D0 QUESTIONS SEPARATELY PLEASE

year (in millions): Amended Budget Original Budget Actual Results (Budget Basis) Revenues Property taxes $46.6 $42.5 $53.0 Sales taxes 16.3 13.6 15.1 Licenses and permits 1.1 1.0 1.0 Other 3.2 2.9 3.4 Total revenues $67.2 $60.0 $72.5 Expenditures General government $18.2 $16.2 $18.1 Public safety 29.2 25.1 28.5 Sanitation 9.7 9.4 9.6 Culture and recreation 8.1 7.8 8.1 Interest 1.4 1.4 1.4 Total expenditures $66.6 $59.9 $65.7 Excess of revenues over expenditures $ 0.6 $ 0.1 $ 6.8 You also learn the following: Beginning of Year End of Year Encumbrances (commitments) outstanding $2.7 $1.1 Supplies inventories on hand 1.8 1.0 Wages and salaries payable 0.5 0.7 Property taxes expected to be collected within 60 days 1.7 2.5 ? For purposes of budgeting, the county recognizes encumbrances as the equivalent of expenditures in the year established; for financial reporting, it recognizes expenditures when the goods or services are received, as required by GAAP. ? For purposes of budgeting, it recognizes supplies expenditures when the supplies are acquired; for financial reporting, it recognizes the expenditure when the supplies are consumed. ? For purposes of budgeting, it recognizes wages and salaries when paid; for financial reporting, it recognizes the expenditures when the employees perform their services. ? For purposes of budgeting, it recognizes as revenues only taxes actually collected during the year; for financial reporting, it recognizes taxes expected to be collected within the first sixty days of the following year. 1. Prepare the following four separate schedules in which you compare the budget-to-actual results and compute the budget variance. You need to present only the total revenues, total expenditures, and excess of revenues over expenditures. a. Actual results on a budget basis to the amended budget b. Actual results on a budget basis to the original budget c. Actual results as would be reflected in the financial statements to the amended budget restated so that it is on a financial reporting basis d. Actual results as would be reflected in the financial statements to the original budget restated so that it is on a financial reporting basis Village of Denaville Amounts Received Estimated/Appropriated Amounts Encumbered Estimated Cost Actual Cost Actual Revenues Revenues Property taxes $ 7,900 $ 7,800 Sales taxes 3,900 3,600 Licenses 300 200 Other 700 400 12,800 $12,000 Expenditures/Appropriations General government 3,000 $ 2,600 $ 2,400 $ 2,800 Public safety 6,000 5,900 5,000 4,900 Recreation 1,200 1,200 800 900 Health and sanitation 2,300 2,200 2,200 2,100 $12,500 $11,900 $10,400 $10,700 Excess of estimated revenues over appropriations 300 Beginning unassigned fund balance 1,200 Estimated unassigned ending fund balance $ 1,500 2. The county executive has boasted that the ?better than anticipated results? (based on the comparison of the schedule that appears in the financial statements) are evidence of ?sound fiscal management and effective cost controls? on the part of the county administration. Do you agree? 3. Which of the three schedules best demonstrates legal compliance? Explain. 4. Which schedule best demonstrates effective management? Explain

P. 3-8 Budget variances have to be interpreted with caution. The data presented below were taken from the books and records of the village of Denaville. All amounts are in millions. The village encumbers all outlays. As is evident from the data, some goods or services that were ordered and encumbered have not yet been received. City regulations require that all appropriations lapse at year-end. 1. Prepare summary entries to record a. the budget b. the encumbrance of the goods and services c. the receipt of the goods and services. All invoices were paid in cash. d. the actual revenues (all cash receipts) 2. Prepare summary entries to close the accounts 3. What would be the year-end a. fund balance (unassigned) b. reserve for encumbrance balance (irrespective of how classified) 4. Prepare a schedule in which you compare budgeted to actual revenues and expenditures. 5. A citizen reviews the budget to actual schedule that you have prepared. She comments on the rather substantial favorable variance between budgeted and actual expenditures and questions why the government did not spend the full amount of money that it appropriated. Briefly explain to her the nature of the variance year (in millions): Amended Budget Original Budget Actual Results (Budget Basis) Revenues Property taxes $46.6 $42.5 $53.0 Sales taxes 16.3 13.6 15.1 Licenses and permits 1.1 1.0 1.0 Other 3.2 2.9 3.4 Total revenues $67.2 $60.0 $72.5 Expenditures General government $18.2 $16.2 $18.1 Public safety 29.2 25.1 28.5 Sanitation 9.7 9.4 9.6 Culture and recreation 8.1 7.8 8.1 Interest 1.4 1.4 1.4 Total expenditures $66.6 $59.9 $65.7 Excess of revenues over expenditures $ 0.6 $ 0.1 $ 6.8 You also learn the following: Beginning of Year End of Year Encumbrances (commitments) outstanding $2.7 $1.1 Supplies inventories on hand 1.8 1.0 Wages and salaries payable 0.5 0.7 Property taxes expected to be collected within 60 days 1.7 2.5 For purposes of budgeting, the county recognizes encumbrances as the equivalent of expenditures in the year established; for financial reporting, it recognizes expenditures when the goods or services are received, as required by GAAP. For purposes of budgeting, it recognizes supplies expenditures when the supplies are acquired; for financial reporting, it recognizes the expenditure when the supplies are consumed. For purposes of budgeting, it recognizes wages and salaries when paid; for financial reporting, it recognizes the expenditures when the employees perform their services. For purposes of budgeting, it recognizes as revenues only taxes actually collected during the year; for financial reporting, it recognizes taxes expected to be collected within the first sixty days of the following year. on a budget basis to the amended budget b. Actual results on a budget basis to the original budget c. Actual results as would be reflected in the financial statements to the amended budget restated so that it is on a financial reporting basis be reflected in the financial statements to the original budget restated so that it is on a financial reporting basis Village of Denaville Amounts Received Estimated/Appropriated Amounts Encumbered Estimated Cost Actual Cost Actual Revenues Revenues Property taxes $ 7,900 $ 7,800 Sales taxes 3,900 3,600 Licenses 300 200 Other 700 400 12,800 $12,000 Expenditures/Appropriations General government 3,000 $ 2,600 $ 2,400 $ 2,800 Public safety 6,000 5,900 5,000 4,900 Recreation 1,200 1,200 800 900 Health and sanitation 2,300 2,200 2,200 2,100 $12,500 $11,900 $10,400 $10,700 Excess of estimated revenues over appropriations 300 Beginning unassigned fund balance 1,200 Estimated unassigned ending fund balance $ 1,500 2. The county executive has boasted that the \"better than anticipated results\" (based on the comparison of the schedule that appears in the financial statements) are evidence of \"sound fiscal management and effective cost controls\" on the part of the county administration. Do you agree? 3. Which of the three schedules best demonstrates legal compliance? Explain. 4. Which schedule best demonstrates effective management? Explain EX. 3-1 Select the best answer. 1. Appropriation budgets are typically concerned with a. The details of appropriated expenditures b. Long-term revenues and expenditures c. Current operating revenues and expenditures d. Capital outlays 2. Which of the following types of budgets would be most likely to include a line item \"purchase of supplies\"? a. Object classification b. Performance c. Capital d. Program 3. Per GASB Statement No. 34, a budget-to-actual comparison must include columns for the actual results and a. The original budget only b. The final budget only c. Both the original and the final budget d. Both the amended and the final budget 4. Apportionments are made during which phase of the budget cycle? a. Preparation b. Legislative adoption and executive approval c. Execution d. Reporting and auditing 5. In adopting and recording the budget a government should a. Debit estimated revenues and credit revenues b. Credit estimated revenues and debit fund balance c. Debit revenues and credit fund balance d. Debit estimated revenues and credit fund balance 6. In closing budgetary and expenditure accounts at year-end a government should a. Debit appropriations and credit expenditures b. Credit appropriations and debit expenditures c. Debit expenditures and credit fund balance d. Credit appropriations and debit fund balance 7. The prime function of budgetary entries is to a. Apportion appropriated expenditures to specific accounts b. Help the government monitor revenues and expenditures c. Amend the budget during the year d. Facilitate the year-end budget-to-actual comparisons 8. A government should debit an expenditure account upon a. Recording the budget b. Approving an apportionment c. Ordering supplies d. Recording the receipt of an invoice from its telephone service provider 9. If a government records the budget, and actual revenues exceed budgeted revenues, what would be the impact on the year-end financial statements? a. The difference between actual and budgeted revenues would be reported on neither the balance sheet nor the statement of revenues and expenditures b. The difference between actual and budgeted revenues would be recorded as a budgetary reserve on the balance sheet c. The difference between actual and budgeted revenues would be shown as a revenue contra account on the statement of revenues and expenditures d. The actual revenues would be shown on the statement of revenues and expenditures as a deduction from estimated revenues 10. A \"cash basis\" budget relative to a \"modified accrual basis\" budget a. Better facilitates the preparation of year-end financial statements in accordance with generally accepted accounting principles b. Better facilitates the day-to-day management of an organization's cash flows c. Limits the opportunities of an entity to balance its budget by arbitrarily delaying cash payments from one period to the next d. Better ensures that a government will achieve interperiod equity PROBLEMS P. 3-1 Is accrual-based budgeting preferable to cash-based budgeting? The Disability Research Institute receives its funding mainly from government grants and private contributions. In turn, it supports research and related projects carried out by universities and other not-for-profits. Most of its government grants are reimbursement (expenditure-driven) awards. That is, the government will reimburse the institute for the funds that it disburses to others. The institute estimates that the following will occur in the forthcoming year: It will be awarded $5 million in government grants, all of which will be paid out to subrecipients during the year. Of this amount, only $4.5 million will be reimbursed by the government during the year. The balance will be reimbursed in the first six months of the next year. The institute will also receive $200,000 in grant funds that were due from the previous year. It will receive $600,000 in pledges from private donors. It expects to collect $450,000 during the year and the balance in the following year. It also expects to collect $80,000 in pledges made the prior year. It will purchase new furniture and office equipment at a cost of $80,000. It currently owns its building, which it had purchased for $800,000, and additional furniture and equipment, which it acquired for $250,000. The building has a useful life of twenty-five years; the furniture and equipment have a useful life of five years. Employees will earn wages and salaries of $340,000, of which they will be paid $320,000 during the forthcoming year and the balance in the next year. It will incur other operating costs of $90,000, of which it will pay $70,000 in the forthcoming year and $20,000 in the next year. It will also pay another $10,000 in costs incurred in the previous year. 1. Prepare two budgets, one on a cash basis and the other on a full accrual basis. For convenience show both on the same schedule, with the cash budget in one column and the accrual in the other column. 2. Comment on which budget better shows whether the institute is covering the economic cost of the services that it provides. 3. Which is likely to be more useful to a. Institute managers? b. Members of the institute's board of trustees? c. Bankers from whom the institute seeks a loan? Review the Comprehensive Annual Financial Report (CAFR) that you obtained. 1. What are three main sections of the report? 2. Review the introductory section of the CAFR. a. Was the entity's annual report of the previous year awarded a \"certificate of achievement for excellence in financial reporting\" by the Government Finance Officers Association? What is the significance of this award? b. What are the key issues addressed in the letter of transmittal? 3. Review the financial section. a. Which, if any, independent audit firm performed an audit of the CAFR? b. Did the entity receive an \"unqualified\" audit opinion? If not, why not? c. Does the report contain management's discussion and analysis (MD&A)? If so, what are the key issues addressed? d. Does the report provide a reconciliation between total governmental net position per the government-wide statement of net position and total governmental fund balances per the governmental funds balance sheet? If so, what are the main reconciling items? e. What are the major governmental funds maintained by the entity? Does the entity's fund structure conform to its organizational structure? f. Does the report include \"required supplementary information\"? If so, what are the main areas addressed? g. Does the report include \"combining statements\"? If so, what is the nature of these statements? h. Does the report include other supplemental information? If so, what types of information are in this section of the report? 4. Review the statistical section. a. What is the population of the entity being reported on? b. Who is the entity's major employer? c. What types of information are included in the statistical