Exercise 7-16

the land? rises and All applicable Exercises and Problems are available with Connect. lems 7-16. Examine the CAFR. (LO7-2 through LO7-4) Utilizing the comprehen. sive annual financial report (CAFR) obtained for Exercise 1-17, follow these instructions: a. Internal Service Funds. (1) Use of Funds. What activities of the government are reported as being administered by internal service funds? If internal service funds are not used by the reporting entity, does the report disclose how financing and accounting for activities such as purchasing, motor pools, printing, data processing, and other activities commonly used by more than one fund are handled? Does the report state the basis of accounting used for the internal service funds? (2) Fund Disclosure. In the balance sheet(s) or statement(s) of net position displaying information for the internal service fund(s), are current, capital, and other assets separately displayed? If there are receivables (other than from other funds or other governments), are allowances for estimated uncollectibles provided? Are allowances for depreciation deducted from related capital asset accounts? Are current liabilities and long-term debt properly distinguished in the balance sheet? Are long-term loans from other funds properly distinguished from capital contributions received from other funds? From what sources were revenues actually obtained by each internal service fund? How are costs and expenses of each fund classified? Are noncash expenses, such as depreciation, separately disclosed? Do the revenues of each fund exceed the costs and expenses of the period? If Chapter 7 Accounting for the Business-type Activities of State and Local Governments 311 so, do the statements or the accompanying notes explain how the excess is being used or how the deficiency is being financed? (3) Statement of Cash Flows. Is a statement of cash flows presented for internal service funds? If so, how does the cash provided by operations shown in this statement relate to the revenues and expenses shown in the statement of revenues, expenses, and changes in fund net position, or other similarly titled operating statement? Are cash flows from financing activities presented separately for noncapital- and capital-related activities? Is there a section for cash flows from investing activities? (4) Government-wide Financial Statements. Is there a column for business-type activities on the statement of net position and statement of activities? Is there any evidence that the internal service fund account balances were collapsed into the Governmental Activities column? If enterprise funds are the predominant participants in the internal service fund, do you see evidence that the internal service fund balances are reported in the Business-type Activities column of the governmentwide statements? b. Enterprise Funds. (1) Use of Funds. What activities of the government are reported as being administered by enterprise funds? Does the government own and operate its water utility? Electric utility? Gas utility? Transportation system? Are combining statements presented in the financial section of the CAFR for all enterprise funds, or are separate statements presented for each enterprise fund? Do all enterprise funds use accrual accounting? Are all funds in this category earning revenues at least equal to costs and expenses? If not, how is the operating deficit being financed? Do the notes include segment information on individual enterprise funds where applicable (see "Required Segment Information" in this chapter's Appendix)? Are sales to other funds or other governments separately disclosed? Are there receivables from other funds or other governments? How are receivables from component units, if any, disclosed? Is there any evidence that enterprise funds contribute amounts to the General Fund in lieu of taxes to help support services received by the enterprise? Is there any evidence that enterprise funds make excessively large contributions to the General Fund or any other funds? (2) Utility Funds. Is it possible to tell from the report whether utilities of this government are subject to the same regulations as investor-owned utilities in the same state? (If the utility statements use account titles prescribed by the NARUC and the FERC, as described in this chapter, there is a good chance that the government-owned utilities are subject to at least some supervision by a state regulatory agency.) Is depreciation taken on the utility plant? Are accounting policies and accounting changes properly disclosed? If so, what method of depre ciation is being used? Does each utility account for its own debt ser vice and construction activities in the manner described in this chapter What special funds or restricted assets are utilized by each utility? (3) Government-wide Financial Statements. What proportion of the n position of the business-type activities are reported as net investme in capital assets, restricted, and unrestricted? Were the business-ty activities profitable; that is, did revenues exceed expenses