[Jade CPA-to-be]

Can anyone explain to me what is major fund reporting criteria? 10% & 5% Rule, both must be met. Compare individual funds to total all governmental and enterprise funds OR what? Also Compare enterprise fund to total all governmental and enterprise funds? I am very confused.

it is on Becker F9-20

Thanks in advance.

CPA Licensed in California- Class of 2013

[Shart Happens]

I don't have becker, but to do the tests I think you need 4 financial statements:

1) Governmental funds balance sheet

2) Statement of Revenues, expenditures and changes in fund balances for governmental funds

3) Statement of Net Assets/Position for Proprietary Funds

4) Statement of Rev, Expenses, and changes in fund net assets for proprietary funds

Example when testing if the special revenue fund is major (or whatever is to the left of your “General” fund on sheet 1).

10% Tests:

From sheet 1… Find the special revenue funds total assets and divide them by the “total government funds assets”, if greater than 10% it might be a major fund. Repeat for “Total Liabilities.”

From sheet 2….identify the fund, divide it's total revenue by the total government funds revenue…repeat for “total expenditures”

5% tests (for ones that pass the 10% tests):

Numerator stays the same as before, but need to add to the denominator. Ie IF special revenue funds assets / Total governmental funds assets > 10% then the 5% test is: special revenue funds assets / (total government funds assets + The total assets from the enterprise funds found on sheet 3. Make sure you are only adding the total from the business type activities not the total from “Govt activities-Internal service funds”

Hopefully this makes sense… if not let me know and I'll try to clear up my scatterbrain thoughts.

[Shart Happens]

Forgot the rule itself…. so if either assets, liabilities, rev, or expenditures pass both the 10% and 5% tests then the fund is major (I think if not someone please correct).

[Anonymous]

This is how I understand the major reporting to work. If this isn't correct, someone please correct me! 🙂

First, here's the rule from F-9 page 20:

1. 10% or more of total revenues, expenditures/expenses, assets, or liabilities of all the Gov't funds OR the Enterprise funds

AND

2. 5% or more of total revenues, expenditures/expenses, assets, or liabilities of all the Gov't AND all the Enterprise funds.

So you take the governmental funds (General, Special Revenue, Debt Service, Permanent, Capital Projects) and the Enterprise funds and first individually compare each fund to rule 1. If a fund is greater than or equal to 10% of EITHER the Gov't fund for Enterprise funds it meets the first requirement. Then you look at each fund individually again for rule 2. If the fund is greater than or equal to 5% of the COMBINED totals of Gov't funds and the Enterprise funds it meets the second requirement, making it a major fund.

(Note: as the book says the General Fund is always going to major and you always ignore the Internal Service fund for this)

So for example lets use the Special Revenue Fund:

Say the Special Revenue Fund is only 6% of total rev/expend/exp/assets/liab the gov't funds, BUT is 11% of total rev/expend/exp/assets/liab the enterprise funds it meets the 1st requirement.

AND

Since the Special Revenue Fund is 6% of total rev/expend/exp/assets/liab for gov't funds AND 11% of the total rev/expend/exp/assets/liab enterprise funds it meets the 2nd requirement.

[Shart Happens]

In regards to the 10% test… This won't help you, but Wiley has a footnote on page 811 where they only compare the totals to the respective category ie a governmental fund to a governmental total not a governmental fund to an enterprise total. So not really sure if they just didn't give a full example or if that is actually how the rule is applied.

For the 5% test…I think the “and” in the Becker definition is referencing to add instead of in conjunction with. IE per Wiley book, “total assets, liabilities, revenues, expenditures/expenses are 5% of the total of the governmental and enterprise category combined”

Either way these rules could be explained a lot better….

[Jade CPA-to-be]

Thanks, guys… govt accounting is my weak area, i will need some time to digest… but i believe you are both correct and both explanation makes sense to me…. since you guys understand govt accounting so well, i want to ask one more stupid question….

here is what i understand,

GRaSPP may all possbily be major fund, but general fund is always a major fund.

internal service fund is not counted as major fund always.

enterprise fund may be major fund if it meets both criteria.

PAPI are not major funds always since they are not showing on government wide F/S.

governmenta wide F/S only report major funds, correct?

the more i study, the more i am confused =/

CPA Licensed in California- Class of 2013

[Anonymous]

Shart Happens – Oh that is interesting. Becker has it as 10% of Gov't funds OR Enterprise funds which makes me think that its an either/or requirement. But, there isn't an example in Becker of how it's applied.

The text before the rule says: “To meet the 10% test, the individual Gov't Funds are individually compared to the total of all governmental funds and enterprise funds and enterprise funds are individually compared to the total of all governmental and enterprise funds”.

BUT it also says (which I missed first time around): “Major funds are specifically defined as follows: a major fund must meet the 10% criteria within its category AND also meet the 5% criteria associated with both categories.”

So is Becker contradicting itself? Cause Governmental Accounting isn't confusing enough already. Grump.

Jade – Check out page F9-16 for a gov't wide balance sheet and F9-19 for a gov't wide income statement. The gov't wide statements report as governmental activities (GRaSPP+ Internal Service), Business-type Entities (Enterprise Funds), and component units.

[Author]

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