Using the annual financial report obtained for Exercise 1–1, answer the following questions:

a. Review the General Fund column of the Balance Sheet for governmental funds. What are the major assets? Liabilities? What categories of Fund Balances are reported?

b. Review the General Fund column of the governmental funds Statement of Revenues, Expenditures, and Changes in Fund Balances. Prepare a schedule showing percentages of revenues by source. Prepare a schedule showing percentages of expenditures by function. Does your government have significant transfers in or out? Can you identify the fund that provides or receives these resources? Does your government have any other financing sources or uses? Special and/or extraordinary items?

c. Does your government report any special revenue funds as major funds in the governmental fund statements? What are they? What are the major revenue sources? Expenditure functions?

d. Review the notes to the financial statements to determine the measurement focus and basis of accounting used to prepare the governmental fund financial statements. Do the notes describe modified accrual accounting in a manner consistent with this book? Which revenue sources are subject to accrual? Are expenditures generally recognized when goods and services are received? Which specific modifications to accrual accounting are mentioned in the notes?

e. Review the General Fund column of the governmental fund statements from the point of view of a financial analyst. Is the Fund Balance as of the balance sheet date larger or smaller than at the beginning of the year? Are reasons for the change apparent from the statements? Compute a ratio of Fund Balance/General Fund Revenues and compare it with your class members’ ratios.