Accounts and Reports

GAAP POLICY AND PROCEDURE MANUAL

• Governments should report all expenses by function except for those that meet the definitions of special or extraordinary items, discussed in paragraphs 55 and 56. As a minimum, governments should report direct expenses for each function. Direct expenses are those that are specifically associated with a service, program, or department and, thus, are clearly identifiable to a particular function. GASB 34 Paragraph 41.
• Some functions, such as general government, support services, or administration include expenses that are, in essence, indirect expenses of other functions. Governments are not required to allocate those indirect expenses to other functions. The State of Kansas has chosen not to allocate indirect expenses. However, some governments may prefer to allocate some indirect expenses or use a full-cost allocation approach among functions. If indirect expenses are allocated, direct and indirect expenses should be presented in separate columns to enhance comparability of direct expenses between governments that allocate indirect expenses and those that do not. A column totaling direct and indirect expenses may be presented but is not required. GASB 34 Paragraph 42.
• Some governments charge funds or programs (through internal service funds or the general fund) for "centralized" expenses, which may include an administrative overhead component. Governments are not required to identify and eliminate these administrative overhead charges, but the summary of significant accounting policies should disclose that they are included in direct expenses. GASB 34 Paragraph 43.
• Depreciation expense for capital assets that can specifically be identified with a function should be included in its direct expenses. Depreciation expense for "shared" capital assets (for example, a facility that houses the police department, the building inspection office, and the water utility office) should be ratably included in the direct expenses of the appropriate functions. Depreciation expense for capital assets such as a city hall or a state office building that essentially serves all functions is not required to be included in the direct expenses of the various functions. This depreciation expense may be included as a separate line in the statement of activities or as part of the "general government" (or its counterpart) function (and in either case, may be allocated to other functions as discussed in GASB 34 Paragraph 42). If a government uses a separate line in the statement of activities to report unallocated depreciation expense, it should clearly indicate on the face of the statement that this line item excludes direct depreciation expenses of the various programs. Required disclosures about depreciation expense are discussed in GASB 34 Paragraph 117 and Paragraph 44.
• Depreciation expense for general infrastructure assets should not be allocated to the various functions. It should be reported as a direct expense of the function (for example, public works or transportation) that the reporting government normally associates with capital outlays for, and maintenance of, infrastructure assets or as a separate line in the statement of activities. GASB 34 Paragraph 45.
• Interest on general long-term liabilities generally should be considered an indirect expense. However, interest on long-term debt should be included in direct expenses in those limited instances when borrowing is essential to the creation or continuing existence of a program and it would be misleading to exclude the interest from direct expenses of that program (for example, a new program that is highly leveraged in its early stages). Excluding the cost of the borrowing when it is necessary to establish or maintain the program would significantly understate its direct program expenses. Most interest on general long term liabilities, however, does not qualify as a direct expense and should be reported in the statement of activities as a separate line that clearly indicates that it excludes direct interest expenses, if any, reported in other functions. The amount excluded should be disclosed in the notes or presented on the face of the statement. GASB 34 Paragraph 46.
• Information presented about major classes of capital assets should include:
  1. Beginning and end of year balances (regardless of whether beginning of year balances are presented on the face of the government wide financial statements), accumulated with depreciation presented separately from historical cost.
  2. Capital acquisitions.
  3. Sales or other dispositions.
  4. Current period depreciation expense with disclosure of the amounts charged to each of the functions in the statement of activities. GASP 34 Paragraph 117

• STARS has the following function classifications:
  • 01 - general government
  • 02 - human resources
  • 03 - education
  • 04 - public safety
  • 05 - agriculture and natural resources
  • 06 - highways and streets
• The Kansas Department of Health and Environment (KDHE) does not use STARS function codes. This agency uses the PCA code for it's function reporting.

• Adjustments are needed for funds that have multiple functions.
• Adjustments universitites appropriated funds expenditures so that cash stays in tact with the rest of the appropriated funds but the expenditures are reported with the education function.
      Dr. GLA 5001 Expenditures
         Cr. GLA 5030 Appropriations Transfer In
      Adjustment for university special revenue funds
      Dr. GLA 5031 Appropriations Transfer Out
         Cr. GLA 5001 Expenditures
      Adjustment for university appropriated funds

• The statement of activities presents a comparison between direct expenses and program revenues for each segment of business-type activities of the State and for each function of the State's governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function.

• The "net income / loss" of the internal services funds will be eliminated as proprietary fund statements are rolled up to the entity-wide statements.
• Depreciation expense will be recorded to each fund within an agency; each agency is assigned a function. Therefore, depreciation will be reported as a direct expense by function.
• Interest expense is recorded to each fund within an agency each agency is assigned a function. Therefore, interest expense will be reported as a direct expense by function.
• The functional reporting currently used by STARS will be utilized, with the exception of the following:
  • KDHE will be set up as function 07; the PCA codes will not be used for financial statement reporting.
  • In addition to functions 01 through 06 listed under "Current Reporting by STARS" and 07 listed immediately above, the following additional functional classifications will be used for financial statement reporting of the business-type activities:
    • 21 - water pollution and supply
    • 22 - health care stabilization
    • 23 - employment security
    • 24 - workers' compensation
    • 25 - lottery
    • 26 - universities
    • 27 - intergovernmental transfer program