Transcript 011108gov acct101 tenace
ANATOMY OF A CAFR
Comprehensive Annual Financial Report Karen Tenace CPA, CMA City of Tucson
Objectives
Learn what is mandated by GAAP versus is what is encouraged by GAAP Understand the components of the CAFR and the order in which they should be presented Discover additional resources that can help your jurisdiction prepare a great CAFR
Do we have to do a CAFR?
Need 3 things to comply with GAAP: 1.
2.
Management Discussion and Analysis (MD&A) Basic Financial Statements 3.
Required Supplementary Information (RSI) GAAP, however, encourages the production of the broader presentation in the format of CAFR.
CAFR Comprehensive Annual Financial Report 3 Major Sections
Introductory Section Financial Section Statistical Section
I.
II.
III.
IV.
V.
Order of Presentation Table of Contents Introductory Section A. Letter of Transmittal B. Organizational Chart C. GFOA’s Certificate of Achievement Financial Section A. Auditor’s Opinion B. Management Discussion and Analysis (MD&A) C. Basic Financial Statements D. Notes E. Required Supplementary Information (Other than MD&A) F. Other Information (Combining & Individual Statements) Statistical Section Optional Sections
Title Page-Specific Requirements Comprehensive Annual Financial Report (not “Annual Report”) Name of primary government State where government is located Fiscal period covered Department responsible for preparing the report
Introductory Section-Purpose?
Provides background and context of CAFR NOT included in scope of audit
Introductory Section-Contents
2.
3.
4.
1.
Certificate of Achievement for Excellence in Financial Reporting Prior Year List of Principal Officials Letter of Transmittal Organizational Chart
Letter of Transmittal-4 Sections 1.
2.
3.
4.
Formal transmittal of the CAFR Profile of the government Economic Condition (Subjective Element) Awards & Acknowledgements
Letter of Transmittal-Other Details Minimum-Signed by CFO Dated on the date the CAFR is first made available to the public (AFTER the auditor’s report) NOT audited Should be on letterhead Should be addressed to the citizens Concise with charts and graphs
Financial Section-Purpose?
Provides critical information regarding the financial condition of the government through the presentation of financial statements and schedules, note disclosures and narratives (MD&A)
Finance Section-Contents
1.
2.
3.
4.
5.
Independent Auditor’s Report Management Discussion and Analysis (MD&A) Basic Financial Statements Required Supplementary Information (Other than MD&A) Combining and Individual Fund Presentations & Supplementary Info
Basic Financial Statements
A Quick Detour to Review Basic Terminology & Concepts…
Review -Unique Characteristics of Governmental Accounting
1.
Use of Fund Accounting 2.
Measurement Focus and Basis of Accounting or MFBA Full Accrual
AND
Modified Accrual
Review What’s a Fund?
Fund:
A self contained accounting entity with its own asset, liability, revenue, expenditure or expense and fund balance or other equity accounts.
Review-Measurement Focus & Basis of Accounting (MFBA) Measurement Focus tells you WHAT to recognize Basis of Accounting tells you WHEN to recognize it
Review Two Types of MFBA’s in Governmental Accounting #1 Economic Resources Measurement Focus and Accrual Basis of Accounting WHAT: Economic resource measurement focus considers ALL inflows, outflows and balances affecting or reflecting on an entity’s net assets.
Review Two Types of MFBA’s in Governmental Accounting #1 Full Accrual Basis Cont.
WHEN: Accrual basis of accounting recognizes the financial effect of transactions, events, and interfund activities when they occur, regardless of the timing of related cash flows.
Review Two Types of MFBA’s in Governmental Accounting #2 Current Financial Resources Measurement Focus and Modified Accrual Basis of Accounting WHAT: Current financial resource measurement focus only considers SHORT-TERM or CURRENT inflows, outflows and balances of expendable financial resources.
How can you tell MFBA by looking at a financial statement?
Modified Short-term View
Expenditures (Capital Outlay and Principal Payments) Assets-Liabilities=Fund Balance Only Current Assets and Current Liabilities Shown No Long-term Assets means no Depreciation Expense
Full Accrual Long-term View
Expenses Assets-Liabilities=Net Assets Current AND Long-Term Assets and Liabilities Shown Depreciation Expense Included in Operating
Review-Fund Types
GOVERNMENTAL FUNDS (Current Resources/Modified)
1.
2.
3.
4.
5.
General Fund Special Revenue Fund Capital Project Fund Debt Service Fund Permanent Fund
PROPRIETARY FUNDS (Economic Resources/Full Accrual)
1.
2.
Enterprise Funds Internal Service Funds
FIDUCIARY FUNDS (Economic Resources/Full Accrual)
1.
2.
3.
4.
Agency Funds Pension Funds Investment Trust Funds Private Purpose Trust Funds
Review-GASB Statement No. 34 The “New” Model (2002)
PRE-GASB 34:
General Purpose F/S Emphasis on FUND TYPE Governmental Fund Financial Statements were
ONLY
accounting presented using modified accrual basis
POST-GASB 34:
Basic F/S Emphasis on MAJOR Fund vs. NONMAJOR Fund Governmental Fund Financial Statements presented in basis ( Statements )
BOTH
modified and full accrual accounting Gov’t-wide
END OF DETOUR
…BACK TO BASIC FINANCIAL STATEMENTS.....
Basic Financial Statements Order of Presentation
2.
3.
4.
1.
Government-wide Financial Statements Fund Financial Statements Required Supplementary Information Combining and Individual Fund Statements and Schedules
Government-wide Financial Statements-Major Points
Includes all governmental activity and business-type activity Includes discretely presented component units Excludes fiduciary activities MFBA=Economic Resources, Full Accrual Accounting Gov’t Activity + Business Type Activity = Primary Government
Government-wide Statements
1.
2.
Statement of Net Assets Statement of Activities
All financial statements should refer to Notes!
Gov’t-wide Statement of Net Assets-Major Points
Assets & Liabilities- present in order of liquidity or split between current and noncurrent (classified approach) Capital assets being depreciated must be shown separately from assets that are not being depreciated Assets – Liabilities = Net Assets
Gov’t-wide Statement of Net Assets-Major Points Cont.
Net Assets is broken into 3 categories: 1.
2.
3.
Invested in Capital Assets Net of Related Debt Restricted (Narrower than purpose of reporting unit) Unrestricted
Gov’t Wide Statement of Activities-Major Points
Purpose is to show the extent of how each governmental function supports itself, before general tax dollars kick in Order of Presentation: 1.
Expenses 2.
3.
4.
Program Revenues Net (Expense) Revenue General Revenues
Gov’t Wide Statement of Activities-Expenses Direct expenses – by function Depreciation – by function Indirect expenses – General Government or allocate in separate column Interest Expense – not associated with a function, separate line
Gov’t Wide Statement of Activities-Program Revenues Reported by Function & Shown in 3 Columns: 1.
2.
3.
Charges for Services Operating Grants and Contributions Capital Grants and Contributions
Gov’t Wide Statement of Activities-Net Expenses What you would expect, in theory… Governmental activities carry net expenses and depend on tax revenues Business-type activities either break even or carry net revenues
Gov’t Wide Statement of Activities General Revenues & Other Line Items Tax revenues are reported by type of tax Material gains on sale of capital assets for governmental activities Immaterial gains on governmental assets can be an adjustment to depreciation Gains on assets in enterprise activities should be shown under functional expense Impairments to assets, program expense or special/extraordinary item
Gov’t Wide Statement of Activities General Revenues & Other Line Items Endowment and Permanent Fund Contributions- reported after General Revenues Special Items – significant, subject to management’s control, and either unusual OR infrequent (Sale of Land) Extraordinary Items – significant, unusual AND infrequent (Earthquake) Transfers
PRIMARY GOVERNMENT
Governmental Activities:
General Government Public Safety Highways & Streets Health & Sanitation Other Interest & Fiscal Agent Fees Total Governmental Activities
Business Type Activities:
Golf TOTAL PRIMARY GOVERNMENT
COMPONENT UNITS XYZ CITY EXAMPLE STATEMENT OF ACTIVITIES FOR THE PERIOD ENDING JUNE 30, 2007 Expenses Program Revenues Charges for Operating Capital Services Grants Grants Net (Expense) Revenues Business Governmental Type Activities Activities Total
$ 120,000 $ 120,000 $ (86,900) $ 1,688,300 $ 35,600 $ (21,600) $ 1,197,800 $ $ $ $ $ $ $ -
Component Units
$ (86,900) $ (309,000) $ 35,600 $ (21,600) $ (108,600) $ $ $ $ $ $ $ $ $ 1,197,800 $ $ $ 135,000 $ 200,000 $ $ $ 150,000 General Revenues: Taxes Unrestricted Grants Investment Income Gain on Sale of Capital Assets Other Revenues Transfers Total General Revenues & Transfers Change in Net Assets Net Assets Beginning Net Assets Ending $ 980,800 $ 105,000 $ 52,500 $ 10,000 $ 2,000 $ 18,000 $ 1,168,300 $ 2,366,100 $ 905,514 $ 3,271,614 $ $ $ $ $ $ (18,000) $ (18,000) $ 980,800 $ 105,000 $ 52,500 $ 10,000 $ $ $ $ $ $ $ $ $ 150,000 $ 300,000 $ 450,000
Fund Financial Statements
GOVERNMENTAL FUNDS (Current Resources/Modified)
1.
2.
3.
Balance Sheet Statement of Revenues, Expenditures and Changes in Fund Balance Reconciliation to Government-wide Statements
PROPRIETARY FUNDS (Economic Resources/Full Accrual)
1.
2.
3.
Statement of Net Assets Statement of Revenues, Expenses and Changes in Fund Net Assets Statement of Cash Flows
FIDUCIARY FUNDS (Economic Resources/Full Accrual)
1.
2.
Statement of Fiduciary Net Assets Statement of Changes in Fiduciary Net Assets All financial statements should refer to Notes!
Governmental Fund Financial Statements-Major Points Separates funds – Major vs. Nonmajor MFBA=Current Resources, Modified Accrual Accounting Includes reconciliation back to governmental activities for both financial statements
Basic Financial Statements Major Fund Test Total assets, liabilities, revenues, or expenditures/expenses of that individual governmental or enterprise fund constitute 10% of the governmental or enterprise activity AND Total assets, liabilities, revenues, or expenditures/expenses are 5% of the total governmental and enterprise category combined
Major Fund Test Example
Example - Major Fund Test Assets %G/E Pass 10%?
% T Pass 5% Governmental Funds:
General Fund Library Public Safety Fund Subtotal Governmental Funds
Enterprise Funds:
Golf Zoo Subtotal Enterprise Funds 200,000 10,000 35,000 245,000
Total Gov't and Enterprise Funds
297,000 82% * 4% No 14% Yes 100% 42,000 10,000 52,000 81% Yes 19% Yes 100% 67% * 3% No 12% Yes 14% Yes 3% No 100%
Major Fund?
Yes
No
Yes Yes
No * Irrelevant - General Fund is ALWAYS a Major Fund
Financial Section - Notes
Summary of Significant Accounting Policies Budgetary Information Cash Deposits w/ Financial Institutions Investments Derivatives Contingent Liabilities Encumbrances Subsequent Events Defined benefit pensions and post employment benefit plans Capital Assets and Long-term Liabilities Significant Commitments
Financial Section – Notes Cont.
Fund Balances Interfund Activity Component Units Endowments Risk Financing Fiscal Year Inconsistencies Landfill Closure & Post closure Property Taxes Segment Information Related Party Transactions Joint Ventures Fund Balances Prior Period Adjustments
RSI-Other than MD&A
1.
2.
3.
4.
Budgetary Comparisons (General Fund & Major Special Revenue Funds) Infrastructure Condition and Maintenance (Modified Approach) Pension/Other Post Employment Benefits Revenue & Claims Development Trend Data (Public Entity Risk Pools)
Combining Statements & Individual Schedules- Detail of Aggregate Data 1.
2.
3.
4.
Nonmajor governmental funds Nonmajor enterprise funds Internal Service Funds & Fiduciary Funds Nonmajor discretely presented component units
The End-Financial Section
Whew!
Statistical Section GASB 44 – 10 Yr Trending 1.
2.
3.
4.
5.
Financial Trends Revenue Capacity Debt Capacity Demographics and Economy Operating Information
Optional Sections to the CAFR Common Examples 1.
2.
3.
Investment Section (Pension Plans or Investment Pools) Actuarial Section (Pension Plans) Single Audit (Federal Awards)
Financial Disclosure
GFOA has formally recognized that the CAFR format meets the SEC Rule 15c2-12 (financial statement disclosure to investors) Place on website Checklist is at: http://www.gfoa.org/downloads/GENE RALPURPOSECHECKLIST.pdf