CGFM cheat sheet

U.S. federalism divides authority between a national government and the states; the Tenth Amendment reserves powers not delegated to the federal government to the states or the people.

Federal legislative power comes from Article I, executive power from Article II, and judicial power from Article III of the U.S. Constitution.

GASB sets GAAP for state and local governments (since 1984); FASAB sets GAAP for federal entities (since 1990); FASB sets GAAP for private-sector and not-for-profit entities.

Dillon's Rule: a local government has only powers expressly granted by the state, powers necessarily implied, and powers essential to its declared purposes; home-rule jurisdictions may exercise broader self-governing authority.

GASB's GAAP hierarchy (Statement 76): GASB Statements rank first, followed by GASB Technical Bulletins, GASB Implementation Guides, and AICPA guidance cleared by GASB.

Government's primary objective is accountability for public resources rather than profit; the adopted budget is the legal authority to incur obligations, usually for one year.

Interperiod equity means current-period revenues finance current-period services, so costs are not shifted to future taxpayers.

Grants: categorical grants restrict use to a defined program and often carry matching or maintenance-of-effort requirements; block grants allow broad discretion within a functional area.

Local government types are counties, municipalities, townships, special districts, and school districts; special districts are created for a single function such as water, transit, or fire protection.

Governmental funds (5): General, Special Revenue, Debt Service, Capital Projects, Permanent. Proprietary (2): Enterprise, Internal Service. Fiduciary: pension/OPEB trust, investment trust, private-purpose trust, custodial.

Measurement focus and basis: governmental funds use current financial resources and modified accrual; proprietary funds, fiduciary funds, and government-wide statements use economic resources and full accrual.

Modified accrual: revenues recognized when measurable and available (commonly collectible within the period or shortly after, often 60 days); expenditures recognized when the liability is incurred.

Fund balance (GASB 54): nonspendable, restricted, committed (formal governing-body action), assigned (intended use), and unassigned; only the General Fund normally reports a positive unassigned balance.

Budgetary entries: debit Estimated Revenues, credit Appropriations, and post the difference to Budgetary Fund Balance; encumbrances are commitments, not liabilities.

Major fund test: a fund is major if assets, liabilities, revenues, or expenditures/expenses are at least 10% of the total for its fund type and at least 5% of the governmental plus enterprise aggregate.

General capital assets and long-term debt are excluded from governmental fund statements and appear only in the government-wide statements; bond proceeds are other financing sources in the fund statements.

Nonexchange transactions (GASB 33): derived tax revenues (sales, income taxes) are recognized when the underlying exchange occurs; imposed nonexchange revenues such as property taxes are recognized when an enforceable claim arises.

Government-wide net position has three components: net investment in capital assets, restricted, and unrestricted.

Basic financial statements: government-wide statement of net position and statement of activities, fund financial statements, and notes to the financial statements; MD&A is required supplementary information, not a basic statement.

Statement of activities: expenses by function less program revenues (charges for services, operating grants, capital grants), plus general revenues, equals the change in net position.

Budgetary comparison schedule (RSI) compares original budget, final amended budget, and actual amounts with a variance column; required for the General Fund and each major special revenue fund with a legally adopted budget.

CAFR structure: introductory section, financial section (MD&A, basic statements, RSI, combining statements), and statistical section with up to 10 years of trend data.

Fund balance rollforward: beginning fund balance + revenues + other financing sources − expenditures − other financing uses = ending fund balance.

Budget approaches: line-item (object of expenditure), performance (spending linked to outputs), program (by function or activity), zero-based (each activity justified from zero), and separate capital versus operating budgets.

Budget cycle: executive preparation and submission, legislative review and adoption, execution and monitoring, then audit and evaluation.

The Popular Annual Financial Report summarizes CAFR information for citizens; it is not a substitute for the CAFR and does not follow GAAP presentation requirements.

A legally adopted budget creates the appropriation authority that limits expenditures and requires budgetary comparison reporting when the budget is legally adopted.

COSO and the GAO Green Book: five components are control environment, risk assessment, control activities, information and communication, and monitoring; the Green Book expands these into 17 principles.

Control types: preventive controls stop problems before they occur (authorization, segregation of duties), detective controls find them afterward (reconciliations, audits), and corrective controls fix them.

Segregation of duties separates authorization, custody of assets, and recordkeeping so no single person controls a transaction from start to finish.

Single audit (2 CFR 200 Subpart F): required when federal award expenditures are $750,000 or more for fiscal years beginning before October 1, 2024, and $1,000,000 or more thereafter; covers financial statements and major programs.

Audit finding elements: criteria, condition, cause, effect, and recommendation.

GAGAS (Yellow Book) requires independence, professional judgment, competence, quality control, and CPE of 80 hours every two years, with at least 24 hours in government auditing.

Public-funds investment priority: safety of principal first, liquidity second, yield third; statutes and policies restrict eligible instruments and maturities.

Fraud triangle: pressure or incentive, opportunity, and rationalization; management override of controls is treated as the highest fraud risk area.

Arbitrage: proceeds of tax-exempt bonds must be invested at a yield no higher than the bond yield, or the excess earnings are rebated to the U.S. Treasury.