A permanent fund of a municipality would have the same measurement focus as a

Budgeting & Accounting Practices

The basic financial statements of the City of Greenfield, Massachusetts are prepared in accordance with Generally Accepted Accounting Principles (GAAP) in the United States of America. The Governmental Accounting Standards Board (GASB) is the recognized standard-setting body for establishing governmental accounting and financial reporting principles. The Significant accounting policies are described herein.

For budgetary financial reporting purposes, the Uniform Municipal System (UMAS) basis of accounting (established by the Commonwealth of Massachusetts) is followed, which differs from the GAAP basis of accounting, those differences are listed below. A reconciliation of budgetary-basis to GAAP-basis results for the General Fund for the fiscal year ended June 30, can be found in the City’s Comprehensive Financial Statement (CAFR) at the following website: http://greenfield-ma.gov/files/FY2015_FinancialStatements_-_Greenfield_-_signed_final.pdf

Basis of Accounting & Budgeting

The basis of accounting and the basis of budgeting determine when revenues and expenditures are recognized for the purpose of financial reporting and budget control. Accounting on a cash basis means that revenues and expenditures are recorded when cash is actually received or paid out. Most larger business employ full accrual accounting in which revenues are recorded when earned (rather than when received), and expenditures are recognized when an obligation to pay is incurred (rather than when payments is made). Capital expenses (the cost of acquiring tangible assets) are recognized over the life of the asset, not when the asset is purchased.

Governments typically employ a hybrid basis of accounting termed modified accrual. Under this system, revenues are recognized when they become measurable and available; expenditures are recognized when the obligation to pay is incurred. Capital expenditures are recognized at the time of purchase. This means that governments may experience significant increases and decreases in total expenditures from year to year because capital expenses tend to be large and unevenly timed. To help explain year to year expenditure trends, capital expenditures are reported separately from operating costs in this budget document.

The City of Greenfield uses modified accrual accounting and budgeting for its government fund types which include the general fund, special revenue funds, and capital project funds. For proprietary fund types (enterprise funds) the city uses full accrual accounting and budgeting.

Fund Accounting

Fund accounting is an accounting system organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues and expenditures as appropriate. Resources are allocated to and accounted for in individual funds based upon purpose for which they are to be spent and the means by which spending activities are controlled. Fund accounting is used by states and local government and for not-for-profit organizations that need to account for resources for which the use is restricted by donors or grantors.

Types of Funds

There are seven types of funds that can be used, as needed, by state and local governments, both general purpose and limited purpose. The types of funds are as follows:

Government Funds

The General Fund – The General Fund is the major operating fund of municipal governments, and it accounts for the vast majority of municipal operations. The General Fund is supported by revenues from real estate and personal property taxes, state and federal aid, excise taxes, investment income, fines and forfeitures, and fees and charges. Most of the municipal departments, including the schools, are supported in whole or in part by the General Fund.

Special Revenue Funds – To account for the proceeds of specific revenue sources (other than expendable rust or for major capital projects) that are legally restricted to expenditures for specific purpose. These funds are used mostly for donations, revolving, state, federal, and other intergovernmental revenue and expenditures.

Capital Project Funds – To account for financial resources to be used for the acquisition or construction of major capital facilities or acquisition of equipment – other than those financed by proprietary funds or trust funds.

Debt Service – To account for accumulation of resources for, and the payment of, general long-term debt principal and interest.

Proprietary Funds

Enterprise Funds – To account for operations (a) that are financed and operated in a manner similar to private business enterprises – where the intent of the governing body is that the costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges; or (b) where the governing body has decided the periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability or other purposes.

Internal Service Funds – To account for the financing of goods or services provided by one department or agency to other departments or agencies of the governmental unit, or to other governmental units, on a cost-reimbursement basis.

Fiduciary Funds

Trust and Agency Funds – To account for assets held by a governmental unit in a trustee capacity or as an agent for individuals, private organizations, other governmental units, and/or other funds. These include (a) expendable trust funds, (b) nonexpendable trust funds, (c) pension trust funds, (d) OPEB trust fund, (e) compensated absences trust fund and (f) agency funds.

Governmental Accounting

The modified accrual basis of accounting, as appropriate, should be utilized in measuring financial position and operating results.

Governmental fund revenues and expenditures should be recognized on the modified accrual basis. Revenues should be recognized in the accounting period in which they become available and measurable. Expenditures should be recognized in the accounting period in which the fund liability is incurred, if measurable, except for un-matured interest on general long-term debt, which should be recognized when due.

Proprietary fund revenues and expenses should be recognized on the accrual basis. Revenues should be recognized in the accounting period in which they are earned and become measurable; expense should be recognized in the period incurred, if measurable.

Fiduciary fund revenues and expenses or expenditures (as appropriate) should be recognized on the basis consistent with the fund’s accounting measurement objective. Nonexpendable trust and pension trust funds (and investment trust funds) should be accounted for on a accrual basis; expendable trust funds should be accounted for on the modified accrual basis. Agency fund assets and liabilities should be accounted for on the modified accrual basis.

Transfers should be recognized in the accounting period in which the inter-fund receivable and payable arise.

Fund Balance & Fund Equity

The arithmetic difference between the amount of financial resources and the amount of liabilities recorded in the fund is the Fund Equity. Residents of the governmental unit have no legal claim on any excess of liquid assets over current liabilities; therefore, the Fund Equity is not analogous to the capital accounts of an investor-owned entity. Accounts in the Fund Equity category of the General Fund and special revenue funds consist of reserve accounts established to disclose that portions of the equity are not available for appropriation (reserved or designated); the portion of equity available for appropriation is disclosed in an account called FUND BALANCE.

Annual Audits

At the close of each fiscal year, state law requires the City of Greenfield to publish a complete set of financial statements in conformity with accounting principles generally accepted in the United State of America (GAAP), and that are audited in accordance with generally accepted auditing standards by a firm of licensed certified public accountants. Pursuant to that requirement, the City of Greenfield has been audited by the firm of MelansonHeath, Accountants/Auditors, of Greenfield, Massachusetts. A copy of the most current CAFR and prior fiscal year financial statements can be found on the City’s website at http://greenfield-ma.gov/files/FY2015_FinancialStatements_-_Greenfield_-_signed_final.pdf

Reporting Entity

For financial reporting purposes, the City has included all funds, organizations, agencies, boards, commissions and institutions. The City as also considered all potential component units for which it is financially accountable as well as other organizations for which the nature and significance of their relationship with the City are such that exclusion would cause the basic financial statements to be misleading or incomplete. As required by GAAP, these basic financial statements present the City (the primary government) and it component units. One entity has been included as a component unit in the reporting entity, because of the significance of its operation and/or financial relationship.

Blended Component Units

Blended component units are entities that are legally separate from the City, but are so related that they are, in substance, the same as the City, or entities providing services entirely or almost entirely for the benefit of the City. The following component unit is blended within the Fiduciary Funds of the

The Greenfield Contributory Retirement System (the System) which was established to provide retirement benefits primarily to city and school employees and their beneficiaries. In fiscal year 2017, employees of the newly established Municipal Light Plant (GCET) became members of the System. The System is governed by five-member board comprised of the City Auditor (ex-officio), two members elected by the System’s participants, one member appointed by the Mayor and one member appointed by the other board members. The System is presented using the accrual basis of accounting and is reported as a pension trust fund in the fiduciary fund financial statements. Additional financial information of the System can obtained by contacting the System located at City Hall.

Availability of Financial Information for Component Units

The Greenfield Contributory Retirement System does not issue a separate audited financial statement. The System issues a publicly available unaudited financial report in accordance with guidelines established by the Commonwealth of Massachusetts’ (Commonwealth) Public Employees Retirement Administration Commission (PERAC). That report may be obtained by contacting the System located at 14 Court Square, Greenfield, MA 01301.

Government-Wide and Fund Financial Statements

The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the non-fiduciary activities of the primary government. For the most part, the effect of inter-fund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support.

Fund Financial Statements

Separate financial statements are provided for governmental funds, proprietary funds and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements.

Major Fund Criteria

Major funds must be reported if the following criteria are met:

· If the total assets, liabilities, revenues or expenditures/expenses of an individual governmental or enterprise fund are at least 10 percent of the corresponding element (assets, liabilities, etc.) for all funds of that category type (total government or total enterprise funds), and

· If the total assets, liabilities, revenues, or expenditures/expenses of the individual governmental fund or enterprise fund are at least 5 percent of the corresponding element for all governmental and enterprise funds combined.

Additionally, any other governmental or enterprise fund that management believes is particularly significant to the basic financial statements may be reported as a major fund.

Internal service funds and fiduciary funds are reported by fund type.

Measurement Focus, Basis of Accounting, and Financial Statement Presentation

Government-Wide Financial Statements

The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. As a general rule, the effect of inter-fund activity has been eliminated from the government-wide financial statements.

The statement of activities demonstrates the degree to which the direct expenses of a particular function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include the following:

· Charges to customers or applicants for goods, services, or privileges provided.

· Operating grants and contributions

· Capital grants and contributions, including special assessments.

Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes and excises.

For the most part, the effect of inter-fund activity has been removed from the government-wide financial statements. However, the effect of inter-fund services provided and used between functions is not eliminated as the elimination of these charges would distort the direct costs and program revenues reported for the functions affected.

Fund Financial Statements

Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soos as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers property tax revenues to be available if they are collected withing 60 days of the end of the current fiscal year end. All other revenues items are considered to be measurable and available only when cash is received by the government.

Expenditures general are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due.

The City reports the following major governmental funds:

· The General Fund is the government’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund.

· The FEMA tropical storm Irene accounts for the activity related to the disaster recovery and clean-up efforts for the August 27, 2011 tropical storm.

· The capital articles fund accounts for all activities related to the capital articles voted for all fiscal years.

· The High School Construction Fund accounts for all activities related to the construction to the City’s new high school.

Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generall result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the enterprise fund are charges to customers for sales and services. Operating expenses for the enterprise funds include cost of sales and services, administrative expenses and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses.

The City reports the following major proprietary funds:

· The Water Enterprise Fund, which accounts for operations related to providing the City’s water services and supporting infrastructure.

· The Sewer Enterprise Fund, which accounts for operations of the City’s wastewater treatment facility and supporting infrastructure.

· The GCET Enterprise Fund, which accounts for the oprations related to providing and supporting infrastructure for the City’s internet service utility.

Fiduciary fund financial statements are reported using the flow of economic measurement focus and usse the accrual basis of accounting except for the Agency Fund, which as no measurement focus. Fiduciary funds are used to account for assets held in trustee capacity for others that cannot be used to support the governmental programs.

The following Fiduciary fund types are reported:

· The Pension Trust Fund accounts for the activities of the Greenfield Contributory Retirement System, which accumulates resources for pension benefit payments to qualified employees.

· The Private-Purpose Trust Fund is used to account ofr trust arrangements, other than those properly reported in the pension trust fund or permanent fund, under which principal and investment income exlcusively benefit individuals, private organization, or other governmens.

· The OPEB Trust Fund is used to account for trust arrangements, specifically the OPEB trust, under which the principal and investment income exlusively benefit individuals.

· The Agency Funds account for fiduciary assets held by the City in a custodial capacity as an agent on behalf of others. Agency funds report only assets and liabilities, and therefore, have no measurement focus.

Posted: Tue, Apr 10, 2018 03:25 PM
Updated Tue, Apr 10, 2018 12:00 AM

Which measurement focus should be used in government

What is the economic resources measurement focus?

What is measurement focus?

Which of the following funds all use the economic resources measurement focus?