Question

Utilizing the city of Jackson 2018 CAFR follow the instructions and answer the questions

1. Custodial Funds. Note that depending on the CAFR fiscal year, agency funds rather than custodial funds may be reported. Does the government operate a tax custodial fund or participate in a tax custodial fund operated by another government? Does the government act as a custodian for owners of property within a special assessment district and for the creditors of those property owners? Does the government operate one or more pass-through custodial funds? If so, describe.
2. Investment Trust Funds. Does the government operate, or participate in, a cash and investment pool? If so, is the pool operated as an investment trust fund? If there is a cash and investment pool and it is not reported as an investment trust fund, how is it reported? Explain.
3. Private-Purpose Trust Funds. Does the government operate one or more private-purpose trust funds? If yes, explain the purpose(s).
4. Pension Trust Funds. Are the government employees covered by a retirement fund operated by the government, by the state, by the federal Social Security Administration, or by two or more of these? If the government operates one or more pension plans, or retirement systems, is a reference made to the actuary’s report in the notes to the financial statements? Is a net pension liability reported in the government-wide statement of net position and/or in a proprietary fund? Is all the pension information specified by GASB standards and discussed in Chapter 8 presented in the notes to the financial statements? Are all required supplementary schedules and related notes reported in the comprehensive annual financial report? Page 350
5. Fiduciary Fund Financial Statements. Are all fiduciary funds shown in a statement of fiduciary net position and a statement of changes in fiduciary net position? Does the financial report state the basis of accounting used for trust and custodial funds? Are custodial funds properly disclosed in the financial statements? Does the report contain a schedule or list of investments of trust funds? Are investments reported at fair value? Is the net increase (decrease) shown separately from interest and dividend income?

Answer 1

Proprietary funds:

Proprietary funds consist of user charges collected by the government. The accounting standards require the government to treat the proprietary funds like the organizations that aim for profit. The two types of proprietary funds include the internal service fund and enterprise fund.

a)

Internal service fund:

Internal service funds record the transaction relating to purchasing and distribution within the departments of the government. It is necessary that there should be sufficient amount of internal service funds to recover the operating costs.

1)

Determine the use of internal service fund by City of L:

• The City of L does not maintain internal service funds.

• The report does not clearly specify the treatment of purchasing, data processing, and motor pools. However, the report records the services as revenues and expenses for each fund. It reconciles the transfers between government funds and enterprise funds in the government wide financial statements.

• The report does not provide the basis of accounting for internal service funds because it does not have any internal service fund.

2)

Disclosure of fund:

There is no balance sheet available to evaluate the fund disclosure of the internal service fund because the City of L does not have any internal service fund.

3)

Evaluate the statement of cash flows for internal service funds:

There is no “statement of cash flows” for the internal service fund of City L. It is because the City of L does not maintain internal service funds.

4)

Evaluate the aspects related to internal service fund” in government-wide finanacial statement:

The City of L does not include the balance of internal service fund in the “governmental activities column” or “business type activities” column. It is because the City of L has no internal service funds.

b)

Enterprise funds:

The enterprise funds comprise of funds that provide services to the public for a specified user charge. There are certain conditions as per the "Governmental accounting standards board codification 1300.109" to treat any activity as an enterprise fund. They are as follows:

• The activity should be financed by debt

• The activity should charge fees to recover the revenue and capital costs as required by the law.

• The price charged by the activity should be such that the price can recover the capital and revenue costs.

1)

Determine the use of enterprise fund by City of L:

• The City of L considers the following activities as enterprise funds:

• Airport fund

• Harbor fund

• Power fund

• Water fund

• Sewer fund

• Convention center fund

• The government only owns the water utility fund and Power fund. The gas utility comes under the power fund. The transportation is partly owned by the government of City of L.

• The statements are combined for all the enterprise funds.

• Every enterprise fund earns good operating revenue. The power fund has the highest operating revenue at 54.19 percent. The convention centers operating revenue is 0.47 percent.

• The report of City of L does provide the "required supplementary information" for all the funds.

• Only the convention center fund receives grants. The other funds do not receive any grants. It reports as "transfer in" in the "statements of revenues, expenses, and change in fund net position".

• The funds other than convention center transfer funds. They report it as "transfer out" in the "statements of revenues, expenses, and change in fund net position".

• There are no large contributions by any of the enterprise funds.

2)

Evaluating the utility funds:

• The power fund of the government is subject to the regulation similar to that of investor-owned utilities. It is because the power fund of the City of L is subject to the "Federal energy regulatory commission"
• The airport fund earned 12.92 percent of the overall operating revenue. Its change in net assets was down by 14.1 percent when compared to the previous year.
• The harbor fund earned 8.28 percent of the overall operating revenue. Its change in net assets was up by 17.1 percent when compared to the previous year.
• The power fund earned 54.19 percent of the overall operating revenue. Its change in net assets was down by 25.5 percent when compared to the previous year.

• The water fund earned 14.12 percent of the overall operating revenue. Its change in net assets was up by 313.7 percent when compared to the previous year.
• The sewer fund earned 10.02 percent of the overall operating revenue. Its change in net assets was up by 30 percent when compared to the previous year.

Depreciation, debt, and restricted assets of utility funds:

• The funds charge depreciation separately.

• The report provides information on accounting policies.

• The funds follow the straight-line method of depreciation.

• Every fund accounts for its own debt.

• The airport fund owns cash and investments in restricted assets.

3)

Evaluate the aspects related to enterprise fund" in government-wide financial statement:

• The total net position of the government is $13,983,796. The net position of business type activities is $12,375,164. Hence, the portion of net position of business type activities to the $12,375,164 total net position of the government is 88.49 percent ($12,375,164 / $13,983,796 × 100).

• Every business type activity was profitable. All the major funds saw a growth in the operating revenues.