Transcript Management’s Discussion and Analysis: What you need to say

Management’s Discussion and
Analysis: What you need to say
BY: MATT HJELM, CPA, CFE
KIM DARE, CPA, CFE
GALUSHA, HIGGINS, & GALUSHA, PC
The Key Points
 Introduction
 Year to year comparisons
 Analysis of financial position
 Discussion of the basic financial statements
 Condensed GW financial information
 Analysis of fund activities
 Analysis of budget to actual variations
 Description of capital asset and debt activities
 Description of known facts or conditions that
are expected to have a significant affect on
operations
Introduction
 Who wrote the MD&A?
 What is the purpose of the MD&A?
MANAGEMENT DISCUSSION AND ANALYSIS – JUNE 30, 2013
This Management Discussion and Analysis (MD&A) written by the Business
Manager/District Clerk of the Galusha School District provides an overview of
the financial position and governmental financial activities for the fiscal year
ending June 30, 2013. Please read it in conjunction with our audit report
financial statements. Certain comparative information between the current year
and the prior year is required to be presented in the MD&A.
Year to Year Comparison – The Highlights
 Emphasize the current year!
 Discuss both positive and negative aspects of the
year’s operations.

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Reserves
Cash flows
Tax items
Mill levies
 Valuation

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
Capital Improvements
Other postemployment benefits
Multi-district cooperative agreements
The Basic Financial Statements
 Discussion on the district-wide financial statements
 Accrual method of accounting
 Be sure to use up to date terminology

Ask the auditor
 Check your numbers and percentages if you use
them!
 Keys to keeping the reader’s attention…… sure
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Give a general overview of what you are discussing
Be descriptive but concise
Keep it simple
The Basic Financial Statements
 Statement of Net Position

General Overview

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Assets, Liabilities and Net Position
 Makeup of categories
A. The Statement of Net Position on Page 13 shows the assets, liabilities, and the net
position of the school district. The statement categorizes assets to show that some assets
are very liquid, such as cash and cash equivalents. Some assets are restricted for certain
purposes or reserved for emergencies and cash flow purposes. Some assets are invested
in fixed or capital assets, such as buildings, equipment and other long-lived property;
and some assets are available to fund budgets of the following year. Assets exceed
liabilities by $X,XXX,XXX as of June 30, 2013. For current year net position, capital
assets and restricted net position compose 90% of the total of net assets and 10% are
unrestricted or liquid. Last year capital assets and restricted net assets composed 90% of
the total net assets and unrestricted or liquid assets comprised 10% of the total. This
allocation has remained the same for the last four years.
 Deferred inflows and outflows if you have them
The Basic Financial Statements
 Statement of Activities
 Discussion on revenue types
General
 Program-specific


General overview of expenditure activity
The Statement of Activities on Page X shows the amounts of program-specific and general
school district revenues used to support the various functions of the school district.
General revenues from taxes and other sources for general school supported 81 percent of
expenditures, while 19 percent of expenditures were supported with sources other than
taxes, called program revenues. Program revenues for Galusha Schools include grants,
purchased meals and community education fees.
Significant Fund Activities
 Discuss the major funds presented in the financial
statements

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How to determine major funds
Proprietary funds if you have them
Fiduciary responsibilities i.e. extracurricular accounts

Refer to the schedule of extracurricular activity
 Method of accounting

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Governmental funds – modified accrual
Proprietary and Fiduciary funds – Full accrual
 Refer to the reconciliations included in the financial
statements to determine what makes up the differences
between the district-wide financial statements and the
fund financial statements
Condensed Financial Information
 Keyword here is condensed!
 Summarize the district-wide statements only
 Make sure you update terminology if there has been
guidance changes

Ask your auditor about this
Condensed Financial Information
Statement of Net Position
2013
2012
Net Position:
Current assets
Capital assets - net
Total assets
2,984,900
17,624,587
20,609,487
2,919,265
18,179,360
21,098,625
Current liabilities:
Non-current liabilities
Total liabilities
622,115
12,121,732
12,743,847
598,425
12,176,506
12,774,931
Net Position:
Net investment in capital assets
Restricted
Unrestricted
Total net position
7,054,587
1,900,372
(1,089,319)
7,865,640
7,049,360
1,625,622
(351,288)
8,323,694
Condensed Financial Information
Statement of Activities
2013
Revenues:
Program revenues:
Charges for services
Federal grants
State program funding
Other
Total program revenues
General revenues:
Property taxes
County retirement distribution
State aid
Interest
Other
Special Item
Gain/(Loss) on disposal of assets
Total general revenues
Total Revenues
2012
201,756
1,111,428
945,898
90,179
2,349,261
211,742
1,009,345
920,106
84,360
2,225,553
3,486,356
785,126
5,141,420
10,435
62,756
3,456,701
820,260
5,077,667
18,735
77,959
0
9,486,093
11,835,354
(8,202)
9,443,120
11,668,673
2013
Expenses:
Regular pograms
Special programs
Vocational programs
Adult education
Supporting services
Operations and maintenance
Student Transportation
Food Services
Extracurricular
Interest
Debt issuance costs
Unallocated depreciation
Total expenses
5,691,310
665,146
393,762
6,928
2,620,414
1,171,021
546,198
686,847
36,630
474,850
300
0
12,293,406
2012
5,352,596
633,628
313,046
7,856
2,404,804
997,949
515,522
666,912
37,668
496,450
300
2,844
11,429,575
Budget to Actual Results
 Discuss any changes between the original, approved
budget and the final budget

General description for any modifications
 Highlight any large variances between final budgeted
amounts and the actual amounts for the year
Capital Assets and Debt Activity
 Capital Assets
 Annual balance in each category i.e. land, buildings, etc.
 General information on capital additions or disposed assets
 Annual depreciation expense
 Debt Activity
 Type of Debt i.e. Bonds, Capital Leases, Intercap loans

Include general information i.e. Maturity dates and interest rates
Outstanding amounts at year end
 Make sure to include your OPEB information
 Note: Will include pension liability information starting in
FY15 – Talk to your auditor if you unaware of this change
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Currently Known Information
 Make sure to highlight key changes that have
happened or are expected to happen in the near
future
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Mill levies
Changes to tax base or valuations
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Include significant items such as tax protests
Enrollment trends
Changes to state/federal funding
Contact Information for the District
 District Superintendent
 District Clerk/Business Manager
 Mailing/Physical Address
 Phone Number
Helpful References
 OPI
 Finance & Grants

Accounting
 GASB34 Tab
• Model MD&A
• MD&A Checklist
• Samples
Background on Presenters
Firm:
Founded in 1919
7 offices
Audit clients include 20+
school districts and
education co-ops as well as
other governmental
entities
Matt Hjelm:
Graduated MSU
6+ years experience auditing
governments including schools, cities,
Indian tribes
Kim Dare:
Graduated MSU-B
15+ years experience auditing
governments including schools, cities,
Indian tribes
Both licensed in the State of Montana
and Certified Fraud Examiners
Questions
Contact: 406-248-1681
[email protected] or [email protected]