An important feature of the financial statements of state and local governments is the two-layer

reporting system. In addition to the traditional fund financial statements, the Governmental

Accounting Standard Board (GASB) issued Statement No. 34 to add a new layer of reporting,

the government-wide financial statements. The government-wide statements are presented

using the full accrual basis of accounting and with the economic resources' measurement

focus. Combined with the fund level statements, the financial overview of the governmentwide financial statements provides a comprehensive evaluation of the overall financial

condition and operating results of a government. City of Sugar Land in Texas is selected as a

good example to illustrate the two-layer financial reporting system. Most students in our school

are familiar with the city and its services, facilities, and infrastructures. It serves as an

interesting case for students in learning its activities and accounting system. The city has a

population of about 90,000, and its 2014-2015 budget is $181.59 million. It is a full-service

municipality engaging in both governmental activities (i.e., police and fire protection, curbside

recycling, parks and recreation, public works, planning / zoning) and business- activities

(i.e. water / wastewater utilities, solid waste collection, a regional airport). But the city does

not have fiduciary activities. During the past years, the city has seen continuous economic

growth, and has been named one of the top 50 best places to live in the US. The most recent

CAFR can be obtained from the city's website. After going over the general structure of the

reports, the students are asked to focus on the financial section, including the management

discussion and analyses (MD&A), government-wide financial statements and the

governmental funds financial statements. Then, a written summary from each student is

required to address the following questions.

1) What are the programs/functions reported in the Government-wide Statement of

Activities? By how much has the city's Net Position increased from the last fiscal year?

2) Why is fund accounting used in governmental accounting? Which types of

governmental funds and enterprise funds does the city have?

3) What are the major revenues for the city's governmental funds? What are the three

major revenue sources for the city? How is sales tax collected by the city? What is

franchise tax?

4) What is the revenue recognition policy for the city's governmental funds? How is the

policy different from revenue recognition in for-profit companies?

5) In which situation will the city issue bond? What sources can the city rely upon to make

payments for the premium and interest related to the bond?

6) What is restricted fund? What are the examples of restricted fund in the city?

7) How does the city balance its budget, especially when the projected expenditures exceed

the projected revenues?

8) What is an interfund transfer? Why are interfund transfers closely monitored by the

government?

9) Why is reconciliation needed between the fund financial statements and governmentwide financial statements? Please give one or two example (s).