Terms Guide for Understanding District Financials
This guide is designed to help you understand key financial and auditing terms used in the audit report of the Broadmoor Police Protection District, as well as terms related to the funding and cash flow of the police department. We know that these reports contain a lot of information, and we aim to present it clearly and transparently.
Accounting Terms
Accounting Principles Generally Accepted in the United States of America (GAAP)
A set of accounting standards and guidelines used to prepare financial statements, ensuring consistency, reliability, and comparability of financial reporting.
Accrual Basis of Accounting
An accounting method where revenues and expenses are recorded when they are earned or incurred, regardless of when cash is received or paid.
Assets
Resources owned by the District that have economic value and can provide future benefits. Assets are categorized as:
- Current Assets: Assets expected to be converted into cash or used within one year (e.g., cash, accounts receivable).
- Capital Assets: Long-term assets such as buildings, equipment, and land used in operations, with a useful life exceeding one year.
Liabilities
Obligations of the District arising from past transactions, requiring future payment or service provision. Liabilities are classified as:
- Current Liabilities: Obligations due within one year (e.g., accounts payable).
- Long-term Liabilities: Obligations due beyond one year (e.g., pension liabilities).
Net Position
The difference between the District's assets and deferred outflows of resources and its liabilities and deferred inflows of resources. It indicates the District's financial health and is categorized as:
- Net Investment in Capital Assets: Capital assets minus accumulated depreciation and any related debt.
- Unrestricted Net Position: Resources available for general use, not restricted for specific purposes.
Deferred Outflows of Resources
A consumption of net assets by the District that is applicable to future reporting periods. It represents expenses paid but not yet recognized.
Deferred Inflows of Resources
An acquisition of net assets by the District that is applicable to future reporting periods. It represents resources received but not yet earned.
Fund Balance
The difference between assets and liabilities in a governmental fund. Fund balances are categorized as:
- Nonspendable: Funds not in spendable form (e.g., inventories, prepaid expenses).
- Restricted: Funds constrained for specific purposes by external parties or legislation.
- Committed: Funds designated for specific purposes by formal action of the District's governing body.
- Assigned: Funds intended for specific purposes but not formally committed.
- Unassigned: Funds available for any purpose; only the General Fund can report a positive unassigned fund balance.
General Fund
The primary operating fund of the District, used to account for all financial resources except those required to be accounted for in another fund.
Revenue
Income earned by the District from various sources, including:
- Property Taxes: Taxes levied on real and personal property within the District's jurisdiction.
- Special Assessments: Charges imposed on property owners to fund specific public projects or services that benefit their properties.
- Grants and Contributions: Funds received from other governmental agencies or organizations.
Expenses
Costs incurred by the District in providing services and conducting operations, such as salaries, benefits, supplies, and depreciation.
Depreciation
The systematic allocation of the cost of a capital asset over its useful life, reflecting wear and tear, obsolescence, or usage.
Auditing Terms
Audit
An independent examination of financial statements and records to ensure accuracy and compliance with accounting standards.
Auditor's Opinion
The auditor's formal statement about the reliability of the financial statements.
Unmodified (Clean) Opinion: This is what our audit received and indicates that the financial statements present fairly, in all material respects, the financial position of the entity.
Going Concern
An accounting principle that assumes the District will continue its operations into the foreseeable future. An auditor may express doubt about this if there are significant financial issues.
Management's Discussion and Analysis (MD&A)
A section of the audit report where management provides an overview and analysis of the District's financial activities, highlighting significant changes and future considerations.
Notes to the Financial Statements
Additional information provided in the audit report that explains and supplements the financial statements, offering more detail on accounting policies, significant transactions, and specific account balances.
Pension Terms
Pension Plan
A retirement plan sponsored by the District, where contributions are made to provide future benefits to employees upon retirement.
Net Pension Liability
The District's proportionate share of the unfunded pension obligations owed to current and future retirees, calculated as the total pension liability minus the plan's fiduciary net position.
Other Relevant Terms
Risk Management
Processes and practices employed by the District to manage exposure to various risks, including insurance coverage for liabilities and losses.
Litigation
Legal proceedings involving the District, which may result in financial obligations or liabilities.
Capital Improvements
Expenditures for acquiring or upgrading physical assets such as buildings, equipment, or infrastructure, intended to improve services or operations.
By understanding these terms, you will have a clearer picture of the financial information presented in the audit report and the considerations related to the funding and cash flow of the police department. Our goal is to ensure transparency and help you make informed decisions based on accurate and accessible information.
View Full Report
Financial Statements and Independent Auditor's Reports for the Fiscal Year Ended June 30, 2023