KIM WOODS

1) A governmental budget is legally binding in that expenditures (and revenues) are "appropriated". This means that the total expenditures for the year are approved by the governing body, such as the City Council or Board of Trustees. In our city code, there are laws about how and when municipal budgets must be approved. These are called "Municipal Fiscal Procedures".

It is illegal to spend over the appropriated budgetary authority. We track our expenditures during the year, and if we need more budgetary authority, we have an budget hearing. Many municipalities (like cities and school districts) do one budget adjustment hearing at the end of the fiscal year to account for any overruns. To me, this goes against the spirit of the law as appropriations should be made before the funds are expended.

Too often, I have seen the budgetary authority viewed as a "license to spend", meaning there is more focus on spending all of the budget instead of sound financial management. There is a "use it or lose it" mentality.

Class, what are your thoughts on this?

2) Recall from week one that the measurement focus of the General Fund is different from the measurement focus of the governmental-wide financial statements. Why is there a different focus?

The basis of accounting is also different -- why is this?

3) Fund journal entries and financial statements compared to government wide journal entries and financial statements. 

Class, let's take a look at the homework template I provided -- notice how outflow of funds, like payments to vendors, are called "expenditures" in the general fund and "expenses" in the governmental activities. Why is there this difference? What other differences do you notice?

The template for 4-10, which is much like the problem for your week 2 case study, is a good place to start this discussion. Also please let me know if you have any questions on the homework!

4) Class, the general fund, which is the most major fund of a government, uses the current financial resources focus.  What are your thoughts about this "current" focus, and fiscal responsibility focusing on the budget?  Is this too narrow of a focus, or too short-term of a focus?  Why or why not?  As a financial manager in a governmental or NFP entity, how would you also focus on the longer term viability of your programs?

ACCT567 Case Study I (Week 2)

The General Fund of Middleville has presented you with the following trial balance as of June 30, 2011.

Debits Credits

Cash $ 40,000

Taxes Receivable- Delinquent 142,000

Estimated Uncollectible Taxes- Delinquent 9,100

Interest and Penalties Receivable 32,000

Vouchers Payable 24,000

Budgetary Fund Balance-Reserve for Encumbrances 10,200

Fund Balance _________ 170,700

$ 214,000 $214,000

The information that is being presented to you pertains to the transactions for the city of Middleville for the fiscal year ended June 30, 2012.

1. The following budget was adopted by the city council:

Estimated Revenues:

Property Taxes $ 650,000

Fines and Penalties 44,000

Licenses and Permits 150,000

Federal Grant 85,000

929,000

Appropriations and Other Financing Uses

Public Safety 402,000

General Government 263,000

Public Works 102,000

Parks and Recreation 92,000

Transfers Out 34,000

893,000

2. Encumbrances outstanding at the end of the year were re-opened.

3. Property taxes of $ 660,000 were levied. It is estimated that 2.5% of the property taxes levied are expected to be uncollectible/

4. Purchase orders issued for the 2012 fiscal year were as follows:

Public Safety, $ 395,000; General Government, $ 259,000; Public Works, $ 100,000; Parks and Recreation, $ 98,000.

5. Cash collected for the Federal Grant from the Federal Government, $ 94,000.

6. Cash collected and transferred in as follows:

Fines and Penalties 43,000

Licenses and Permits 164,000

7. Cash collected on property taxes were as follows: Current taxes, $559,000, Delinquent Taxes, $ 41,000 and $ 22,000 of interest and penalties were collected.

8. Purchase orders issued in 2012 in the following amounts were filled in at the following amounts:

Estimated Actual

Public Safety $ 395,000 $ 393,600

General Government $ 259,000 $ 258,200

Public Works $ 100,000 $ 99,400

Parks and Recreation $ 98,000 $ 97,500

--------------- ---------------

$ 852,000 $ 848,700

9. Vouchers paid amounted to $ 840,000 and the transfer out to the Debt Service Fund, $34,000.

10. Please reclassify the Taxes Receivable –Current and Estimated Uncollectible Taxes- Change from Current to Delinquent.

Instructions:

a. Prepare journal entries for the fiscal year ending 2012.

b. Prepare closing entries.

c. Prepare a General Fund Statement of Revenues, Expenditures, and Changes in Fund Balance for the year ended June 30, 2012.

d. Prepare a General Fund Balance Sheet as of June 30, 2012.

Grading Rubric for Case Study 1: