Financial Report Flora and Fauna (Ex., California 2011: the Reports and the Funds)

I am hammering home this topic of the Comprehensive Annual Financial Report (“CAFR”) to document that people yelling about the Budget Deficits aren’t Telling the Whole Truth about what the Government Owns — or where to look it up.

I’m also building a Menu for the blog’s sidebar: CAFR by State (all 50 & territories of the USA) — which is only a start, as every “State” has within it many subsidiary (but separate) government units or entities holding other assets as well.  So this is an upfront matter of simply learning a few concepts and the terms (labels/Vocabulary) that go with them.

I assure us,  we do not have to actually BE a CPA or an Accountant to understand enough of this to understand whether or to what extent deception and derailment of the public from the collective net worth of government (and why it’s accumulating this)  has occurred, and approximately where excess might lie that might relieve, for example, either the state income taxes, or the continuous fund-raising propositions people are faced with come time to vote.  We simply need to get a grip on the scope of these things — or go floating passive down hoping we don’t run into other floating debris in the river of life.  I believe this is also good knowledge to have if one should find onesself in a situation of needing to challenge one or another element of government on budget matters; for example, cutting music, arts libraries, etc. out of schools — or the jail overcrowding issue — almost any issue involving government will relate to its financing.  Well, then how do we get a basic look at its elements — financially?

Anyhow, again, California’s “CAFRs,” are found on a page listing different types of reports, as you can see from the Controller’s page.  Today I’m going to take a little more detailed look not at the CAFR, but at the “Budgetary/Legal Basis Annual Report.”

((from what I can tell, the difference between this report and a CAFR might be like the difference between a nonprofit corporation’s “annual report” which is for advertising/promo purpose (Glossy, etc., featuring what it did) versus a 990 tax return for the same year, which has to show more information, and accumulated assets to date.  The annual reports can move things all over between funds, it’s more a statement of movements then of assets — and doesn’t have to show collective net worth to date.  The CAFR & 990s do.  There then of course remain the issues of (1) whether there actually IS a CAFR or 990 for a particular entity (org.) and (2) whether the reports are actual.  Interesting stuff, accounting… it can be spun..)).

Welcome to the State of California

State Government Annual Financial Reports

The government (institutions, agencies, etc.) intrinsically work as corporations now.  They basically are basically profit-seeking heat missiles.  That they also provide services, take funds from the public to pay for those services and are sometimes altrustics (sometimes terroristic) seems to justify the sales. Government is not our “friend” — it’s a powerful pack of dogs, and not that well trained.  It can pull dogsleds, help people hunt, guard the homes, be comforting (when nice and cuddly) but not to forget — dogs are carnivores, and sometimes turn on their “masters.”    If you are living in a neighborhood where wild-roaming packs of dogs are the majority and you are an isolated minority — guess who has the advantage?  (Just to keep this in mind.  Centralized, and accumulated power HAS to be respected).

Just a reminder of who owns the infractructures (at least) — from “The Bentley 500” (this link also on my blogroll):

The Bentley Infrastructure 500 is a ranking of the top owners of infrastructure around the world from both the public and private sectors that is published annually. The rankings make it possible to readily compare investment levels across types of infrastructure, regions of the world, and public and private organizations.

Bentley Systems has compiled the Bentley Infrastructure 500 to help global constituents appreciate and explore the magnitude of investment in infrastructure and the potential to continually increase the return on that investment. The infrastructure value represented is over US$14 trillion, which is close to the U.S. annual GDP and to the combined annual GDPs of China, Japan, and Germany. Bentley itself is committed to enhancing ROIs through leveraging information modeling in integrated projects to create more intelligent infrastructure on behalf of owner organizations.

Data Results for 2011

Top 10 Owners in the Bentley Infrastructure 500 

Rank Organization Headquarters Country Infrastructure Value*
(millions USD)
1 UNITED STATES GOVERNMENT United States 308,800
2 STATE GRID CORPORATION OF CHINA China 209,727
3 EXXON MOBIL CORP United States 199,548
4 OPEN JOINT STOCK COMPANY GAZPROM Russia 180,019

and also of interest, in the top 100 (there’s going to be TX, CA, NY & FL, right?) (NB:  BP, Chevron, and Walmart are higher on the list than:)

16 STATE OF CALIFORNIA United States 104,107
18 AT&T INC. United States 103,196
19 STATE OF TEXAS United States 92,214
20 ENI SPA  {{WHO??}} Italy 90,065
21 STATE OF NEW YORK United States 89,583
22 COMMONWEALTH OF AUSTRALIA Australia 89,212
23 VERIZON COMMUNICATIONS INC United States 87,711
24 GOVERNMENT OF THE RUSSIAN FEDERATION Russia 87,317
37 STATE OF FLORIDA United States 67,521
81 CITY OF NEW YORK United States 41,495

But then go to this site and look at the emphasis on debt, complete with ticking debt clock and the statement that MY share is $227,000.00, and listing the “Sunshine” and “Sinkhole” states.  It says the “official” (national) debt is $16 trillion (and speedily tick upwards), but the “TRUTH” is $71 trillion.  (http://www.truthinaccounting.org/)

(logo displays “Truth in 2012,”; they are selling reports on their “state of the states)

http://www.truthin2008.org/content/?articlesource=420

ABOUT

THE INSTITUTE FOR TRUTH IN ACCOUNTING WAS CREATED BY DISTINGUISHED FINANCIAL AND PUBLIC POLICY EXPERTS CONCERNED WITH THE QUALITY OF PUBLIC AND PRIVATE ORGANIZATIONS‘ FINANCIAL REPORTING. 

IT IS THE MISSION OF THE IFTA TO ENCOURAGE PRIVATE AND PUBLIC ENTITIES TO PRODUCE FINANCIAL REPORTS THAT ARE COMPREHENSIVECOMPREHENSIBLE AND TRANSPARENT AND TO INFORM THE PUBLIC OF THE IMPORTANCE OF TRUTHFUL ACCOUNTING.

What’s interesting to me is that this group actually does contain a link to the CAFRs of every state (it’s available to download from my “Box.net” widget at bottom of sidebar, and I also I think linked it on the blogroll as well), but the word “CAFR,” or “Comprehensive ANnual Financial Report” is not featured prominently anywhere on the site.  I had to download it to an Excel Spreadsheet, Export the Spreadsheet to PDF and upload it to the blog.  The wonderful experts above hadn’t bothered to even label the links in any comprehensive manner.  They would rather interpret the data, as experts, without talking about the net worth issues, I suppose….  How can someone in this position say they want “financial reports that are Comprehensive” without mentioning the existence of “Comprehensive Annual Financial Reports” in one breath, on a page, or as a main link title?  Do they not want the public to have tools to even take a layperson’s look??   Not only are they not mentioning the CAFRs here (collective accumulated net worth) — but they are not mentioning how very many levels of government (functioning as corporations,  only with different funding sources and rules) actually exist within each “State.”

To me, that’s not quite honest — although undoubtedly there’s some vital information on this site about accounting methods that’s important to know also.  But WHY NOT try to break it down for the public by starting with the elements of government — who they actually are — and where one finds out what their assets & liabilities are?  And that is these reports.

Also on the “truth in accounting” site I read (Cf. with the Bentley list, above, showing the states, and NYC), how New York, Illinois, and California were graded “by the markets” by their handling of their own debts.  Obviously, I’m not qualified to talk in detail (yet!!) on this, simply presenting these assertions for reference, before presenting where you can go to look at a state’s budgets and comprehensive reports.  Notice the Spin:  New York was a good boy, while Illinois and California were not — based on their debt, and/or budgets.  See above — all of them are among the largest owners of infrastructure around…

State budget crises: Two wins, one loss (<<=url)
New York, Illinois and California have seen the markets and ratings agencies react in very different manners based on their actions (or inactions, as the case may be).
(cbsnews.com) Standard & Poor’s changed its outlook on the general obligation debt of New York to positive from stable while affirming the AA rating on the state.

Unfortunately, Illinois is another story. Standard & Poor’s downgraded the general obligation rating of the state of Illinois to A from A+ and maintained a negative outlook due to budget uncertainty.

((IF YOU READ, this relates to YIELDS on BONDS, the Fund-raisers for Governments.  Taxpayers are handling a lot for bonds):

Unfortunately, Illinois is another story. Standard & Poor’s downgraded the general obligation rating of the state of Illinois to A from A+ and maintained a negative outlook due to budget uncertainty. The news affects $27.5 billion of outstanding general obligation debt.

The downgrade was the result of the legislature’s inability to address the states’ debt-ridden public employee pension system, which now has an estimated funded rate of 43 percent, or $83 billion. It’s estimated that without action that figure will increase to $93 billion by next summer.

The size of the problem is why Illinois has been called “the Greece next door.” Unless the legislature is prepared to address the unfunded pension issue, it seems doomed to fall into a death spiral. Illinois residents and businesses are already heavily taxed, and people worry that a massive “temporary” tax increase — 67 percent on individuals, 46 percent on employers — scheduled to expire in 2014 may be permanent. The bottom line is that Illinois is now facing the consequences of its actions — the bill is coming due and it will be unable to continue to kick the can down the road.

{{Notice it always is falling heavier on individuals than corporations.  How can individual afford to contribute 67% MORE to their governments?  That’s insane!  Clearly this government is mis-managing something, and not a “servant.”

The news was somewhat better for California. Governor Jerry Brown and state lawmakers recently reached an agreement on some pension reforms for future state and local employees in California.   Read more.

{{I did…}}:The news was somewhat better for California. Governor Jerry Brown and state lawmakers recently reached an agreement on some pension reforms for future state and local employees in California. Reforms included capping pension salaries, increasing employee contributions, boosting the retirement age, and creating rules that will limit pension spiking tactics. Unfortunately, a number of important proposals that Brown made earlier this year weren’t included in the reform, such as moving new employees to a hybrid defined contribution/defined benefit plan. CalPERS, the agency that manages public pension and other benefits for the state, estimates the savings could be $40 billion to $60 billion over 30 years. Having cleared both the U.S. House and Senate, Brown signed the bill Wednesday.

The yields on California’s general obligation bonds look attractive. The 10-year is yielding about 0.7 percent more than similar AAA-rated bonds, much less than the 1.8 percent incremental yield on Illinois bonds with a similar rating. The high tax rate for California residents creates high demand for its obligations. ** Given the state’s inability to completely address its problems, it seems prudent to avoid California general obligation debt, even considering the relatively attractive yields and the tax advantage for residents. However, if you’re willing to accept the risks, you should limit the holdings to the short term, say three years or less. You should also limit the amount of holdings to a relatively small portion of your portfolio.

The “funny” part of this article is that it has only one comment and 16 tweets.   While this isn’t a language I really speak, notice that the high tax rate of Californians is attracting people to invest in its bonds.  In other words, investors can count on our State to tax us pretty high to help pay of ITS debt.    Also, I’d like to point out that the issues relate to handling of DEBT and PENSIONS/EMPLOYEE RETIREMENT PLANS.   Our governments are huge — employ so many people — unlike many in the private sector, who may have zero retirement funds or pensions (depending on where they work), ALL of us must contribute to making sure our government civil servants have their retirement funds met.

Wouldn’t that be reason enough to want to know more about the financial reports of our own governments?  I hope so!  

What we as consumers need to understand (better) is who we are dealing with and whether that’s a big deal.  Because Government isn’t SUPPOSED to be a infinitely profit-making, assets-expanding enterprise above all — its reason for existing is to provide the services — not to expand forever (into outerspace, even, right?) — and accumulate wealth, then conceal parts of it and tell the public to pay up — more.

But it has been doing exactly this.  It sucks money and value from one place into another — into itself.   (Approximately since the 1930s “Gold Grabs” this has been fairly clear — Americans were told to turn in their excess gold, after which the price of it was raised.  If that’s not a clear explanation of what government, in general does, where are you going to get a much better one?).

Anyhow, again, California’s “CAFRs,” are found on a page listing different types of reports, as you can see from the Controller’s page:

Welcome to the State of California

State Government Annual Financial Reports

“1” the BLBAR

Budgetary?Legal Basis” for California, 2011 has introductory Notes.  Good idea to read ’em, ya’ think?

For a better understanding and a little vocabulary (Gee, that sounds complicated!).

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. Reporting Entity  (WHO is reporting = “the State”)

The accompanying financial statements present the financial position and the results of operations of the State for the year ended June 30, 2011. These statements have been prepared in compliance with state laws, state accounting procedures, and the state budget.

The State of California also prepares a separate report, the Comprehensive Annual Financial Report,* which includes financial statements prepared in conformity with generally accepted accounting principles (GAAP) in the United States of America. A copy of this report is available online, at http://www.sco.ca.gov, or from the State Controller’s Office, Division of Accounting and Reporting, P.O. Box 942850, Sacramento, California 94250-587

*Needless to say, this fact rarely makes the front or business page of any mainstream newspaper.

The State of California Budgetary/Legal Basis Annual Report presents information on those financial activities of the State over which the Governor, the Legislature, and other elected officials have direct or indirect governing and fiscal control.

Translation: If they don’t have direct or indirect governing and fiscal control (however that’s defined), over an “Activity of the State,” that information is not presented.    Question:  So, what (if any) “activities of the State” exist that it doesn’t have any such control over (Direct or indirect governing AND fiscal)?  the answer to that job is a lookup task.  Feel free to participate and submit comments; if you’re good at this I’m looking for others to post, too.

The financial statements in this report include accounts of various boards, commissions, agencies, authorities, retirement systems, and the State’s public universities.

The funds from which these entities operate are included in this report in accordance with Government Code section 12461(b)(3), which requires the Budgetary/Legal Basis Annual Report to include statements showing the receipts, disbursements, and closing balances of each fund in the State Treasury.

So these are funded categories:

  • Boards
  • Commissions
  • Agencies (sounds like some major ones there)
  • Retirement Systems
  • State Public Universities (in California, that’s a LARGE system!):

The University of California, including its various branches, is administered by a Board of Regents as a public trust. It is subject only to such legislative control as may be necessary to ensure compliance with the terms of the endowments of the university and the security of its funds.

The financial transactions of the University of Californiathat are included in this report are onlythe amounts appropriated by the Legislature for support and capital outlay. Expenditures from these appropriations are included as part of the cost of state government.

In other words, this report is not going to give a full picture of the financial transactions of Univ. of California System, only the portions that come from the State.  This includes some major universities (UCBerkeley, UCLA, UCDavis, Irvine, etc.).  Here’s a map/List:

About the Campuses
The web sites of individual UC campuses provide a wealth of information about their history, traditions, academic distinctions and social contributions as well as a compendium of facts, figures, maps and pictures. The links below will take you directly to each campus’ “About UC” page:

Berkeley
Davis
Irvine
Los Angeles
Merced
Riverside
San Diego
San Francisco
Santa Barbara
Santa Cruz

Just wanted to put that up because leadership from some of these campuses are affecting a lot of nationwide government, particularly when they are churning out attorneys (some of who no doubt end up as judges), educators, social scientists, etc.  It’s a very large state with a very large university system — and it’s significant that this is operated as a public trust — not government.  TRUSTS enable much more control over how money is spent (ask me how I know that); so who gets to be Board of Regents is a major deal.  Also (not sure yet exactly how this fits in) but imagine the size of the retirement/pension funds associated with this.  It’s a global investment force, I’m sure (overall!).

The financial transactions of district agricultural associations, citrus fairs, and county fairs are included only with regard to the disbursement of state funds appropriated for their use. These associations and fairs are semi-independent and operate with both state and local funds.

So there you have it. After reading part “B” to the notes, the letter will get around to the general purpose of these types of reports, which is stating how close to the margin the State is running and recommend cost-savings and increased revenues (generally speaking). This is a 489 page report (wonder how long the CAFR is!) and contains at its end a list of all the funding.

The following summary, right above the signature of our Controller, John Chiang, references the CAFR. It also mentions two departments that didn’t submit their reports in time. ONE of them seems to overlap with the Department that got its pants pulled down recently for claiming they were broke, after which (someone looked at the CAFRs??) it was discovered they were nothing of the sort, but had $54 million sitting in (two) special funds. Some of the angry donators raising money to “Save the Parks” (there is a California Parks Foundation also, which hasn’t publicized this info last I heard) wanted their money back!

Anyhow, I’m sure many readers may have friends working in one or another branch of the State (or local, county, etc.) government and know or find them to be wonderful, upstanding, probably very ethical individuals earning their keep. And then there are the court-appointed attorneys, mediators, and some of the judges (JUST KIDDING!!! See my other blog). I know I do. However, it seems to me a moral and ethical responsibility of citizens of each state, to understand WTF it is doing with their moneys, and if there is a need for the taxes to be at their preset levels. IN OTHER WORDS, there really is a fiscal monster in our midst — is it sleeping? is it active? is it honest? How big is it?

Financial Reports beat anecdotal evidence hands down — they give a scope of activities. Both are important (for example, when government employees end up whistleblowing, or getting sued, etc., or things such as the MSM is going to report — it sells papers, drives traffic to their on-line sites). But it seems to me that AS MANY PEOPLE AS POSSIBLE able to comprehend this — and I’ll bet an average adolescent with basic math AND reading skills who could see its relevance, could read and think about these things). As most school districts are also a government operation, it might shed light on recent high school experiences also, whether in well-heeled, or under-funded and unsafe buildings, schools.

_ _ _ _ _ _ _ _ _
Closing comments to introduction to the 2011 Budgetary//Legal Basis Annual Report (“BLBAR”):

Major highlights of this budgetary report include the following:
• General Fund revenues rose for the second consecutive fiscal year, up 6.4% from $86.6 billion in fiscal year 2009-10 to $92.1 billion in fiscal year 2010-11, primarily due to an increase in personal income tax revenue.

Yes, income tax revenue is always a great way to increase the General Fund balance!  It’s automatically deducted by employers from employees paychecks (unless they opt out to pay later in the year), and this is a large state. As we can see, individuals are expected to make their living from working JOBS (see mainstream media).  This isn’t anything at all close to how governments or corporations make their “living,” however.  It’s hardly a level playing field, as to collective clout — especially because people earning so much less per/hour work more hours, and have to scramble harder to do anything beyond survive (let alone, organize in, or out of unions).

From p. 6, stated in thousands, the State “General Fund” balance for start of the fiscal year (2010), was significantly in the hole.  It’s thus important to understand what are FUNDS and how things are moved around and reported between them, as well as just how many funds ARE there?  And how many of them are serving legitimate purposes?

“Combined Statement of Operations All Fund Types

“FUND BALANCE, JULY 1, 2010 ……………………………………. $(4,481,422)”

• General Fund expenditures rose 4.9%, from $87.5 billion in fiscal year 2009-10 to $91.8 billion in fiscal year 2010-11. The cost-saving measures introduced in the prior fiscal year were successful in reducing local assistance and operating expenditures for fiscal year 2009-10; but, by comparison, the same measures had a less significant or opposite effect in fiscal year 2010-11 as follows:

 In fiscal year 2009-10, the temporary suspension of Proposition 1A allowed for offsets of $3.6 billion of local assistance expenditures. In fiscal year 2010-11, the offsets were $350 million.

In order to reduce the General Fund operating expenditures for fiscal year 2009-10, Executive Order 10/11-A deferred June 2010 payroll expenditures in the amount of $800 million to fiscal year 2010-11. For this fiscal year, Executive Order 11/12-A deferred June 2011 payroll expenditures of $773 million to fiscal year 2011-12. This resulted in operating expenditures of $27 million due to the difference between the June 2010 and June 2011 payroll expense.

So the General Fund here is by Executive Order simply pushing the $800M payroll debt forward a year, an action repeated again the next year. They did this another year, so $800-$773 = $27 million only for the year 2011 as “operating expenditure” because sooner or later one has to pay SOME of one’s bills…. or there might be a civil servant walkout, etc….

For the third consecutive year, the State’s General Fund ended the fiscal year with a deficit fund balance. The $2.3 billion negative fund balance includes $0.8 billion in deferred payroll; $1.8 billion in reserves; and a negative $4.9 billion in the unreserved-undesignated portion that must be funded before any amount is available for appropriation. Reserved funds are set aside for specific purposes and, therefore, are not available for appropriation.

{{and they are of course of interest to us, generating their own interests and investments, I’m sure — but unavailable for general fund use.}}

The Special Fund for Economic Uncertainties (the State’s “rainy day fund”) was fully depleted, resulting in a zero balance at the end of the fiscal year.

(See link to Gov’t Code 16418 [I DNK when it was passed].  This used to be called the CONTINGENCY fund for economic uncertainties.  Now it’s the SPECIAL fund (for economic uncertainties).  I tell, you since  I filed for something which generated a child support order, my own life (as many’s) became rapidly full of economic AND legal uncertainties, which is what initially started me blogging on grants, agencies, incentives, and now — this blog — financial reports and all these nice funds….Wish I’d known about them a decade (or two) ago….   It’s just one page, take a look….

Well.  I wonder how depletion that happened?  Maybe they should’ve gone after some of the missing DOC and ARB/Motor Vehicle Account/State Transportation Fund {{does this include the DMV and all those parking tickets and towed/auctioned vehicles input??}}  funds not reported, below:

For the second consecutive year, the Department of Conservation (DOC) did not submit the General Fund year-end financial statements to the State Controller’s Office (SCO). Therefore, the amounts reported for the General Fund in the BLBAR for the DOC consist of the June 30, 2011 cash balances plus accruals derived from actual cash basis activity recorded through December 5, 2011.

The State Air Resources Board (ARB) did not submit the required year-end statements for the Motor Vehicle Account (MVA), in the State Transportation Fund, to the SCO in time to be included in this publication. Therefore, the MVA amounts reported include the ARB’s June 30, 2011, cash balances plus estimated accrual amounts provided by the ARB.

I also have issued the Comprehensive Annual Financial Report (CAFR), prepared strictly in accordance with generally accepted accounting principles (GAAP) in the United States of America, which in some instances differ from those used to prepare the BLBAR. The GAAP {{CAFR}} report is primarily intended to meet the needs of users outside of the state government.** A reconciliation of these two bases of accounting is contained in the CAFR.

(Yours truly, John Chang, Controller of the State of California….)


**Pretty much everyone in government accounting, and I’ll bet ALL the legislature, knows there are CAFR — just not advertising this.  It’s not necessarily in their best interest, as much of the campaigning is centered around fund-raising, right?  And solving the deficits, being the hero to rescue state problems, etc.

From this report is at least (for viewing pleasure) a list of TYPES of funds involved.  Included for the outline purpose only in re: the question of government, “How big is this monster? Is its growth rate important to monitor?  Is it benign or malignant?

Just be aware of the “Special Fund Types” under “GOVERNMENTAL COSTS.”  Then there is also NON-GOVERNMENTAL, as well.  These names probably don’t vary that much from state to state, and might be worth noting.  From the Table of Contents:

Governmental Cost Funds–Special Fund Types*:

(*Special Fund Types is obviously a sub/set of “Governmental Costs Funds.” [see column headings on p. 6 “Comparative Statements,” showing that this]  Where is the TOC entry for simple “General Fund” (not special fund types)? Unless that is what the p.6 (column 1) refers to.  Feedback solicited if you do….

However Governmental Cost Funds NOT “special fund types”) I see started Fiscal Year 2010 (July 1st) $4,481,422 in the hole (with a deficit).  This is a factor of funds available, transfer in and out of funds (The General Fund is an operating fund.  See below)

( each fund will have its own Balance sheet/statement of operations, see TOC)

  • General Fund Special Accounts
  • Feeder Funds  
  • Transportation Funds
  • Other Governmental Cost Funds  {{Great title, right?}}

(see corresponding NonGovernmental, below):

Described in Section B to the “NOTES”:

The General Fund is the main operating fund of the State, consisting of moneys that are not required by law to be deposited in any other fund.

Special Funds are used to account for resources that are legally restricted for particular functions or activities of government. The following are classified as special funds:

General Fund Special Accounts are accounts within the General Fund created by the Legislature to account for revenues that are restricted by law for specific purposes. The accounts are treated as special funds and are excluded from the General Fund for accounting and budgetary purposes.

Included within these accounts is the Budget Stabilization Account (BSA) which was established by Proposition 58 in March 2004. This fund requires the Controller to transfer a percentage of estimated General Fund revenue, currently three percent, from the General Fund to the BSA. However (smile…), pursuant to Section 20(e) of Article XVI of the Constitution of the State of California, the transfers of money from the General Fund to the BSA may be suspended for a fiscal year by issue of an executive order by the Governor no later than June 1 of the preceding year.  {{that’s only 30 days’ notice?}} In May 2010, the Governor issued Executive Order S-08-10 to suspend the transfer of moneys from the General Fund to the BSA for fiscal year 2010-11. The suspension was necessary to alleviate the need for additional program cuts given the unprecedented budget deficit.

Feeder Funds are the depositories for the collection of major taxes prior to clearance to the General Fund. The resources and obligations of these funds that apply to the General Fund as of June 30 are included in Due From Other Funds. Resources and obligations remaining in any of these funds represent collections that were not available to the General Fund on June 30.

Transportation Funds are used to account for revenues that are restricted by law to transportation and related public safety programs.

Other Governmental Cost Funds are used to account for other revenues that are restricted by law for specific purposes.


Nongovernmental Cost Funds:

  • Bond Funds
  • Trust and Agency Funds – Federal
  • Public Service Enterprise Funds
  • Working Capital and Revolving Funds
  • Retirement Funds
  • Trust and Agency Funds – Other

…BOND, TRUST & AGENCY FUNDS — FEDERAL (bet that’s interesting one), PUBLIC SERVICE ENTERPRISE (the whole topic of Enterprise Entities — at a more local level, such as Water District, Public Utility District, Sewer Districts, etc. — is important to be aware of. For example, one county was maintaining a hospital district without any hospitals, etc.  It took a while to shut that board down!)

Nongovernmental Cost Funds consist of funds that derive their revenue from sources other than general and special taxes, licenses, fees, or other state revenues. Expenditures of these funds do not represent a cost of government. Three major fund classifications exist under this group: Bond Funds, Trust and Agency Funds – Federal, and Other Nongovernmental Cost Funds. The purpose of each fund classification is as follows:

Bond Funds are used to record proceeds from the sale of general obligation bonds and expenditures for acquisition of property, capital outlay, or loans to local agencies for the same purposes.

It seems to me this might be a HUGE category — raising money through bond (who buys?  Private individuals, private corporations, foreign governments?)  They then can acquire property, capital, and having raised money in this manner, loan to local agencies engaged in the same purposes.  These should be at least looked at.

Trust and Agency Funds – Federal are used to account for moneys that are received from the federal government to be expended for specific purposes.

The Federal Government has a Huge influence on local state policy.  This country is far less representative than it may seem — (more at the family court blog); and the decisions about these purposes are often strategized by meetings outside the state(s).  For example, how about the immense amount of welfare funding (block grants to the states, since 1996) coming from HHS to the states, covering Medicaid, Food Stamps, Cash Aid, Disability, Foster Care/Adoption/Child Protection funds, and Child Support Enforcement, etc.    The indications are from the HHS — the expenditures of these funds aren’t well monitored by HHS itself (who doesn’t control them once disbursed, either) — or by the states.   This affects people in any of the above situations, and it affects the number of cases in the courts as well.

Other Nongovernmental Cost Funds are used to account for the following revenues and services:

Public Service Enterprise Funds are used to account for the transactions of state-operated enterprises that render services primarily to the public for a charge.

{{I keep telling us, governments in any other clothes, are like corporations; they operate for-profit businesses, raise money to operate more of these business (from the public), sell it to the public at-profit, and then look for more market niches to explore, while telling the public, less money for schools, libraries, police, fire departments (parks), etc. etc.)}} I look forward to seeing what’s in this section….

• Working Capital and Revolving Funds are used to account for the internal service activities rendered by a state agency to other state agencies or local governments.

The transfers between agencies at the state level, or the state/local governments level.  So, where are THEIR statements (time to find out) and see if the numbers match.  (Mission Impossible, should you choose to accept it??)

Retirement Funds are used to account for contributions received by various retirement systems, the investment of these moneys, retirement allowances, and refunds to members.

Trust and Agency Funds – Other are used to account for moneys and properties that are received and disbursed by the State as trustee or custodian.

{{I’m pretty sure this would include foreclosed properties, including from elderly people who die without heirs, and collected child support before it’s disbursed, or after it’s declared “undistributable,” etc. …It’s probably very large.}}


The salmon-background detail (above) is from NOTES, PART B — and then go back to publishing the statewide CAFRs.  Here are from NOTES, PART C (not all of them — best read from orig. document PDF).  Just want this language out in the open — the purpose of the GOVERNMENTAL COST FUNDS is measuring cash flow (back and forth).:

C. Measurement Focus and Basis of Accounting

Governmental cost funds are presented in this publication using the flow of current financial resources measurement focus. With this measurement focus, operating statements present increases and decreases in net current assets.

Generally, the accounts of the governmental cost funds are reported using the modified accrual basis of accounting. Revenues of the governmental cost funds are recognized according to the provisions of Government Code sections 13302 and 13303. Revenues are accrued if the underlying transaction has occurred as of the last day of the fiscal year and the due date for the tax is within two months of the end of the fiscal year. Receivables for which collection is indefinite are fully reserved until collected or determined to be uncollectible.

Expenditures of governmental cost funds include obligations incurred but not paid by June 30. This includes all interfund settlements due but not completed at the end of the fiscal year. Encumbrances at year-end (such as obligations in the form of purchase orders, contracts, or salary commitments chargeable to an appropriation) are excluded from the liabilities and expenditures and are established as a reserve for encumbrances against the fund balance. Transfers from governmental cost funds to nongovernmental cost funds are shown as expenditures of the governmental cost funds in the fiscal year covered by this report, even though actual expenditures from the nongovernmental cost funds may not occur until a later date (e.g., transfers to the Architecture Revolving Fund for capital outlay purposes).

The measurement focus for nongovernmental cost funds varies among fund types. Proprietary fund types and pension trust funds are presented using the flow of economic resources measurement focus; the other fund types are presented using the flow of current financial resources measurement focus.

So what’s the difference between “Economic resources” and “Current Financial Resources”?? (I don’t know…..)

The basis of accounting for nongovernmental cost funds also varies among fund types. The accounts of the proprietary fund types and the pension trust funds are reported using the accrual basis of accounting. Under the accrual basis, revenues are recognized when they are earned and expenses are recognized when they are incurred. The accounts of the other fund types are reported using the modified accrual basis of accounting.

Also what’s the difference between “measurement focus” and “basic of accounting”? (the latter sounds more strict).
There are other sections.  In general, a LOT can be learned simply reading the NOTES to financial statements; it sets the stage on which government stuff acts, giving definitions, categories, and talking about processes.  So, if this language isn’t familiar, like immigrants who come here and eventually figure out it’s a good idea to be bilingual (including in English), I suggest that whether we’re first, second, our long-term generation immigrants to the state (or descended from people who’ve lived here for thousands of years, and survived the initial genocides, i.e., native Americans) we’d BETTER learn to speak some of this language!  Have any offspring in a public school?  Then what happens here, affects their futures….

D. Capital Assets

Capital assets are reported in this publication only for nongovernmental cost funds with the exception of bond funds.  (i.e., if there are any governmental cost funds spent on CAPITAL (?) they’re not mentioned, assuming that wasn’t an oxymoron?)

E. Long-Term Obligations  {{this part VERY interesting — it’s the fund-raising part, and debt-service part — see the above article from IFTA posted on NY, IL & CALIFORNIA.

The State Constitution permits the State to issue general obligation bonds for specific purposes and in such amounts as approved by a two-thirds majority of both houses of the Legislature and by a majority of voters in a general or primary election.

Proceeds from the sale of general obligation bonds, including premium and accrued interest, are recorded in the Bond Funds. The debt service for general obligation bonds is appropriated from the General Fund. Premium and accrued interest received when bonds are sold is transferred to the General Fund to reimburse the debt service.

Under the State Constitution, the General Fund is first used to support the public school system and public institutions of higher education. The General Fund can then be used to service the debt on outstanding general obligation bonds. Self- liquidating bonds reimburse the General Fund for the debt service provided on their behalf.

Public and higher education public institutions FIRST when general obligation (not just for those specific purposes, I gather) bonds are paid back.  In short, people & corporations, or other governments (i’m sure) are investing in California, just as California’s CALPers system invests in governments and currencies all over the world.    They give the State of California money; the bond is a SALE; which the State of California then has to pay it ALL back with interest.   In other words, we as declared residents of this state (A marriage license, a drivers’ license, a birth certificate, a domestic corporation etc. )– all are “mortgaged” to (how many owners?) just by virtue of living in California, as managed by the State.  And that doesn’t even include County & Local.

I think this is why many people are looking at, what does it mean legally to be a resident of a specific state (a shareholder in its government in essence) as opposed to a “natural-born” person without an allegiance as citizen of a specific state.  That’s why I put in “box.net” gadget the link to some discussion on this under “Patriot … 1871.”  It seemed a good explanation, and FYI, no I am not a Patriot.  I’m a thinker and flesh and blood person who unwittingly made a seriously bad deal with this State (or, see local County governments) when I asked it for help leaving a certain marriage.  And I do think that if we are going to talk “Cold Hard Facts,” that this is among them.

For example, when California pays back its general obligation debt, do we pay our investors in $$?  Because $$ vary in value — do we later have to pay more $$ based on inflation?  And $$ are only tender for debt, they are not “bona fide” money anyhow!

Do you see where that might be leading, if the investors are foreign and the $$ is dumped as a national reserve currency?  (Note — I have a recent email circular from Walter  Burien on the 50-yr cycles of currency/commodities/gold (as I recall the subject matter) which should be posted soon as well, or linked.  The public is usually being played to go one direction so the profits will go in another direction.  What we should want, on the contrary, is a smarter public so we don’t end up enslaved by debt — and this includes knowing whether their truly is a huge and necessary debt.

And as far as I’m concerned, that question isn’t answered til all the CAFRs are in and examined….  anyhow, continuing with California’s BLBAR, here, NOTES to the financial statement.

F. Fund Equity

The term fund balance is defined as the excess of the assets of a fund over its liabilities. Part or all of the total fund balance may be reserved as a result of law or generally accepted accounting principles. Reserves represent those portions of the fund balance that are legally segregated for specific uses.

This talks about reserves and capital, and has quite a bit of detail.  The next two paragraphs are only part of it:

Deferred Payroll represents the amount of June 2011 payroll expenditures deferred to July 2011 for all state departments paid through the uniform payroll system. Executive Order 11/12-A was issued by the Department of Finance, as authorized under Control Section 12.45 of the Budget Act of 2010 and pursuant to Government Code sections 12472.5 and 13302, to implement the deferral of June 2011 payroll expenditures for various governmental and nongovernmental cost funds. June 2011 payroll expenditures will be realized in July 2011.

The Special Fund for Economic Uncertainties (SFEU) was created by Chapter 139, Statutes of 1985, {{LINK to the law, above}} and is funded with General Fund revenues. Commonly known as the State’s “rainy day fund,” it provides the moneys for necessary expenditures throughout the year that have not been anticipated or provided for in the annual budget. It also provides relief, to the amount of its available funds, for any budgeted shortfalls. At June 30, 2011, the SFEU balance of $1.2 billion was added to the negative $6.1 billion Unreserved- Undesignated balance of the General Fund, in accordance with Government Code section 16418(d), leaving the SFEU with a zero fund balance.

The Contingency Reserve for Economic Uncertainties represents the unappropriated balance in each special fund, as of June 30, that is available for appropriation in the following fiscal year.

I believe money comes INTO this SFEU fund, by a specified %, from the General Fund, as well.  It is like a separate bank account or savings account for the General Fund.  Perhaps the Contingency Fund is a holding pool, I DNK.   I wonder whether money in here earns interest, or is invested….
Another section here is on Cash Management, Appropriations, etc.  Whether or not someone goes through it now, pasting this makes its contents a searchable terms on the blog.  It will probably take more than one reading to digest (will for me): Please forgive!
Among the items discussed below is what else to do with excess besides just return them to the taxpayers.  LIke funnel it to the schools, postpone it for a year and after that 50% to the schools, 50% back to others; the Cigarette Additional Tax (since I’ve lived in the state, Cigarette costs have almost doubled.  Also just a reminder:  The Budget Act has to be approved every year, right?

Appropriations Limit

The State is subject to an annual appropriations limit imposed by Article XIIIB of the California Constitution. Article XIIIB established a limit on the growth of certain appropriations made from state tax revenues, adjusted annually for inflation and population growth. All tax revenues received are to be appropriated within the limit or returned to the taxpayers. Propositions 98 and 99, approved by voters in the November 1988 general election, established the limit, and Proposition 111, approved by voters in the June 1990 general election, amended Article XIIIB.

Proposition 98 requires that tax revenues received in excess of the state appropriations limit be allocated to school districts and community colleges (K-14) rather than returned to the taxpayers. The amount to be allocated is not to exceed 4% of the minimum school funding level. Effective in fiscal year 1988-89, Proposition 98 provides a guaranteed minimum level of funding for school districts and community colleges. The K-14 programs are guaranteed either the same percentage of General Fund revenues appropriated in fiscal year 1986-87 or the state and local tax revenues received in the prior year, adjusted for changes in enrollment and the cost of living, whichever is greater.

Proposition 99, the Cigarette Tax Initiative, placed an additional tax on cigarette purchases in California. Before the enactment of Proposition 99, an additional tax would have been considered revenue subject to the appropriations limit. This initiative specified that this additional tax revenue is not subject to the appropriations limit and dedicated the revenue for specific purposes.

Proposition 111 provides that tax revenues received in excess of the state appropriations limit in one fiscal year may be carried over to the succeeding fiscal year. The portion of the excess revenues carried over that are not appropriated in that fiscal year would be considered excess revenues. Fifty percent of all excess revenues must be allocated to school districts and community colleges, and the other 50% must be returned to the taxpayers. Prior to the enactment of Proposition 111, the maximum amount to be allocated to school districts and community colleges was 4% of the minimum school funding level. Proposition 111 excludes from the State’s appropriations limit appropriations for the costs of natural disasters, appropriations for all qualified capital outlay projects, and appropriations of revenue derived from increases in motor vehicle fuel taxes, sales and use taxes on the increased motor vehicle fuel taxes, and weight fees.

Article XIIIB imposes no limit on appropriations or funds obtained through nontax sources, such as bond proceeds and reasonable user charges or fees. The state appropriations limit is also exclusive of certain appropriations, such as debt service on voter-approved debt, debt existing when Article XIIIB was adopted, and state subventions to local governments that are not restricted in their use. State appropriations to local governments are considered tax proceeds for local entities and are subject to each local entity’s revenue and appropriations limit.

The appropriations limit is established each year in the Budget Act and is amended during the fiscal year for transfers of fiscal responsibility between the State and local governments. The Budget Act provides that any judicial action or proceeding to attack, review, set aside, void, or annul the revenue and appropriations limit must begin within 45 days of the effective date of the act.
J. Cash Management

As part of its cash management program, the State issues short-term obligations, known as revenue anticipation notes (RANs), to meet cash flow needs during the fiscal year. The State issued a total of $16.7 billion of short-term debt, including $6.7 billion in interim Revenue Anticipation Notes (RANs) on October 23, 2010, and an additional $10.0 billion on November 23, 2010. As required by law, those RANs were repaid prior to June 30, 2011.

Racing the clock on exposure, here.  FYI — no politician will talk about the CAFRs, including federal government.  There’s resistance, apparently at the MSM level also.  Not a lower and middle level management.  This post here isn’t even about the CAFR, but just how very many “funds” are sitting around, operating, raising capital, whatever it is they do.
Just remember, California is a state that passed a retroactive-immunity bill for its judicial system after Los Angeles County was caught (by an aggressive anti-trust attorney, who was then disbarred and tossed into solitary confinement for 18 months:  Richard Fine) violating the state constitution by giving over $40,000 a year to its judges, in addition to their state salaries.   You rarely see a legislature move that fast, but this time they did!     It had become impossible to win a lawsuit against the County when the County was supplementing judicial payrolls to this extent.   The whole situation of late re: the courts (the Administrative Office of the Courts vs. the Local Trial Judges) has become something of a media soap opera of late.  While that’s more a topic for my other blog (family court matters) — someone is paying them public funding — and that public funding will show up on these are ports and/or other lower-level reports.
You can’t know if you never look!
In case no one has picked up on this yet, I’m looking for (volunteer) helpers to look these types of things up…

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