The financial statements of a debt service fund may reveal less information than is apparent. The balance

The financial statements of a
debt service fund may reveal less information than is apparent.

The
balance sheet and a comparative statement (budget‐to‐actual) of
revenues, expenditures, and changes in fund balance of Parkville’s general
obligation debt service fund (date changed) is presented as follows.

General Obligation Debt Service Fund Balance Sheet as of
December 31, 2021 (in thousands)

Assets

 Equity
in pooled cash and cash equivalents

$  18

 Cash
with fiscal agent

21

 Investments,
at market value

1,527

 Receivables—accrued
interest

2

 Due
from other funds

   44

  Total
assets

$1,612

Liabilities and fund balance

 Liabilities

 Vouchers
and accounts payable

$   1

Fund balance

 Restricted
for special purposes

1

 Assigned

 1,610

  Total
fund balance

$1,611

  Total
liabilities and fund balance

$1,612

General Obligation Debt Service Fund Statement of Revenues,
Expenditures, and Changes in Fund Balance Budget and Actual Year Ended
December 31, 2021 (in thousands)

Budget

Actual

Revenues

 Investment
earnings

$   —

$   151

Expenditures

 Administrative
services

25

22

 Debt
service payments

  Principal

2,592

2,592

  Interest

  4,088

  4,088

   Total
expenditures

$  6,705

$ 6,702

Excess
(deficiency) of revenues over expenditures

$(6,705)

$(6,551)

Other financing sources
(uses)

 Nonreciprocal
transfers‐in

6,292

7,790

 Nonreciprocal
transfers‐out

   (10)

   (10)

 6,282

  7,780

Excess
(deficiency) of revenues and other sources over expenditures and other uses

$ (423)

1,229

Fund
balance, beginning of year

  382

Fund
balance, end of year

$
1,611

Of
what significance is the deficiency of
revenues over expenditures? Is it an indication of poor management?

The
fund reported a smaller deficit than was budgeted. Is this variance a sign
of good management? Explain.

Can you assess whether the fund will
have the fiscal wherewithal to satisfy its obligations of principal and
interest as they come due? Explain.

Included
among the nonreciprocal transfers‐in is a transfer of $1,498 from a
related capital projects fund. What is a likely explanation for the
transfer?

A
schedule of operating transfers indicates that the transfers‐in were as follows:

From
the general fund

$2,080

From
the permanent parks and recreation fund

25

From
the transportation fund

15

From
the open space fund (to account for the acquisition of greenbelt land)

3,944

From
the major maintenance and equipment replacement fund

  228

Total

$6,292

The major maintenance and equipment replacement fund is a capital
projects funds; each of the other funds, other than the general fund, is a
special revenue fund. What are the most likely reasons for the transfers from
the special revenue funds?