Question

The County Transit Authority (CTA) was established by the County to construct, operate, and maintain the County’s mass-transit train system. The CTA was created by the County as a separate legal entity, with powers to issue revenue bonds payable from railway fees and other revenues.

The 9-member governing body of the CTA consists of six members appointed by the mayor for fixed 10-year terms, and three County officials serving ex officio – the elected County treasurer, the elected County comptroller, and the appointed superintendent of transportation.

The CTA is financially self-sufficient, and it sets its own rates and approves its own budget. The County cannot access its assets or surpluses, nor is it obligated to subsidize deficits of the CTA.

The CTA has issued bonds to help fund recent construction and renovation projects. The related bond agreement states that the debt of the CTA is not an obligation of the County. However, County statutes authorize the County’s budget director to include in the budget submitted to the County Board of Supervisors an amount sufficient to make the principal and interest payments on the CTA bonds, in the event CTA revenues are insufficient to meet debt se\rvice requirements.

Is the CTA a component unit of the County?

If so, how should the County present the financial activities of the CTA in its Comprehensive Annual Financial Report (CAFR)? Specifically address both the government-wide and the fund basis financial statement presentation considerations.

Answer 1

As per the Law, CTA is the Component unit of the County.

The Financial activities of the CTA are recorded furestly in the basic financial statements of the county. Then, finally it is recorded inn the CAFR.

Financial Activities of the CTA is recorded both Government wide and the fund basis financial statement presentation consideration.

Government - wide presentation is as under:

Government financial statements report all financial transactions for the government for the year. These statements are are not a budget, but rather a history, showing the revenue collected and the amounts that the government spent.

A statement of activities and a statement of net position are usually included. A balance sheet is often included as well, but is not necessary. These statements are generally used for state and local governments.

The statement of activities lists the revenue and expenditures of the government. A statement of activities is the same thing as an income statement used in business, and is very straightforward. It may also show capital contributions or other sources used such as grants.

These are funds that are not normally funded through, like income tax or proprietary funds. These funds may come from the federal government for road repair, or infrastructure maintenance.

The statement of net position looks at the governments' assets and liabilities, and the difference between the two are considered the net assets. It's essentially the balance sheet for government financial statements. This is what funds the government would have left over after all other obligations and liabilities are met. This is a quick reference to what money the government has.

The net assets are a look at the government's financial position. This can be a good indication as to whether or not their financial position is healthy or deteriorating.

The statement of net position is broken down into five categories: assets, liabilities, deferred inflows, deferred outflows, and net assets.

Now, we will discuss the fund basis presentation of CTA financial transactions.

It is the same as Government wide presentation of CTA, but only differs as its main basis n its focus is on the funds. So it analysis the inflows or sources of funds and outflows or the application of funds.