions:
In which section of the CAFR can the budget-to-actual comparisons of the major funds be found?
Are the actual amounts on a GAAP or a budgetary basis? Do the statements include a reconciliation of any differences between GAAP and budgetary amounts? If so, what are the largest reconciling items?
Does the government encumber goods or services that have been ordered but not yet received? How, if at all, are these goods or services reflected in the governmental fund balance sheet?
What other sections of the CAFR typically present budgetary information?
Do you think the budgetary disclosures in the report fully address the need of all relevant stakeholder groups? Explain your response
Powerpoint and Word documents attached review CAFR, highlight budgetary control transactions and discuss the relevance of budgeting for nonprofit organizations.
Governmental Accounting and Not-For Profit Organizations
Accounting practices for interest expenditures may neither reflect actual economic costs nor mirror those for interest revenues.
A town plans to borrow about $10 million and is considering three alternatives. A town official requests your guidance on the economic cost of each of the arrangements and advice as to how each would affect the town's reported expenditures. The alternatives are:
1. The town would issue $10 million of twenty-year, 6 percent coupon bonds on September 1, 2004. The bonds would be issued at par. The town would be required to make its first interest payment of $200,000 on January 1, 2005.
2. The town would issue $10 million of twenty-year, 6 percent bonds on July 1, 2004. Thebonds would be sold for $9,552,293, a price that reflects an annual yield (effective interest rate) of 6.4 percent. The town would be required to make its first interest payment of $300,000 on December 31, 2004.
3. The town would issue $32,071,355 of twenty-year, zero coupon bonds on July 1, 2004. The bonds would be sold for $10 million, an amount that reflects an annual yield of 6 percent. The bonds require no payment of principal or interest until June 30, 2024.
1. For each of the town's three alternatives, what would be the town's economic cost of using the funds in the year ending December 31, 2004? What would be the amount of interest expenditure that the town would be required to report for the year ending December 31, 2004 in its governmental funds?
2. Suppose that the town elects the first option and issues $10 million of twenty-year, 6 percent coupon bonds at par on September 1, 2004. The town establishes a debt service fund to account for resources that it sets aside to pay principal and interest on the bonds. On December 31, 2004, the town transfers $200,000 from the general fund to the debt service fund to cover the first interest payment that is due on January 1, 2005.
a. How would the transfer be reported in the general fund?
b. How would the transfer be reported in the debt service fund? What options are
available to the town to record 2004 interest in the debt service fund?
3. Suppose that the town borrowed $10 million on September 1, 2004, and temporarily invested the proceeds in two-year, 6 percent Treasury notes. The first payment of debt interest, $200,000, is payable on January 1, 2005.
a. What would be the town's economic gain from investing the funds in the year ending December 31, 2004? Ignore borrowing costs.
b. How much investment revenue should the town report for the year ending December 31, 2004? Assume there was no change in prevailing interest rates.