13
13-1. Chapter The solution to this and the first exercise of Chapters 1 through 9 will vary from student
to student, assuming each has a different CAFR.
13-2.
The solution to this exercise will vary from student to student, assuming each has a
different Not-for-profit.
13-3. The solution to this and the first exercise of Chapters 1 through 8 will vary from student
to student, assuming each has a different CAFR.
13-4.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
A.
C.
D.
D.
C.
D.
A.
D.
D.
B.
13-5.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
D.
A.
B.
B.
D.
C.
D.
C.
D.
D.
13-6.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
A.
B.
C.
B.
B.
D.
B.
C.
C.
C.
13 - 1
13-7.
A.
Financial audits primarily concern providing reasonable assurance about whether
financial statements are presented fairly in all material respects in conformity with
generally accepted accounting principles or with a comprehensive basis of accounting
other than GAAP.
Attestation engagements concern examining, reviewing, or performing agreed upon
procedures on a subject matter or an assertion about a subject matter and reporting on
the results. Attestation engagements can cover a broad range of financial or
nonfinancial objectives and can be part of a financial audit or other type of engagement.
Performance audits are an objective and systematic examination of evidence to provide
an independent assessment of the performance and management of a program against
objective criteria or an assessment of best practices and other information. Performance
audits provide information to improve program operations and facilitate decision
making by parties with responsibility to oversee or initiate corrective action, and
improve public accountability.
Nonaudit services consist of gathering, providing, or explaining information requested
by decision makers or providing advice or assistance to management.
B.
For financial audits, testing would be conducted on the various account balances in the
financial statements as well as the underlying transactions to see if those account
balances fairly present the financial condition and changes in financial condition (and
cash flows, if applicable) of the government. This could include a variety of audit
procedures including analytical analysis, confirmation of account balances, inspection
of inventories and other tangible assets, and other verification of account balances.
For performance audits , testing might be performed to see if purchasing procedures
result in economical orders, to see if food service operations are managed efficiently, to
see if administrative functions are not duplicated, and to see if employee time is
managed efficiently. In terms of program effectiveness, the audit team would first look
to the stated objectives of the program and then determine whether the program has
been effective in meeting these outcomes. For example, the audit team might consider
standardized tests of program participants and whether participants received interviews
and found employment in the areas that they were trained. The results of a given
program may be compared with benchmarks or best practices of other, similar,
programs.
13 - 2
13-8.
A.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the respective financial position of the governmental activities, the businesstype activities, the aggregate discretely presented component units, each major fund, and
the aggregate remaining fund information of the City of X, State, as of Month day,
20X1, and the respective changes in financial position and cash flows, where applicable,
thereof for the year then ended in conformity with accounting principles generally
accepted in the United States of America.
B.
An unqualified opinion indicates that the statements are presented fairly. This means
that users of the financial statements can rely on the fact that the statements and
underlying financial records have been examined and, in the opinion of the auditor, the
statements are not materially misstated. A qualified opinion states that, except for the
effects of the matter(s) to which the qualification relates, the financial statements
present fairly, in all material respects, the financial position, results of operations, and
cash flows of the entity in conformity with generally accepted accounting principles.
An adverse opinion states that the financial statements do not present fairly the financial
position, results of operations, or cash flows of the entity in conformity with generally
accepted accounting principles.
A disclaimer of opinion states that the auditor does not express an opinion on the
financial statements.
(1) An auditor might qualify an opinion if one or more major problems exist with the
statements but, in the auditor's opinion, otherwise the statements are fairly presented.
Examples might include the lack of fixed asset records to give assurance that the
Government-wide statements are correct, the misstatement of the unfunded liability on
the pension notes, or the omission of note disclosure on compensated absences.
(2) An auditor might issue an adverse opinion if the statements are clearly misstated.
For example, the statements might not be categorized by fund as required by GASB, the
required basic statements might not be included, or many disclosures might be omitted.
(3) An auditor might disclaim an opinion if the government does not provide evidence to
support an opinion. For example, the auditor is not able to confirm the existence of
material receivables or inventories, possible unrecorded liabilities may exist, or
significant uncertainties regarding lawsuits or payback of grants may be in the picture.
Additionally, the auditor should disclaim an opinion if he is not independent of the
government.
13 - 3
13-9.
A.
A major program is one that is selected for audit for compliance under the provisions of
OMB Circular A-133. Selection of major programs is made from Type A and Type B
programs, as follows.
A Type A program would be a large program, as determined under OMB requirements.
Type A programs must be audited unless the auditor determines that the program is low
risk. This can be done only when the program has been audited during the past two
years, and no major compliance problems were detected.
Type B programs are smaller and are selected for audit if the auditor determines them to
be high risk. Assessment of risk of Type B programs is required for those programs that
have expenditures exceeding $100,000 for most governments and $300,000 for larger
governments.
Notwithstanding the above, at least 50% of federal expenditures must be audited as
major programs unless the auditor determines that the auditee is low risk. In that case,
25% of federal funds expenditures must be audited.
B.
Revised criteria require a single audit or a program specific audit if an entity has
$500,000 in federal expenditures. The major case where program specific audits are
allowed is when a grantee has expenditures relating to only one federal program.
C.
The auditor is required to prepare up to five reports:
1.
2.
A report discussing the evaluation and testing of internal control and compliance
with laws and regulations .
3.
A report discussing significant deficiencies in internal controls.
4.
A report describing instances of fraud, illegal acts, or other material
noncompliance.
5.
D.
A report containing an opinion on the financial statements.
A report containing the views of responsible officials of the audited organization
regarding any reported significant deficiencies.
1.
GASB Codification, and Statements and Interpretations issued subsequent to the
Codification.
2.
AICPA Audits of State and Local Governmental Units and subsequent Statements
of Position, including SOP 98-3.
3.
AICPA Statements on Auditing Standards .
13 - 4
13-9 (D) (Continued).
4.
Comptroller General Government Auditing Standards .
5.
OMB Circular A-133 and Compliance Supplement.
6.
GFOA Governmental Accounting, Auditing, and Financial Reporting .
7.
State rules and regulations.
8.
Local government legislation, procedures, etc. Minutes of governing
board meetings.
13-10.
A.
The auditor will need to use a risk-based approach. Type A programs would be audited
unless they are determined to be low-risk. Type B programs would be audited if they
are determined to be high risk. Assessment of risk must be made of programs that
exceed $100,000 for most governments. 50% of federal expenditures, or $1,000,000
must be included.
In this case, the auditor would be required to select the HUD Grant in the amount of
$600,000, as it has never been audited. The EPA Grant and the Summer Youth
Employment Grant must be assessed for risk; if either or both are determined to be highrisk, then that program (or both programs) would be selected for audit. Either program
would cause audit coverage to meet the 50% threshold. If neither program were
considered to be high-risk, then the auditor could select either the HHS Grant or one of
the two Type B programs.
B.
The minimum audit coverage would be the HUD Grant in the amount of $600,000. If
the auditor determined that the HHS Grant and the Type B grants were low- risk, then
the HUD Grant would be sufficient.
13 - 5
13-11.
A.
A 501 (c) (3) organization is a corporation and any community chest, fund, or
foundation, organized and operated exclusively for religious, charitable, scientific,
testing for public safety, literary or educational purposes, or to foster national or
international amateur sports competition (so long as none of its activities involve the
providing of athletic facilities or equipment) or for the prevention of cruelty to children
or animals, no part of the net earnings of which inures to the benefit of any private
shareholder of individual, no substantial part of the activities of which is carrying o n
propaganda, participate or intervene in any political campaign.
B.
A public charity is defined as (1) churches, schools, hospitals, governmental units, and
publicly supported charities, (2) an organization which receives more than one third of
its support from a combination of contributions, membership fees, and gross receipts
from exempt activities, and no more than one-third of its support from a combination of
investment income and net unrelated business income after taxes, (3) an organization
operated exclusively for the benefit of organizations described above, or (4) an
organization founded and operated exclusively for public safety.
13-12.
A.
Entities not required to file are (1) certain religious organizations,
(2) instrumentalities of the U.S. Government, and (3) organizations whose
gross receipts are normally less than $25,000.
B.
The major parts of a Form 990 are:
1.
Part I is a schedule of revenues, expenses, and changes in net assets/fund
balances.
2.
Part II is a statement of functional expenses.
3.
Part III is a statement of program service accomplishments.
4.
Part IV is a balance sheet, a reconciliation of the revenue per audited financial
statements with the tax return, and a reconciliation of the expenses per audited
financial statements with expenses reported on the tax return.
5.
Part V is a list of officers, directors, and key employees, the time spent
by each, and the amount paid to each.
6.
Part VI is a series of questions, determined to ascertain whether the
organization should continue to be tax exempt.
7.
Part VII is an analysis of income producing activities.
13 - 6
13-12 (B) (Continued).
8.
9.
C.
Part VIII is a schedule of the relation of income producing activities to the
accomplishment of exempt purposes.
Part IX is information relating to taxable subsidiaries.
The major parts of Schedule A are:
1.
Information listing the five highest paid employees making over $50,000 and the
amount paid to each.
2.
The compensation of the five highest paid independent contractors for
professional services.
3.
Questions about the activities of the public charity.
4.
Questions relating to the reasons for the organizations status as a non-private
foundation.
5.
More information relating to the foundations and other related entities of public
charities.
6.
A separate questionnaire for private schools.
7.
Questions about lobbying activities.
8.
Information relating to transfers and transactions between the public charity and
noncharitable exempt organizations.
Public charities (as defined in Exercise 13-9 (b) are required to file a Schedule A in
addition to the Form 990.
13-13.
A.
The four conditions that will automatically exempt organizations from UBIT are: (1)
that the business is not regularly carried on, (2) volunteers perform most of the labor, (3)
income results from the sale of donated merchandise, and (4) it is operated for the
convenience of employees, patients, students, etc.
B.
Legislation has provided the following exemptions from UBIT:
1.
Royalties, dividends, interest and annuities (except from controlled
corporations).
13 - 7
13-13 (B) (Continued).
2.
3.
Income from qualified public entertainment activities in connection with a fair or
exposition.
4.
Income from labor, agricultural, and horticultural organizations and business
trade associations from qualified convention or trade show activities.
5.
C.
Income of a college, university, or hospital from research performed for a person
or governmental unit.
Income from the rental or exchange of rental lists.
Unrelated Business Income Tax is computed at the corporate or trust rate. Once income
is determined to be subject to tax, the normal range of deductions for corporations
apply, such as business related expenses directly associated with the income, charitable
contributions, etc. In addition, a $1,000 special deduction is allowed.
13-14. First, I would ensure that the objectives of the organization, as listed in the articles of
incorporation, are limited and that those objectives relate solely to the tax exempt
purposes of the organization. I would need to see that the IRS Form 1023, Application
for Recognition of Exemption under Section 501 (c) (3) of the Internal Revenue Code,
was filed, along with the various forms required under state law.
I would need to ensure that income producing activities, to the extent possible, are free
of the characteristics that would make them subject to the unrelated business income
tax, and especially to be sure that the organization does not lose its tax exempt status.
This would include, when possible, fund-raising and other money-raising activities by
volunteers. Sale of donated merchandise would be another example.
As the organization grows, and the Form 990 and Schedule A are required to be filed
because gross revenues exceed $25,000, I would be careful to ensure that the
organization expends most of its resources for program purposes, that no single
contractor or employee, or trustee, etc. appears to be receiving unreasonable
compensation, and that program activities are carefully articulated.
Opportunities may arise when activities can be enhanced by funds that would be
considered unrelated business income. In that case, I would consider the creation of a
related organization, such as a foundation. The related organization, in this case, may
not be tax exempt, but its creation might help the not-for-profit organization retain its
tax exempt status.
13 - 8
13-14 (Continued).
I would certainly seek legal advice and the advice of a CPA to develop a system that
provides sound accounting information and internal controls, and a tax professional who
is experienced in assisting not-for-profit organizations with federal and state taxes.
13-15.
A.
Service - Efforts measures of costs or inputs; the financial and nonfinancial
resources applied to provide services.
B.
Service Accomplishments - include both outputs and outcomes of a service activity.
C.
Inputs - the number of financial and nonfinancial resources applied.
D.
Outputs - the quantity of a service provided or the quantity of a service that meets a
certain quality requirement.
E.
Outcome - the extent to which results are achieved or needs are met at least partially
due to THE SERVICES provide.
F.
Efficiency Measures - relate costs and other inputs to output measures. Such as
number of service units performed per $ (000s).
G.
Cost-Outcome Measures - relate inputs to outcomes. Such as number of favorable
outcomes to dollar spent.
13-16
The answers to this question will vary by student depending on the specific report card
accessed.
13 - 9
13-17.
A.1. Net debt equals total general obligation debt minus the amount available in debt service
funds for debt payment. The general obligation debt figure should be found in the
liability section of the government-wide Statement of Net Assets. The amount available
in debt service funds would be found in the fund balance section of the debt service
funds in the governmental funds Balance Sheet. Normally, it is assumed that any fund
balance amount available at year-end is available for principal payment. The population
would be found in the statistical section. Net debt per capita equals net debt divided by
population.
2.
Net debt would be calculated as described in (A) (1). The fair value of
property would be found in the statistical section. If the statistical section uses assessed
value, not fair value, care must be taken to ensure that fair value is computed using the
appropriate factor. For example, in Illinois, the fair value would be three times the
assessed value. When the statistical table lists the assessed value, the assessment ratio
is normally listed, so the fair value can be computed easily. The ratio is calculated by
dividing net debt by the fair value.
3.
Net debt to assets is obtained from the government-wide Statement of Net Assets. It
can be computed separately for governmental activities, business-type activities, the
total primary government, and for component units. In all cases, the long-term debt is
taken from the liability section of the Statement of Net Assets, and the assets would be
assets from the asset section of the same statement. The debt amount is divided by total
assets.
4.
Debt service to total expenditures-General and debt service funds would be found in the
governmental funds Statement of Revenues, Expenditures, and Changes in Fund
Balances. The total expenditures reported, in those funds, for debt service (principal
and interest and fiscal charges) would be divided by the total expenditures in those
funds. .
5.
Net assets/expenses is calculated from the government-wide statements. It can be
computed for governmental activities, business-type activities, the total primary
government, and for component units. The net assets would be found in the
government-wide Statement of Net Assets, and the expenses would be found in the
Statement of Activities.
6.
Unrestricted net assets/expenses is also calculated from the government-wide
statements, and can be computed for governmental activities, business-type activities,
the total primary government, and component units. Like the previous measure, the
numerator is found in the Statement of Net Assets, and the denominator is found in the
Statement of Activities.
13 - 10
13-17 (A) (Continued).
7.
Unreserved fund balance/revenues-General Fund is a measure long used in
governmental financial analysis. The unreserved fund balance for the General Fund
would be found in the governmental funds Balance Sheet. Be sure to use total
unreserved fund balance, which may include some designated balances. The total
revenues would be found in the General Fund column of the governmental funds
Statement of Revenues, Expenditures, and Changes in Fund Balances.
8.
Governmental revenues per capita is a measure long used in governmental
financial analysis. Governmental revenues would be found in the governmental funds
Statement of Revenues, Expenditures, and Changes in Fund Balances. The population
should be found in the statistical section of the CAFR.
9.
Interest coverage-revenue bonds is found in the proprietary funds Statement of
Revenues, Expenses, and Changes in Fund Net Assets. This measure should be
calculated for each major enterprise fund, especially when revenue bonds exist. Total
revenues (operating and nonoperating) less operating expenses divided by interest
expense would result in this measure.
10.
Operating ratio-enterprise funds is also computed from the proprietary funds Statement
of Revenues, Expenses, and Changes in Fund Net Assets. The operating expenses, less
depreciation, are divided by the operating revenues. This ratio should also be calculated
for each enterprise fund.
B. 1.
Net Debt per capita indicates the amount of debt each citizen of the government bears.
This may be computed for the governmental unit alone, or the overlapping debt may be
shown. This is a commonly used measure that can be used to compare the debt of
governmental units and to compare the debt load of citizens of a particular government
over time.
2.
Net debt to fair value of property indicates the amount of debt borne by property
owners and the amount that might be needed potentially from a property tax levy to
service the debt. The amount is a fixed charge; fair value is used in lieu of assessed
value, since different states use different assessment ratios.
3.
NET DEBT TO ASSETS IS A MEASURE OF SOLVENCY AND IS SIMILAR TO THE DEBT/EQUITY RATIO USED FOR
ANALYSIS OF BUSINESS FINANCIAL STATEMENTS. IF AN ANALYST CHOOSES, COMPENSATED ABSENCES,
PENSION LIABILITIES, AND OTHER FORMS OF DEBT COULD BE ADDED TO THE NUMERATOR. A LSO, THE
DENOMINATOR COULD BE THE UNRESTRICTED NET ASSETS, W HICH WOULD PRODUCE A MUCH MORE
CONSERVATIVE MEASURE.
13 - 11
13-17 (B) (Continued).
4.
Debt service to total expenditures indicates the degree to which total expenditures must
be tied up in debt service. Debt service is a fixed charge, that must be paid. The higher
this ratio, the less that is available for current operations.
5.
Net assets/expenses is a measure of overall financial position. It indicates the
resources available to meet expenses. The higher the number, the better able
the government should be able to cover expenses, in the long run.
6.
Unrestricted net assets/expenses is a more conservative measure than net
assets/expenses. It indicates the amount of unrestricted, unexpended resources that are
available to finance expenses. In one sense, this is a liquidity measure because
unrestricted net assets essentially represent current assets.
7.
Unreserved fund balance/revenues-General Fund is a commonly used liquidity measure.
The General Fund unreserved fund balance represents the resources that are available to
finance future expenditures; those that have not been committed. Governments often
adopt a policy that it should aim to have a certain figure, say 25%.
8.
Governmental revenues per capita is a measure of the demand for services for a
particular jurisdiction. It indicates the total amount that a government has agreed to
raise to meet the demands of its citizens.
9.
Interest coverage-revenue bonds provides a measure of the ability of an enterprise to
pay the interest on revenue bonds. A modification would be to show the total debt
service coverage. Since revenue bonds are often paid from revenues of a particular
enterprise, it is often best to calculate separate figures for each enterprise.
10.
Operating ratio-enterprise funds provides a measure of the cash spread produced by
enterprise fund operations. Depreciation is not included; in governmental financial
reports, depreciation can be excluded, since it is reported separately. In a sense, this
figure indicates the amount available to pay debt, at least in the short run.
13 - 12
13-18.
A.
Analysis of the ability to repay revenue bonds for the water and sewer fund. If the
water and sewer fund is the only enterprise fund, or if all the enterprise funds of the
government are major, the proprietary fund Statement of Revenues, Expenses, and
Changes in Net Assets would be consulted to extract the interest coverage (operating
revenues minus expenses, including depreciation, divided by the interest charges). The
operating ratio is expenses, exclusive of depreciation divided by operating revenues. If
the government has nonmajor enterprise funds, then combining statements should be
consulted, or the information for the individual funds should be available in segment
information contained in the notes.
B.
Analysis of the ability to repay general obligation bonds of a government.
The net debt per capita and the net debt to fair value of property can be obtained from
the government-wide Statement of Net Assets and the statistical section. The notes will
contain the debt service requirements to maturity for general obligation bonds. The
statistical section will contain schedules of legal debt margin and direct and overlapping
debt. Trends should be established for the government in question, and comparisons
should be made with other governmental units.
C.
Analysis of the ability to repay a short-term loan from a local
bank. Assuming the loan is to be repaid with general revenues, analysis should focus on
General Fund revenues, expenditures, and current assets and liabilities. Look at the
unreserved fund balance/revenues ratio in the General Fund. In addition, with the
Statement 34 reporting model, one could look at the unrestricted net assets in the
government-wide Statement of Net Assets to see the amount of expendable, unrestricted
resources available to the government to be used for any purpose desired by the
government, including repaying short-term loans.
D.
Analysis of the ability to increase services next year without raising
taxes. The unreserved fund balance in the General Fund would indicate the amount
available for appropriation, at least for one year. A comparison of the revenues and
expenditures for the past year could be gathered from the governmental funds Statement
of Revenues, Expenditures, and Changes in Fund Balances. A look at the Budgetary
Comparison Schedule (in RSI or a Statement as a basic statement) would reveal the
amount budgeted for the past year. A more detailed analysis might be available from
individual General Fund statements in the Financial Section of the CAFR, if provided.
With the new reporting model, one could look at the government-wide Statement of
Activities and determine the net program costs for each function and compare with
other governments.
13 - 13
13-18 (Continued).
E.
Analysis of the ability to provide raises next year without raising taxes.
This information would be gathered in the same manner as (D) above. The number of
employees may be provided in the statistical section. However, it is possible that much
of this information would not be in the CAFR; it may be necessary to go to budget
documents to determine the current amount of salaries as a starting point. It is possible
that the Budgetary Comparison schedule would report expenditures by object
classifications, including salaries.
F.
Analysis of the ability to raise taxes next year. Basically, of course, this is
a political question. However, the CAFR might provide information on tax limitations.
The CAFR does contain information (in the statistical section) on taxes; levies and
collections, the value of taxable property, and the tax rates. Comparisons might be
made with other governments on the tax rates, expenditures per capita, etc.
G.
Analysis to see if the budget is under control. The Budgetary Comparison
Schedule is a required part of the CAFR, either as Required Supplementary Information
or as a basic statement. The original and revised budgets must be shown, as well as
actual figures. This schedule provides information on the General Fund and on all
special revenue funds for which a legally adopted annual budget has been enacted.
13 - 14
13-C.
1.
Net Debt per Capita:
From the Statement of Net Assets (8-C-4), the general obligation bonds payable amount
to $9,600,000. From the governmental funds Balance Sheet, (5-C-4-A), the amount of
resources available in the debt service funds amounts to $1,009,450 ($ 568,000 +
441,450); the net amount of debt is $8,590,550. Assuming a population of 20,000, the
net debt per capita would be $429.53.
2.
Net Debt to Fair Value of Property:
The net debt computed in #1 is $8,590,550. Assuming a fair value of property of $300
million, the ratio would be: $8,590,550/$300,000,000 = .0286, or $2.86 per $100 fair
value of property.
3.
Net Debt to Assets:
The net debt is $9,600,000 for governmental activities, $2,300,000 for business-type
activities, and $11,900,000 in total. Following the sources, the amount available is
ignored. Total assets for governmental activities are $43,164,490, $4,172,680 for
business-type activities, and $47,337,170 in total. The net debt to assets then is 22.24%,
55.12%, and 25.14%.
4.
Debt Service to Total Expenditures-General and Debt Service Funds:
From the governmental funds Statement of Revenues, Expenditures, and Changes in
Fund Balances (5-C-4-B), the total debt service expenditures are $908,000 ($ 400,000 +
508,000) and the total expenditures for the general and debt service funds are
$10,351,600 ($ 9,443,600 + 748,000 + 160,000). The ratio is $908,000/$10,351,600, or
8.77%.
5.
Net Assets/Expenses:
From the Government-Wide Statement of Net Assets (8-C-4) and the GovernmentalWide Statement of Activities (8-C-3), the following is obtained and computed:
Total Net
Assets
Governmental Activities
Business-Type Activities
Primary Government
Expenses
$32,802,990
$1,700,380
$34,503,370
$13,455,000
$952,000
$14,407,000
13 - 15
Ratio
2.44
1.79
2.39
13-C (Continued).
6.
Unrestricted Net Assets/Expenses:
From the Government-Wide Statement of Net Assets (8-C-4) and the Government-Wide
Statement of Activities (8-C-3), the following is obtained and computed:
Unrestricted
Net Assets
Governmental Activities
Business-Type Activities
Primary Government
Expenses
$485,190
$237,380
$722,570
$13,455,000
$
952,000
$14,407,000
Ratio
.0361
.2493
.0502
7.
Unreserved Fund Balance/Revenues-General Fund:
The unreserved fund balance for the General Fund is found in the governmental funds
balance sheet (5-C-4-A) and the revenues for the General Fund are found in the
governmental funds Statement of Revenues, Expenditures, and Changes in Fund
Balances (5-C-4-B). $438,390 divided by $10,970,000 equals 4.00%.
8.
Governmental Revenues per Capita:
This ratio is computed from the governmental funds Statement of Revenues,
Expenditures, and Changes in Fund Balances (5-C-4-B). The governmental revenues are
$12,449,000. $12,449,000 divided by a population of 20,000 results in revenus per
capita of $622.45.
9.
Interest coverage-Revenue Bonds:
This ratio would come completely from the Statement of Revenues, Expenses, and
Changes in Net Assets (6-C-3-2). The city has no nonoperating revenues. Thus,
operating income ($170,340) divided by interest expense ($170,900) equals 1.00 times.
10.
Operating Ratio-Enterprise Funds:
This ratio also comes from the Statement of Revenues, Expenses, and Changes in Net
Assets. Operating expenses of $781,100, less depreciation of $210,000, equals
$571,100. Divide $571,100 by the operating revenues of $951,440 to get 60.02%.
13 - 16