FINANCE-The City of Pearland was recently incorporated and had the following transactions

QUESTION

1. The City of Pearland was recently incorporated and had the following transactions for the fiscal year ended December 31, 2016.a. The city council adopted a General Fund budget for the fiscal year. Revenues were estimated at $2,000,000 and appropriations were $1,990,000.b. Property taxes in the amount of $1,940,000 were levied. It is estimated that $9,000 of the taxes levied will be uncollectible.c. A General Fund transfer of $25,000 in cash and $300,000 in equipment (with accumulated depreciation of $65,000) was made to establish a central duplicating internal service fund.d. A citizen of Pearland donated marketable securities with a fair value of $800,000. The donated resources are to be maintained in perpetuity with the city using the revenue generated by the donation to finance an after school program for children, which is sponsored by the parks and recreation function. Revenue earned and received as of December 31, 2016, was $40,000.e. The city’s utility fund billed the city’s General Fund $125,000 for water and sewage services. As of December 31, the General Fund had paid $124,000 of the amount billed.f. The central duplicating fund purchased $4,500 in supplies.g. Cash collections recorded by the general government function during the year were as follows:Property taxes $1,925,000Licenses and permits 35,000User charges 28,000h. During the year the internal service fund billed the city’s general government function $15,700 for duplicating services and it billed the city’s utility fund $8,100 for services.i. The city council decided to build a city hall at an estimated cost of $5,000,000.To finance the construction, 6 percent bonds were sold at the face value of $5,000,000. A contract for $4,500,000 has been signed for the project; however no expenditures have been incurred as of December 31, 2016.j. The general government function issued a purchase order for $32,000 for computer equipment. When the equipment was received, a voucher for $31,900 was approved for payment and payment was made.RequiredPrepare all journal entries to properly record each transaction for the fiscal year ended December 31, 2016. Use the following funds and government-wide activities, as necessary:General Fund GFCapital projects fund CPFInternal service fund ISFPermanent fund PFAfter School Fund (a special revenue fund) SRFEnterprise fund EFGovernmental activities GAEach journal entry should be numbered to correspond with each transaction. Do not prepare closing entries.1. A not-for-profit organization has hired you to conduct an audit. The audit has been requested by the organization’s board of directors. A mission of the organization is to provide for the education of children in an economically distressed area of the city. In fulfilling its mission, the organization operates a Head Start program, a K-3 elementary school, and an after-school kids program. To help fund its mission, the organization receives funds from several sources, including federal programs. The federal programs and the amount of funding expended from each program for the fiscal year are as follows:Program Funds ExpendedTitle I $374,891National School Lunch Program 32,562National School Breakfast Program 11,821Head Start 482,002TRIO—Student Support Services 261,085Child and Adult Care Food Program 37,639RequiredUse the Catalog of Federal Domestic Assistance (CFDA) Web site (www.cfda.gov), OMB Circular A-133 Compliance Supplement (www.whitehouse.gov/OMB/circulars) and what we learned this week to answer the following questions.a. What federal departments are sponsoring the listed programs?b. OMB allows “cluster programs” to be considered as a single program when conducting the risk-based approach to selecting programs for audit under the single audit. Of the programs listed, which (if any) are part of the same cluster?c. Which programs would be considered Type A programs or Type B programs and why?d. Based on provided information, which programs would you select for audit and why?e. If the not-for-profit has received an unqualified opinion in each of the last two years and the Head Start program was selected for audit in both years, would the programs you select for audit change? If not, why not? If so, what programs would you select and why?f. If you found out that a new manager with no previous experience was now in charge of Title I Program, would your answer to part c change? If so how?g. Reading the objectives of the programs identified, you will notice a common underlying objective. Since the ability to obtain funds depends on meeting this underlying objective, it should be considered a major compliance issue for the auditor. What is the objective? What compliance item is particularly affected by this underlying objective?

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