August4, 2014.


Cityof Atlanta

Methodof accounting used by the government

Thecounty government has three funds propriety funds, government fundsand the fiduciary funds. The audit record of the Atlanta governmentindicated that it uses the GASB fund accounting method as a way ofcomplying with the set legal guidelines for financial statements.Cash method of accounting and the accrual method were used inrecording transactions involving use of the various funds. In theutilization of the City government funds, the county government usesthe cash method in which financial statements reflects a balance ofoutflows and inflows in every financial year. The city governmentuses the cash method in the utilization of government funds becausethe funds are available to carry out government operations.

Theutilization of government funds is reflected through balance sheetsand other financial statements in form of revenues and expenditure.Under the proprietary funds, the government uses the accrual methodof accounting to record funds used in business activities this isbecause records are made on the availability of these funds even whenactual funds are not received. In the same way, expenses accrued arerecorded even when payment has not been done. The accrual method wasused during the accounting of financial statements using thefiduciary and the proprietary funds. The reason for using the accrualmethod when recording financial statements on the use of fiduciaryand the proprietary funds was because these resources were notavailable for use by the city programs during the time of recording(Reed, 2012).

Applicationand compliance of GASB Statement 34

Thecounty government adopted the GASB statement in it recording andreporting of basic financial statements. After the GASB statement thecounty government adopted the guidelines in regard to reporting ofdiffered outflows and inflows for all funds resources. This was doneduring the fiscal period of 2011. All the guidelines were applied asindicated by the GASB during the financial year of 2012 and had noimpact on the financial aspects of the city. The city applied most ofthe guiding principles in the management of financial estimates andassumptions that altered the amounts of revenues, liabilities, assetsand expenditures. After the application of those guidelines thefinancial statements did not differ much from those made in thefinancial estimates.

Duringthe year 2012, the city government applied the GASB guidelines incorrecting the net position of proprietary and the fiduciary funds.For instance, the financial statements of employees’ pension planonly reflected the amounts for city government employees and notothers. In line with the new GASB requirement the city governmentreclassified and adjusted cash balances and cash flow balances inproprietary funds statements of particular investments. In general,as part of complying with the GASB guidelines, the government alsoadopted a combined funding approach in which a balance was madebetween revenue collected and government funds spending thisapproach enhanced an increased fund balance which in turn increasedthe unassigned funds for the City government(Reed, 2012).

Whenrecording government financial statements information on allnon-fiduciary activities were removed from the statements. Allgovernment funded activities were reported separately depending onthe level of program revenues. In the same line, all separate fundshad different financial statements with government funds and theproprietary funds been reported in separate columns of financialstatements. Under the proprietary funds and the fiduciary funds,financial statements were reported using the accrual method ofaccounting expenses were recorded only when an expense occurred andrevenues were recorded only when cash was earned. Government fundsutilization were reported using financial measures and through theaccrual method of accounting.

Management’sdiscussion and analysis (MD&ampA)

Afterthe adoption of the GASB guidelines and making adjustments in thereporting of the financials statement under the government funds,proprietary and fiduciary funds the city business activitiesincreased. Total operating expenses reduced and total revenueincreased compared to the same period prior the adjustments, however,net expenses increased. The unassigned funds under the governmentfunds increased resulting in a surplus budget. These funds were laterchanneled to Watershed Management (DWM) and in debt servicing.

Allthese information helped the city government in the managementdiscussions and analysis of financial statements by giving detailedaccounts of changes that occurred in the use of particular funds andthe application of GASB guidelines. In addition, looking at thefinancial statements one can understand why the financial statementsreflected some changes. For instance, why there was a surplus,deficit and unbalanced financial statements. In these financialstatements, it’s important to have included the analysis of baddebts, loans, long and short term projects, appreciation anddepreciation of assets acquired under different fund programs.

Analyzingchanges in the financial statements

Ingeneral the financial position of the City government improvedsignificantly. In particular, the adoption of GASB accountingprinciples helped the City government to increase its operatingrevenue, decrease their operating expenditures, servicing long-termdebts and increased unassigned revenue.


ReedKasim, 2012. Comprehensive annual Financial Report. City of Atlanta.Retrieved on August 4, 2014, from