Using the annual financial report obtained for Exercise 1–1, answer the following
questions:
a. Examine the governmental fund financial statements. Are any major capital
projects funds included? If so, list them. Attempt to find out the nature and
purpose of the projects from the letter of transmittal, the notes, or MD&A.
What are the major sources of funding, such as bond sales, intergovernmental
grants, and transfers from other funds? Were the projects completed
during the year?
b. Again looking at the governmental fund financial statements, are any major
debt service funds included? If so list them. What are the sources of funding
for these debt service payments?
c. Does your report include supplemental information including combining
statements for nonmajor funds? If so, are any capital projects and debt service
funds included? If so, list them. Indicate the major revenue and other
financing source categories for these funds.
d. Look at the governmental fund Statement of Revenues, Expenditures, and
Changes in Fund Balances, specifically the expenditure classification.
Compute a ratio of capital outlay/total expenditures. Again, compute a ratio
of debt service/total expenditures. Compare those with your classmates’
ratios. Comment on the possible meaning of these ratios.
e. Look at the notes to the financial statements, specifically the note (in the
summary of significant accounting policies) regarding the definition of
modified accrual accounting. Does the note specifically indicate that modified
accrual accounting is used for capital projects and debt service funds?
Does the note indicate that debt service payments, both principal and interest,
are recorded as an expenditure when due?
f. Does your government report capital leases payable in the governmentwide
Statement of Net Assets? If so, can you determine if new capital
leases were initiated during the year? Can you trace the payments related
to capital leases?
g. Does your government report any permanent funds, either major or nonmajor?
If so, list them. What are the amounts of the permanent resources
available for governmental purposes? What is/are the governmental
purpose(s)?