Government-wide and fund financial statements are crucial tools in governmental accounting. They offer different perspectives on a government's financial health, with government-wide statements providing a broad overview and fund statements diving into specific activities.

Understanding these statements is key to grasping governmental finances. Government-wide statements use accrual accounting and include all assets and liabilities, while fund statements focus on current resources and use modified accrual accounting for governmental funds.

Government-wide financial statements

Overview and purpose

• Provide a broad overview of a government's finances, including all activities and functions, regardless of fund type or category
• Focus on the government as a whole, except for fiduciary activities
• Include both governmental activities (generally supported by taxes and grants) and business-type activities (supported by fees and charges)

Required statements and their components

• Statement of Net Position
  • Presents information on all assets, deferred outflows of resources, liabilities, deferred inflows of resources, and net position as of a specific date
  • Uses economic resources measurement focus and accrual basis of accounting
• Statement of Activities
  • Presents information showing how the government's net position changed during the most recent fiscal year
  • Focuses on the net (expense) revenue of each of the government's functions
  • Demonstrates the degree to which direct expenses of a given function are offset by program revenues

Government-wide vs fund statements

Differences in focus and level of detail

• Government-wide statements focus on the government as a whole, while fund statements provide more detailed information about individual funds
• Government-wide statements provide information about overall financial position and results of operations, while fund statements focus on the flow of current financial resources and compliance with finance-related legal requirements

Differences in measurement focus and basis of accounting

• Government-wide statements use economic resources measurement focus and accrual basis of accounting for all activities
• Governmental fund statements use current financial resources measurement focus and modified accrual basis of accounting
  • Revenues recognized when measurable and available to finance current period expenditures
  • Expenditures generally recognized when related liability is incurred, except for long-term liabilities recognized when due

Treatment of capital assets and long-term liabilities

• Government-wide statements include capital assets and long-term liabilities
• Governmental fund statements generally exclude these items and focus on near-term inflows, outflows, and balances of spendable resources
• Reconciliation required between government-wide and fund statements due to differences in measurement focus and basis of accounting

Governmental fund statements

Types of governmental funds and their purposes

• Account for activities primarily supported by taxes, grants, and similar revenue sources
• Examples include General Fund, Special Revenue Funds (grants), Capital Projects Funds, and Debt Service Funds

Balance Sheet

• Reports information about current financial resources (assets, liabilities, deferred inflows, and fund balances) of each major governmental fund and all nonmajor governmental funds in aggregate as of the end of the fiscal period
• Prepared using current financial resources measurement focus and modified accrual basis of accounting

Statement of Revenues, Expenditures, and Changes in Fund Balances

• Reports information about inflows, outflows, and balances of current financial resources of each major governmental fund and all nonmajor governmental funds in aggregate
• Prepared using current financial resources measurement focus and modified accrual basis of accounting
• Fund balance represents the fund's spendable resources (difference between assets plus deferred outflows and liabilities plus deferred inflows)

Reconciliation of financial statements

Reasons for reconciliation

• Differences in measurement focus and basis of accounting between government-wide and fund statements
• Explains the relationship between the two sets of financial statements

Reconciliation of the governmental fund balance sheet to the government-wide statement of net position

• Focuses on capital assets, long-term liabilities, and deferred outflows/inflows of resources
• Capital assets not reported in governmental funds but reported in government-wide statement of net position
• Long-term liabilities not reported in governmental funds but reported in government-wide statement of net position

Reconciliation of the governmental fund statement of revenues, expenditures, and changes in fund balances to the government-wide statement of activities

• Focuses on differences in reporting capital asset and long-term debt transactions
• Governmental funds report capital outlays as expenditures, while government-wide statement reports depreciation expense
• Repayment of long-term debt principal is an expenditure in governmental funds but reduces the liability in government-wide statement of net position
• Reconciliations provide a bridge between the two sets of statements, allowing users to understand how current-year activities impacted overall financial position