Introductions Administrative Protocols Group Selections Chapter One Lecture Chapter One Problems

Chapter 1

Exams Project (8 groups of 3 or 4) -Governmental topics -Nonprofit topics Pick your group and sit together

Chapter 1

Different missions and different structure

-the goal is something other than earning a profit -no defined ownership (the power of the people)

Not necessarily revenue based

-revenue is often driven by the necessary expenditure level -revenue not necessarily driven by demand (butthere is the power to tax) -revenue not always linked to expenses (no matching concept)

Budgets Govern
-if revenue is not driven by demand, then legally imposed by the budget -thus, the budget is the single most important document -accounting and financial reporting are based around the budget -less distinction between internal and external reports

Chapter 1

Budgets must be balanced

-inter-period equity (Table 1-1)

Assets and resources are different

-capital assets are sometimes just there to serve not earn -resources can be restricted for a specific purpose (fund accounting)

SUMMARY Yeah, governmental not-for-profit accounting may be the oddest thing you have ever seen!

Chapter 1

There are about 88,000 government entities and over one million NFP in the United States! Larger section of commerce then some think (Table 1-2) Short-term focus (about the length of one term) (breeding ground for huge ethical issues) Shhhgovernments and NFP engages in business-like activities Note that governments and NFP are also not exactly alike!

Chapter 1

The purposes (as noted in GASB Concepts Stmt No.1) for which external financial statements vary but allow users:

Assess financial condition can they meet their obligations and continue to supply essential services? Compare actual results with the budget did they adhere to that very important document? Determine compliance with laws, etc. were they ethical with our money? Evaluate efficiency and effectiveness were outcomes consistent with the level of resource inputs?

Chapter 1

The main users of the financial statements are the parties to whom the organizations are accounting, including:

Governing Boards elected or appointed Investors and Creditors bondholders Citizens and Organization Members the general public Donors and Grantors where did my money go? Regulatory Agencies ensure law compliance Employees and Others love to keep that job!
Chapter 1

Governmental Accounting Standards Board (GASB) ACCOUNTABILITY is the cornerstone of all financial reporting in government, (GASB Concepts Statement No. 1, par. 56). And there are three sub-objectives:

Inter-period Equity Financial reporting should provide information to determine

whether current-year revenues were sufficient to pay for current-year services.

Budgetary and Fiscal Compliance Financial reporting should demonstrate whether

resources were obtained and used in accordance with the entitys legally adopted budget; it should also demonstrate compliance with other finance-related legal or contractual requirements.

Service Efforts Costs and Accomplishments Financial reporting should provide

information to assist users in assessing the service efforts costs and accomplishments of the governmental entity.

Chapter 1

10

Financial Accounting Standards Board (FASB)

Similar to governmental objectives; Not as focused on budgetary compliance as GASB. See Table 1-4 for a complete listing

Chapter 1

11

In this course you will become familiar with current GASB, FASB, and FASAB standards relative to governmental and not-for-profit organizations. Accounting and reporting for governmental and not-forprofit entities differ from those of for-profit entities because each type of entity has different purposes and reporting objectives.

Chapter 1

12