Question

How do proprietary fund financial statements differ from other fund type’s financial statements?

Answer 1

Proprietary fund is a business-like fund of a state or local government, and involves governmental accounting for reporting purpose. Enterprise funds, Internal service funds are few examples of proprietary funds; Enterprise funds provide goods or services to the general public for a fee. Internal service funds account for goods and services provided by one department or agency to another department or agency of the governmental unit/other governmental units on a cost-reimbursement basis.
Proprietary fund reporting mainly focuses on:
Determination of operating income, Changes in net position (or cost recovery), Financial position and Cash flows. Which means that the financial statements used to present proprietary funds involve; Statement of net position, Statement of revenues, expenses and changes in net position and Statement of cash flows. Proprietary Funds reporting uses GASB 34 Reporting standard, and requires reporting on Capital contributions, additions to permanent and term endowments, special and extraordinary items and transfers are reported above the increase (decrease) in net position. Present special and extraordinary items separately at the bottom of the statement. Statement of cash flows for proprietary funds uses the direct method of cash flows from operating activities. Statements include reconciliation of operating cash flows to operating income.
Other Fund’s Financial Statements are prepared and reported on the basis of appropriate regulatory reporting, whether IAPD or SEC. Most of the funds (Publicly traded, mutual funds, Hedge Funds) are regulated by the Securities and Exchange Commission/IAPD, require to release an annual and semiannual report that includes detailed information about the fund’s performance, finances and holdings. The fund’s financial statements must provide detailed information about its performance during the previous year, including comparisons with the fund’s historic trends, so that the Investors can read a narrative from the fund’s managers about its recent and historical performance. Additional financial information about the fund that can be useful to investors, can also be integrated. A financial information table showing the fund’s total returns during the past five years is to be a part as well. The fund’s portfolio turnover rate, Objective, Strategies, Portfolio mix, Management Fee/Commissions, Fund Manager, regulatory information related to both Fund and Fund Manager. The Financial reports also must disclose how dividends are generated, as some dividends are a return on capital and not actually the result of a profit. Mutual funds with other outstanding issues that could affect performance, such as a lawsuit, must disclose these as part of the report’s notes section.