Glossary of Terms
Accrual basis of accounting. Method of accounting that recognizes the financial effect of transactions, events, and inter-fund activities when they occur, regardless of the timing of related cash flows.
Activity. Specific and distinguishable service performed by one or more organizational components of a government to accomplish a function for which the government is responsible (e.g., police is an activity within the public safety function).
Actuarial cost method. Term used in connection with defined benefit pension and other postemployment benefit plans to describe a procedure used by an actuary to determine the actuarial present value of plan benefits and expenses and then allocate that value to specific periods.
Additions. Term used to describe increases in the net assets of fiduciary funds.
Adopted Budget. A plan of financial operations, legally adopted by the County, after a vote by the Commissioner’s Court, providing an estimate of revenues and expenditures for a given fiscal year, and providing details of expected debt financings. By law, the Adopted Budget must be balanced. The Adopted Budget includes the expense budget, which is used to fund the County’s day to day operations and the Revenue Budget, which is a forecast of how much the County expects to collect during the fiscal year from taxes and other sources.
Advance refunding. Transaction in which new debt is issued to refinance existing debt (old debt), but the proceeds must be placed in escrow pending call date or maturity.
Adverse opinion. Independent auditor’s opinion that financial statements are not fairly presented.
Agency funds. One of four types of fiduciary funds. Agency funds are used to report resources held by the reporting government in a purely custodial capacity (assets equal liabilities). Agency funds typically involve only the receipt, temporary investment, and remittance of fiduciary resources to individuals, private organizations, or other governments.
Analytical review. Term used by auditors to describe the process of attempting to determine the reasonableness of financial data by comparing their behavior with other financial and nonfinancial data.
Annual required contribution (ARC). Term used in connection with defined benefit pension and other postemployment benefit plans to describe the amount an employer must contribute in a given year.
Appropriated budget. Expenditure authority created by the appropriation bills or ordinances that are signed into law and related estimated revenues. The appropriated budget would include all reserves, transfers, allocations, supplemental appropriations, and other legally authorized legislative and executive changes.
Arbitrage. In government finance, Arbitrage is the reinvestment of the proceeds of tax-exempt securities in materially higher yielding taxable securities.
Audit committee. Group of individuals assigned specific responsibility for addressing issues related to the independent audit of the financial statements on behalf of the entity under audit.
Audit scope. In the context of a financial statement audit, the coverage pro- vided by the independent auditor’s opinion. For example, required supplementary information normally is not included within the scope of a financial statement audit (i.e., the independent auditor does not offer an opinion on its fair presentation).
Auditor rotation. Policy that a government periodically replace the independent auditor of its financial statements.
Auditor’s report on internal control and compliance over financial reporting. The independent auditor report on internal control weaknesses and instances of noncompliance discovered in connection with the financial audit, but does not offer an opinion on internal control or compliance.
Basic financial statements. The minimum combination of financial statements and note disclosures required for fair presentation in conformity with GAAP (Generally Accepted Accounting Principles).
Bond anticipation note. Short-term, interest-bearing note issued by a government in anticipation of bond proceeds to be received at a later date. The note is retired from proceeds of the bonds to which it is related.
Budgetary reporting. As used by accountants, it is the requirement to present budget-to-actual comparisons in connection with general purpose external financial reporting. Budgetary reporting is required in connection with the basic financial statements for both the general fund and individual major special revenue funds with annual (or biennial) appropriated budgets. Budgetary reporting also is required within the comprehensive annual financial report to demonstrate compliance at the legal level of control for all governmental funds with annual (or biennial) appropriated budgets.
Business-type activities. One of two classes of activities reported in the government-wide financial statements. Business-type activities are financed in whole or in part by fees charged to external parties for goods or services. These activities are usually reported in enterprise funds.
Capital and related financing activities. Term used in connection with cash flows reporting. Capital and related financing activities include (a) acquiring and disposing of capital assets used in providing services or producing goods, (b) borrowing money for acquiring, constructing, or improving capital assets and repaying the amounts borrowed, including interest, and (c) paying for capital assets obtained from vendors on credit.
Capital assets. Land, improvements to land, easements, buildings, building improvements, vehicles, machinery, equipment, works of art and historical treasures, infrastructure, and all other tangible or intangible assets that are used in operations and that have initial useful lives extending beyond a single reporting period.
Capital projects fund. Fund type used to account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by proprietary funds and trust funds).
Capital spending. Spending on items that are capitalized. Spending on items with a useful life of more than one year. The price of these items affects the cash flow statement in the year purchased, and then gets expensed over many years on the income statement via depreciation.
Cash. In the context of cash flows reporting, not only currency on hand, but also demand deposits with banks or other financial institutions. Cash also includes deposits in other kinds of accounts or cash management pools that have the general characteristics of demand deposit accounts in that the governmental enterprise may deposit additional cash at any time and also effectively may withdraw cash at any time without prior notice or penalty.
Cash basis of accounting. Basis of accounting that recognizes transactions or events when related cash amounts are received or disbursed.
Certificate of Achievement for Excellence in Financial Reporting Program. Program sponsored by the Government Finance Officers Association to encourage and assist state and local governments to prepare high-quality comprehensive annual financial reports. The program has been in continuous operation since 1946. The program originally was known as the Certificate of Conformance Program.
Combining financial statements. Financial statements that report separate columns for individual funds or component units. Combining financial statements normally are required in a comprehensive annual financial report to support each column in the basic financial statements that aggregates information from more than one fund or component unit.
Comparative financial statements. Financial statements providing all of the information required by Generally Accepted Accounting Principles for two or more fiscal periods.
Component unit. Legally separate organization for which the elected officials of the primary government are financially accountable. In addition, component units can be other organizations for which the nature and significance of their relationship with a primary government are such that exclusion would cause the reporting entity’s financial statements to be misleading or incomplete.
Comprehensive annual financial report (CAFR). Financial report that contains, at a minimum, three sections: 1) introductory, 2) financial, and 3) statistical, and whose financial section provides information on each individual fund and component unit.
Current refunding. Refunding transaction in which the proceeds of the refunding debt are applied immediately to redeem the debt to be refunded. This situation differs from an advance refunding, where the proceeds of the refunding bonds are placed in escrow pending the call date or maturity of the debt to be refunded.
Debt service fund. Governmental fund type used to account for the accumulation of resources for, and the payment of, general long-term debt principal and interest.
Debt spending. Spending on semi-annual expenses for principle and interest on outstanding debt.
Defeasance. In financial reporting, the netting of outstanding liabilities and related assets on the statement of position. Defeased debt is no longer reported as a liability on the face of the statement of position. Most refundings result in the defeasance of the refunded debt. Defeasance also is sometimes encountered in conjunction with annuity contracts purchased in connection with lottery prizes and settlements of claims and judgments.
Deferred revenue. Resource inflows that do not yet meet the criteria for revenue recognition. Unearned amounts are always reported as deferred revenue. In governmental funds, earned amounts also are reported as deferred revenue until they are available to liquidate liabilities of the current period.
Designated unreserved fund balance. Management’s intended use of available expendable financial resources in governmental funds reflecting actual plans approved by the government’s senior management. Expressed another way, designations reflect a government’s self-imposed limitations on the use of otherwise available expendable financial resources in governmental funds.
Disbursement Amount. Dollar amount paid for goods or services.
Document ID. A unique number assigned to track the disbursement amount.
Employer contributions. Term used in the context of pension and other postemployment benefits to describe contributions actually made by the employer in relation to the Annual Required Contribution (ARC) of the employer.
Encumbrances. Commitments related to unperformed contracts for goods or services. For financial reporting purposes, encumbrance accounting is restricted to governmental funds.
Enterprise fund. Proprietary fund type used to report an activity for which a fee is charged to external users for goods or services.
Expenditures. Under the current financial resources measurement focus, decreases in net financial resources not properly classified as other financing uses.
Expense Category. A category description assigned by Williamson County for the purposes of organizing expenses.
External auditors. Independent auditors, typically engaged to conduct the audit of a government’s financial statements.
Finding. Term used in connection with public-sector auditing. Published communication of an internal control weaknesses or instance of noncompliance in connection with an audit.
Fiscal accountability. Responsibility of governments to justify that their actions in the current period have complied with public decisions concerning the raising and spending of public moneys in the short term (usually one budgetary cycle or one year).
Fiscal Year. A 12-month period used for accounting, budgeting and reporting purposes, indicating the period in which the disbursement or other financial transaction occurred. A fiscal year's beginning and end dates do not necessarily coincide with those of the calendar year. The fiscal year for Williamson County, Texas is Oct 1st through Sept 30th.
Fixed budgets. Budgets that embody estimates of specific (fixed) dollar amounts, in contrast with flexible budgets.
Flexible budgets. Budgets that embody dollar estimates that vary according to demand for the goods or services provided, in contrast with fixed budgets.
Fund. Fiscal and accounting entity with a self-balancing set of accounts recording cash and other financial resources, together with all related liabilities and residual equities or balances, and changes therein, that are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions, or limitations.
Fund balance. Difference between assets and liabilities reported in a governmental fund.
General fund. One of five governmental fund types. The general fund typically serves as the chief operating fund of a government. The general fund is used to account for all financial resources except those required to be accounted for in another fund.
General revenues. All revenues that are not required to be reported as pro- gram revenues in the government-wide statement of activities.
Generally accepted accounting principles (GAAP). Conventions, rules, and procedures that serve as the norm for the fair presentation of financial statements.
Generally accepted auditing standards (GAAS). Rules and procedures that govern the conduct of a financial audit.
Government Finance Officers Association of the United States and Canada (GFOA). Association of public finance professionals founded in 1906 as the Municipal Finance Officers Association. The GFOA has played a major role in the development and promotion of GAAP for state and local government since its inception and has sponsored the Certificate of Achievement for Excellence in Financial Reporting Program since 1946. It also publishes Governmental Accounting, Auditing, and Financial Reporting, commonly known as the “Blue Book.”
Governmental funds. Funds generally used to account for tax-supported activities. There are five different types of governmental funds: the general fund, special revenue funds, debt service funds, capital projects funds, and permanent funds.
Government-wide financial statements. Financial statements that incorporate all of a government’s governmental and business-type activities, as well as its non-fiduciary component units. There are two basic government-wide financial statements: the statement of net assets and the statement of activities.
Grant anticipation note. Short-term, interest-bearing note issued by a government in anticipation of a grant to be received at a later date. The note is retired from proceeds of the grant to which it is related.
Inter-fund activity. Activity between funds of the primary government, including blended component units. Inter-fund activities are divided into two broad categories: reciprocal and nonreciprocal. Reciprocal inter-fund activity comprises inter-fund loans and inter-fund services provided and used. Nonreciprocal inter-fund activity comprises inter-fund transfers and inter-fund reimbursements.
Internal auditing. Appraisal of the diverse operations and controls within a government entity to determine whether acceptable policies and procedures are followed, established standards are met, resources are used efficiently and economically, and the organization’s objectives are being achieved. The term covers all forms of appraisal of activities undertaken by auditors working for and within an organization.
Internal service funds. Proprietary fund type that may be used to report any activity that provides goods or services to other funds, departments, or agencies of the primary government and its component units, or to other governments, on a cost-reimbursement basis.
Issue Date. Date on which a check or payment was created.
Major fund. Governmental fund or enterprise fund reported as a separate column in the basic fund financial statements and subject to a separate opinion in the independent auditor’s report. The general fund is always a major fund. Otherwise, major funds are funds whose revenues, expenditures/expenses, assets, or liabilities (excluding extraordinary items) are at least 10 percent of corresponding totals for all governmental or enterprise funds and at least 5 percent of the aggregate amount for all governmental and enterprise funds for the same item. Any other government or enterprise fund may be reported as a major fund if the government’s officials believe that fund is particularly important to financial statement users.
Management letter. In the context of the independent audit of the financial statements, a formal communication by the auditor to management that focuses on internal control weaknesses discovered in the course of the audit of the financial statements. The management letter, as just described, should be distinguished from the management representation letter. The latter is a communication by management to the independent auditor in which management takes formal responsibility for the fair presentation of the financial statements and makes certain specific representations regarding their contents and circumstances.
Management’s discussion and analysis. Component of required supplementary information used to introduce the basic financial statements and provide an analytical overview of the government’s financial activities.
Material weakness. Reportable condition (internal control weakness) of such magnitude that it could potentially result in a material misstatement of the financial statements.
Materiality. In the context of financial reporting, the notion that an omission or misstatement of accounting information is of such significance as to make it probable that the judgment of a reasonable person relying on the information would be changed or influenced by the omission or misstatement.
Modified accrual basis of accounting. Basis of accounting used in con- junction with the current financial resources measurement focus that modifies the accrual basis of accounting in two important ways 1) revenues are not recognized until they are measurable and available, and 2) expenditures are recognized in the period in which governments in general normally liquidate the related liability rather than when that liability is first incurred (if earlier).
Modified budget. The budget reflecting changes made to the Adopted budget subsequent to the start of the fiscal year. These charges are due to new estimates of revenues and expenditures.
Operating activities. Term used in connection with cash flows reporting. Operating activities generally result from providing services and producing and delivering goods, and include all transactions and other events that are not defined as capital and related financing, noncapital financing, or investing activities.
Operational spending. Spending on routine, day-to-day expenses for the normal operations of the County.
Original budget. First complete appropriated budget. The original budget may be adjusted by reserves, transfers, allocations, supplemental appropriations, and other legally authorized legislative and executive changes before the beginning of the fiscal year. The original budget should also include actual appropriation amounts automatically carried over from prior years by law. For example, a legal provision may require the automatic rolling forward of appropriations to cover prior-year encumbrances.
Other postemployment benefits (OPEB). Postemployment benefits other than pension benefits which include postemployment healthcare benefits, regardless of the type of plan that provides them, and all postemployment benefits provided separately from a pension plan, excluding benefits defined as termination offers and benefits.
Overlapping debt. In the context of the statistical section, the outstanding long-term debt instruments of governments that overlap geographically, at least in part, with the government preparing the statistical section information. That is, debt of another government that at least some of the reporting government’s taxpayers will also have to pay in whole or in part. Lower levels of government are not required to treat debt of the state as overlapping debt, even though it technically meets this definition. Furthermore, states, regional governments, and counties are exempted from the requirement to present overlapping debt, although counties are still encouraged to do so.
Overlapping governments. In the context of the statistical section, all local governments located wholly or in part within the geographic boundaries of the reporting government.
Payment in lieu of taxes (PILOT). Payment that a property owner not subject to taxation makes to a government to compensate it for services that the property owner receives that normally are financed through property taxes.
Popular annual financial reporting. Supplementary financial reporting designed to meet the special needs of interested parties who are either unable or unwilling to use the more detailed financial information provided in traditional comprehensive annual financial reports.
Popular Annual Financial Reporting Award Program. Awards program sponsored by the Government Finance Officers Association with the objective of encouraging and assisting governments to prepare and publish high quality popular annual financial reports.
Qualified opinion. In the context of financial audits, a modification of the independent auditor’s report on the fair presentation of the financial statements indicating that there exists one or more specific exceptions to the auditor’s general assertion that the financial statements are fairly presented.
Refunding. Issuance of new debt whose proceeds are used to repay previously issued debt. The proceeds may be used immediately for this purpose (a current refunding), or they may be placed with an escrow agent and invested until they are used to pay principal and interest on the old debt at a future time (an advance refunding).
Reserved fund balance. Portion of a governmental fund’s net assets that is not available for appropriation.
Revenue anticipation note. Short-term, interest-bearing note issued by a government in anticipation of revenues to be received at a later date. The note is retired from the revenues to which it is related.
Single Audit. Audit designed to meet the needs of all federal grantor agencies and performed in accordance with the Single Audit Act of 1984 (as amended) and Office of Management and Budget (OMB) Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations.
Special revenue fund. Governmental fund type used to account for the proceeds of specific revenue sources (other than for major capital projects) that are legally restricted to expenditure for specified purposes.
Statistical section. Third of three essential components of any comprehensive annual financial report, it 1) provides information on financial trends, 2) provides information on revenue capacity, 3) provides information on debt capacity, 4) provides demographic and economic information, and 5) provides operating information.
Supplementary information. Financial information presented together with basic financial statements that is not included within the scope of the audit of those statements. When the presentation of certain supplementary information is mandated by the GASB it is referred to as required supplementary information.
Tax anticipation note. Short-term, interest-bearing note issued by a government in anticipation of tax revenues to be received at a later date. The note is retired from the tax revenues to which it is related.
Unqualified opinion. Opinion rendered without reservation by the independent auditor that financial statements are fairly presented.