Question

Nancy is a new staff accountant for the City of Rockford and has been part of the financial services department for about 6 months. The City has a professional development program that allows staff members, with supervisor approval, to advance their education and/or pursue professional certification. She feels fortunate that her supervisor, Jerrod, is supportive of her efforts to earn both her CPA license and CGFM certification and he approved her participation in the professional development program Recently, Nancy has been assigned to take over the infrastructure asset accounts previously maintained by Jerrod. Her responsibilities include: 1) journalize expenditures related to these assets 2) prepare quarterly depreciation adjusting entries for those assets ineligible for the modified approach and, 3) maintain the modified approach documentation for the eligible infrastructure assets. In preparation for her first set of quarterly reports on infrastructure assets, Nancy is reviewing prior quarterly documentation and reports. Nancy observes and concludes the following: 1) Ongoing expenditures for maintaining the eligible city-owned sidewalk subsystem meet the definition of repairs and maintenance and/or did not meet the capitalization threshold for the city. Nonetheless, these expenditures were capitalized instead of expensed. The summary reports previously prepared by Jerrod for the city council did not provide detail regarding the nature of the expenditures. Instead, the summary reports simply listed the capital expenditures as capital expenditures 2) If the expenditures had been expensed instead of capitalized, the infrastructure condition level as expressed in dollar terms, established by the city council would not be met. 3) The three most recent condition assessment reports were prepared by Patterson Consulting and Construction. The condition assessment reports confirmed that the service utility of the sidewalk subsystem is preserved at the established condition level set by the city council. 4) Nancy notes that the invoices show that Patterson Consulting and Construction not only prepared the condition assessment reports but also completed the majority of sidewalk preservation work. 5) Nancy's research of GASB standards for infrastructure asset accounting tells her that if infrastructure assets are not preserved approximately at or above the established condition level, the modified approach may no longer be used and those assets will need to be depreciated Interestingly, Nancy lunches with the individual that answers telephone and email communications for the city's 'citizen communication and interface center'. Nancy's lunch partner tells her that the most common complaint received in the last 6 months dealt with the lack of repair of city sidewalk cracks. Also, Nancy overheard a conversation between her supervisor, Jerrod, and Kyle Patterson, the owner of Patterson Consulting and Construction that revealed Kyle as her supervisor's brother-in-law.

Answer 1

Nancy, as a staff accountant of the City of Rockford have been assigned some tasks. She finds her supervisors being so supportive as they allow her to take up professional courses during her work schedules. Nancy gets overwhelmed by this response for the time being.

But after spending some time she finds out the real picture behind this.

It comes to her notice that supervisors are involved in some mismanagement of things and are not keeping proper records of the expenses made. As a part of her job, while going through the previous records she finds things are not in proper shape and accounts statements are mishandled. It was no where complying with GASB Standard of Infrastructure Accounting. She also finds the expenses made for the repairs and maintenance of the sidewalk does not meets the expectation and they got lots of public complaints in last couple of months.

It was also observed that, Kyle Patterson, owner of Patterson Consulting and Construction was assigned assessing these projects only because he is one of the close relative of Supervisor. Nancy also discovers some of the invoices stating that this construction company was also involved in completing major parts of the project. So in a nutshell, they were assessing the works of their own.

The above case depicts that the supervisors were personally biased in managing things and never cared about problems faced by residents of the city.