Transcript Government Financial Statements & Reporting

Prepared for: Government Finance Officers Association of
Arizona
May 17, 2012
By: Dawn Jenkins & Dan Leahy
 Basic
Financial Statements
 Required Supplementary
Information (RSI)
 Comprehensive Annual
Financial Report (CAFR)
 The Reporting Entity
BFS is the minimum requirement of
financial reporting
 Elements of BFS

◦ Government-wide financial statements
◦ Fund financial statements
 Governmental funds
 Proprietary funds
 Fiduciary funds
◦ Footnotes to the financial statements

Governmental Fund Financial
Statements
◦ Use flow of current financial resources
measurement focus and modified accrual
basis of accounting
◦ Focus on major funds (non-major
combined into one column)
◦ Required statements
 Balance Sheet
 Statement of revenues, expenditures, and
change in fund balance

Governmental Fund Financial
Statements (continued)
◦ Balance Sheet
 Format is assets + deferred outflows =
liabilities + deferred inflows + fund balance
 Generally in order of liquidity
 Fund balance categories





Nonspendable,
Restricted
Committed
Assigned
Unassigned
Balance Sheet
Governmental Funds
Assets – cash
Major Funds
General Fund
Half-Cent Fund
Non-Major
Gov’t Funds
Total Gov’t
Funds
$93,230
$21,131
$69,633
$183,994
76,428
0
30,205
106,633
$169,658
$21,131
$99,838
$290,627
Liabilities – AP
51,659
3,964
1,496
57,119
Liabilities – Deferred Rev
27,823
0
1,521
29,344
Total Liab.
79,482
3,964
3,017
86,463
76,428
0
30,205
106,633
Restricted
6,030
0
23,927
29,957
Committed
1,388
0
15,690
17,078
Assigned to
1,830
0
1,817
3,647
Unassigned
4,500
17,167
25,182
46,849
90,176
17,167
96,821
204,164
$169,658
$21,131
$99,838
$290,627
Assets – Prepaid
Total assets
Fund balance
Unspendable
Total fund balance
Total Liab & Fund bal.

Governmental Fund Financial
Statements (continued)
◦ Statement of revenues, expenditures, and
changes in fund balance
 Format is revenues [by type] – expenditures
[current by function, debt service, & capital
outlay] +/- other financing sources/(uses) [debt
issuance, transfers in/out, etc.] = change in
fund balance
Statement of Revenues,
Expenditures, and Changes in
Fund Balance
Taxes
Major Funds
General
Fund
Half-Cent
Fund
Non-Major
Gov’t Funds
Total Gov’t
Funds
$32,073
$14,323
$2,255
$48,651
State Shared
11,649
0
0
11,649
Total revenues
43,722
14,323
2,255
60,300
General Government
15,080
398
208
15,686
3,927
282
20,838
25,047
Total expenditures
19,007
680
21,046
40,733
Excess (deficiency) of revenues
24,715
13,643
(18,791)
19,567
6,748
0
20,299
27,047
(1,767)
(10,092)
(10,387)
(22,246)
4,981
(10,092)
9,912
4,801
Net change in fund balance
29,696
3,551
(8,879)
24,368
Fund balances - beginning
60,480
13,616
105,700
179,796
$90,176
$17,167
$96,821
$204,164
Capital Outlay
Transfers in
Transfers out
Total other financing sources/uses
Fund balances - ending

Proprietary Fund Financial Statements
◦ Use flow of economic resources measurement
focus and accrual basis of accounting
◦ Enterprise funds by major fund (non-major
combined)
◦ Internal service funds – one combined column
◦ Required statements
 Statement of Net Position
 Statement of revenues, expenses, and changes
in fund net position
 Statement of cash flows

Proprietary Fund Financial Statements
(continued)
◦ Statement of Net Position
 Format is assets (current & non-current) +
deferred outflows – liabilities (current & noncurrent) – deferred inflows = net position
Statement of Net Position
Proprietary Funds
Business-type Major Funds
Water Fund
Wastewater
Fund
Total
Govtl-Activities
Internal Srvc
Funds
Assets – current
$50,636
$28,404
$79,040
$30,112
Assets – Non-current
286,567
311,158
597,725
43,384
Total assets
337,203
339,562
676,765
73,496
5,776
7,433
13,209
5,324
Liabilities – Non-current
48,558
89,399
137,957
126
Total Liab.
54,334
96,832
151,166
5,324
245,949
226,324
451,720
37,384
Restricted – Capital
10,413
3,244
13,657
0
Unrestricted
26,507
13,162
39,669
30,788
$282,869
$242,730
$525,599
$68,172
Liabilities – current
Net Assets
Invested in capital, net of related debt
Total net position

Proprietary Fund Financial Statements
(continued)
◦ Statement of revenues, expenses &
changes in fund net position
 Format is operating revenues – operating
expenses, +/- non-operating revenues
(expenses) + capital contributions +/- transfers
in (out) = change in net position
Statement of Revenues,
Expenditures, and Changes in Net
Position
Charges for services
Business-type Major Funds
Water Fund
Wastewater
Fund
Total
Govtl-Activities
Internal Srvc
Funds
$29,974
$15,876
$45,850
$32,547
15
56
71
204
Total operating revenues
29,989
15,932
45,921
32,751
Salaries, wages, benefits
4,613
2,209
6,822
7,995
Contractual
15,497
6,289
21,786
10,381
Total operating expenses
20,110
8,498
28,608
18,376
Capital Contributions
3,943
1,343
5,286
68
Transfers in
8,909
3,749
12,658
3,340
Transfers out
(3,128)
(99)
(3,227)
(774)
Change in Net Position
19,603
12,427
3,690
17,009
263,266
230,303
493,569
51,163
$282,869
$242,730
$525,599
$68,172
Miscellaneous
Total net position – beginning
Total net position – ending

Proprietary Fund Financial Statements
(continued)
◦ Statement of cash flows
 By category




Cash
Cash
Cash
Cash
flows
flows
flows
flows
from
from
from
from
operating activity
noncapital financing activities
capital & related financing activities
investing activities
 Ending cash must = cash on statement of net
position
 Reconciliation of operating income (loss) to net
cash provided by (used in) operating activities
Statement of Cash Flows
Proprietary Funds
Business-type Major
Funds
Water Fund
Wastewater
Fund
Govtl-Activities
Internal Srvc
Funds
Total
Receipts from customers
$30,090
$15,955
$46,045
$32,931
Payments to suppliers
(13,549)
(5,592)
(19,141)
(11,942)
16,541
10,363
26,904
20,989
5,780
3,649
9,429
2,566
(4,163)
(3,706)
(7,869)
(3,993)
16
0
16
179
(4,147)
(3,706)
(7,853)
(3,814)
(41,256)
(17,602)
(58,858)
(32,913)
Proceeds from sale of investments
38,839
17,303
56,142
32,991
Cash Flows from Investing Activities
(2,417)
(299)
(2,716)
78
Net increase (decrease) in cash
15,757
10,007
25,764
19,819
Cash Flows from Operating
Cash Flows from Non-Capital
Financing Activities Transfers In/Out
Acquisition and construction
Disposal of capital assets
Cash Flows from Capital and Related
Financing Activities
Purchase of investments

Fiduciary Fund Financial Statements
(if applicable)
◦ Pension & other trusts, & agency funds
◦ Use flow of economic resources
measurement focus and accrual basis of
accounting, except agency funds have no
measurement focus
◦ Required statements
 Statement of fiduciary net position
 Statement of changes in fiduciary net position

Fiduciary Fund Financial Statements
(if applicable) (continued)
◦ Statement of fiduciary net position
 Assets (by category) – liabilities (by category) = net
position (agency funds have only assets & liabilities
– no net position)
 Net position labeled “Held in trust for …” (pension,
pool participants, etc.)
◦ Statement of changes in fiduciary net
position
 Trust funds only in format additions – deductions =
change in net position
Statement of Fiduciary
Net Position
Cash and cash equivalents
Pension Fund
Agency Funds
$57,989
$164,280
99,061
280,631
261
0
157,311
$444,911
Liabilities – AP
0
222
Liabilities – Other
0
444,689
Total Liabilities
0
444,911
Investments (pooled), at fair value
Interest receivable
Total assets
Net Assets
$157,311
Statement of Changes in
Fiduciary net Position
Pension Fund
Additions -Contributions
State insurance premium tax rebate
Total contributions
$613
613
Additions -Investment earnings
Interest and investment income
Total investment earnings
$792
792
Less investment expenses
Investment management fees
Net investment earnings
Total additions
62
730
1,43
Deductions – Retirement payments
25,500
Total deductions
25,500
Change in net position
(24,157)
Net position – beginning of the year
181,468
Net position – end of year
$157,311

Two required statements
◦ Statement of Net Position
◦ Statement of Activities

Use flow of economic resources
measurement focus and accrual basis
of accounting

Distinguish between
◦ Governmental activities
 Must provide reconciliation between
governmental fund financial statements &
governmental activities on governmentwide financial statements
◦ Business-type activities
◦ Total primary government
◦ Discretely presented component units
◦ Does not include Fiduciary Funds

Statement of Net Position
◦ Preferred format is Assets + deferred
outflows – liabilities- deferred inflows = net
position
◦ Net position must be presented in three
components
 Net investment in capital assets
 To show that part of net position is not available for use
 Restricted (may display categories of restrictions)
 Restriction created by outside parties (bond covenants, other
governments, enabling legislation, etc.
 Unrestricted
Statement of net Position
Government-Wide
Govtl
Activities
Assets – Cash/Equivalents
Component
Units
Primary Government
Business-type
Activities
Total
$378,602
$326,711
$705,313
Assets – A/R net
446,710
405,989
852,699
Assets – Restricted investments
734,600
0
734,600
1,559,912
732,700
2,292,612
Liabilities – Accounts Payable
55,927
41,972
97,899
Liabilities – Customer Deposits
23,515
17,455
40,970
Liabilities – Non-current
554,708
117,519
672,227
Total Liabilities
634,150
176,946
811,096
Invested in capital assets net of
related debt
687,835
329,230
1,017,065
Restricted
155,857
172,080
327,937
82,070
54,444
136,514
$925,762
$555,754
$1,481,516
Total Assets
Unrestricted
Total net position
Discretely
Component
Units would
be presented
in this
column
(if applicable)

Statement of Activities
◦ Presented in a format that reports the net (expense)
revenue of individual functions
 Objective – to report the relative financial burden of each
function on the taxpayers. How much each function relies on
general revenues.
 Expenses – all direct expenses identifiable to a function
 Items like interest expense and unallocated depreciation
shown separately
 Program revenues vs. general revenues
 If clearly associated with a function, or restricted for a
function, then program revenue, otherwise general revenue
 Taxes are always general revenues
 Net (expense) revenue

Statement of Activities (continued)
◦ Governmental activities reported at least at the
level of detail (function) required in the
governmental fund statement of revenues,
expenditures & changes in fund balances
◦ Business-type activities should be reported at
least by segment (an identifiable activity reported
as or within an enterprise fund)
Statement of
Activities
Net (Expense) Revenue and Changes
in Net Assets
Gov’t-wide
Functions /
Programs
Government
al Activities
Businesstype
Activities
Total PG
Program Revenues
Expenses
Fees,
Fines &
Services
Operating
Grants
Primary Government
Capital
Grants
Govt’l
Activities
$(94,364)
$160,730
$17,722
$13,709
$34,932
64,635
60,597
209
5,408
225,365
78,319
13,918
40,340
Businesstype
Activities
Total
$(94,364)
1,579
1,579
(94,364)
1,579
(92,785)
$117,758
$0.00
$117,758
1,354
306
1,660
Transfers in (out)
(11,119)
11,119
0.00
Total general revenues and transfers
107,993
11,425
119,418
13,629
13,004
26,633
912,133
542,750
1,454,883
$925,762
$555,754
$1,481,516
General Revenues – Property Taxes
General Revenues – Auto in-lieu taxes
Change in net position
Net position – beginning
Net position - ending
GAAP also requires certain other
information referred to as Required
Supplementary Information (RSI)
 Auditors cannot give a “clean” opinion
on financial statements presented in
conformity with GAAP if RSI is missing
or deficient


Elements of RSI
◦ Management’s Discussion and Analysis
(MD&A)
◦ Budgetary comparisons
◦ Trend data on infrastructure condition (only if
using the modified approach instead of
depreciation)
◦ Trend data on funding of pension & other
post employment benefits
◦ Claims development data for public-entity
risk pools (not likely to have)

MD&A
◦ Provide an objective and easily readable
analysis of the government’s financial
activities based on currently known facts
 Known facts as of the date of the auditor’s report
◦ Must compare current and past year, with
emphasis on current year
◦ Charts, graphs, and tables are encouraged to
enhance understandability

Required elements of MD&A
◦ Brief discussion of basic financial statements
 Relationships, significant differences
◦ Condensed financial information
◦ Analysis of government’s overall financial position
and results of operation
◦ Analysis of balances and transactions of individual
funds
◦ Analysis of significant variations between original
budgets and final budgets and between final
budgets and actual results for general fund

Required elements of MD&A
(continued)
◦ Description of significant capital asset and long-term
debt activity during the reporting year
◦ If government uses modified approach:
 Significant changes in the assessed condition
 How current condition compares to target level set by the
government
 Significant differences between the estimated annual amount
to maintain/preserve eligible infrastructure assets compared
with the actual amounts spent during the reporting period
◦ Description of currently know facts, decisions, or
conditions that are expected to have a significant effect
on financial position or results of operations

Important points
◦ Currently know facts
◦ Analysis, not just numbers
◦ GFOA Certificate of Achievement program
hot button
◦ The minimum = the maximum


Required for general fund and any major
special revenue funds with an appropriated
budget
Option to include within the basic financial
statements, or as RSI following the footnotes
◦ GFOA recommended practice to include in BFS
◦ Only the required statements may be included in
BFS. Any others presented must be outside BFS or
RSI

Must include:
◦ Column for original budget
 First complete appropriated budget
 May be adjusted before the beginning of the fiscal
year, or by automatic carry over appropriations
◦ Column for final budget
 After all budget amendments processed during the
fiscal year
◦ Column for actual amounts
 On budgetary basis that may differ from GAAP basis
amounts shown on fund statements

Must include: (continued)
◦ Column for variance between final budget and
actual results [over/(under)]
 May not be labeled favorable/unfavorable
◦ A reconciliation between budgetary inflows and
outflows and GAAP revenues and expenditures

Provide certain information on the funding of
pension benefits or OPEB if the reporting
government:
◦ Sponsors a single-employer defined benefit plan, or
◦ Participates in an agent multiple-employer defined
benefit plan (P.S.P.R.S.)

Required data
◦ Schedule of funding progress
◦ Schedule of employer contributions


Beyond the basic financial statements and
RSI, if you desire to issue a Comprehensive
Annual Financial Report (CAFR), there are
additional requirements
Required sections of a CAFR
◦ Introductory Section
◦ Financial Section
◦ Statistical Section

At the beginning:
◦ Report cover and title page
 Must use “Comprehensive Annual Financial Report”
terminology
 Name of reporting entity
 If component unit, must disclose
 Should list the state that the reporting government is
in
 Show fiscal year covered by the report – i.e. For the
Fiscal Year Ended June 30, 2012

At the beginning: (continued)
◦ Title page
 Repeat information on cover
 Indicate the party responsible for preparation of the
report
 May indicate principal officials (usually less of a list
than in introductory section)
◦ Table of contents


Provides general information of the government’s
structure, services, and environment
Contents
◦ Transmittal letter





Formal transmittal of document (responsibility, etc.)
Profile of government
Economic condition information
Awards and acknowledgements
Date & signature
◦ Awards for report if applicable
◦ List of principal officials
◦ Organizational chart





Independent auditor’s report
MD&A
Basic financial statements
RSI other than the MD&A
Combining and individual fund presentations
◦ Including other budgetary comparison Schedules
◦ Combining statement of changes in assets & liabilities –
all agency funds

Supplementary information
◦ Federal Financial Data Schedule (if applicable)
◦ Schedules like long-term debt, capital assets, transfers,
etc.

Information regarding economic condition of
the reporting government
◦
◦
◦
◦
◦

Provide
Provide
Provide
Provide
Provide
information on financial trends
information on revenue capacity
information on debt capacity
demographic and economic information
operating information
Generally 10 years of data

Information about net position (10 years)
◦ Three components of net position shown separately for
governmental activities, business-type activities, and
total government

Information about changes in net position (10
yrs)
◦ Shown separately for governmental activities, businesstype activities, and total government





Expenses – by function, program, or identifiable activity
Program revenues by category
Total net (expense)/revenue
General revenues and other items by type
Total change in net position

Information about governmental funds (10
yrs)
◦ Present fund balance by type for both general fund
and all other governmental funds (combined)
◦ For total governmental funds
 Revenues by source
 Expenditures by function
 Debt service principal and interest must be shown separately
 Other financing sources/uses
 Other changes to fund balance
 Ratio of total debt service expenditures to noncapital
expenditures

At a minimum, should report three aspects of the
government’s most significant own-source
revenue
◦ Revenue base (10 yrs)
◦ Revenue Rates (10 yrs)
◦ Principal revenue payers (current yr & 9 yrs ago)

If presenting info about property taxes, should
present both assessed value of taxable property
by component and the total estimated actual
value of taxable property. Also disclose tax
levied, amount collected in tax year and % of levy
collected, and subsequent collections & % of levy

At a minimum, should report four types of
information
◦ Ratios of outstanding debt (10 yrs)
 Report debt by governmental & business-type by type
& total debt
 Debt per capita
 Total debt as a percentage of personal income
 Additional ratios if outstanding general bonded debt

Minimum (continued)
◦ Direct & overlapping debt (current yr and 10 yrs)
 Governmental activities debt only
◦ Debt limitations (10 yrs)
◦ Pledged revenue coverage (10 yrs)
 For each type with pledged revenues other than
general obligation debt

Demographic & economic indicators (10 yrs)
◦ Population, total personal income, per capita
personal income, and unemployment rate

Principal Employers (current yr & 9 yrs ago)
◦ Top 10 unless fewer gets to 50% of total
employment

At a minimum, three types of information (at
least at level required for expenses on
F/S)
◦ Number of government employees (10 yrs)
 By function, program, or identifiable activity
◦ Operating indicators (10 yrs)
 By function/program
 Indicators of demand or level of service
◦ Capital asset information (10 yrs)
 By function/program
 Volume, usage, or nature of capital assets



Must provide required information if
applicable to reporting government
May also include other stat tables of local
interest or to meet other needs (bond
disclosures, etc.)
Should include sources, assumptions,
methodologies, and narrative explanations
(as necessary) on stat tables


Concept is to ensure that financial reporting
is inclusive of other legal entities for which
the primary government is financially
accountable
Component units are by definition separate
legal entities, but GAAP stresses substance
over form
◦ Fact that the separate entity exists solely to benefit
the primary government (substance) is more
important than legal form for financial reporting

Reporting Entity consists of
◦ The primary government
◦ Organizations for which the primary government
is financially responsible
◦ Other organizations for which the nature and
significance of their relationship with the primary
government are such that exclusion would cause
the reporting entity’s financial statements to be
misleading or incomplete

Two methods of including component
units in financial reporting
◦ Discrete presentation
 Default methodology
 Show as separate column(s) on face of governmentwide financial statements
◦ Blending
 Only allowed if meet specific requirements
 Treat as fund(s) of the primary government

For guidance on component units and
discrete vs. blending presentation, see
GASB14 and GASB61
Questions ???




Governmental Accounting, Auditing, and
Financial Reporting (GAAFR) published by
GFOA (Gfoa.org)
Statements of the Governmental Accounting
Standards Board (GASB) (Gasb.org)
Comprehensive Implementation Guide
published by GASB
Governmental Accounting Research Software
(GARS) published by GASB


Dawn Jenkins, Senior Accountant
[email protected] P 623-7737334
Dan Leahy, CPA, Accounting Supervisor
[email protected] P 623-773-7023