011108gov acct101 tenace

Report
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.
Management
Discussion and
Analysis (MD&A)
2.
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
Order of Presentation
I.
II.
III.
IV.
V.
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


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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
1.
2.
3.
4.
Certificate of Achievement for
Excellence in Financial ReportingPrior 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?
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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

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
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
PROPRIETARY FUNDS
(Current Resources/Modified)
(Economic Resources/Full Accrual)
1.
2.
3.
4.
5.
General Fund
Special Revenue Fund
Capital Project Fund
Debt Service Fund
Permanent Fund
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 presented
using modified accrual
accounting
basis



POST-GASB 34:
Basic F/S
Emphasis on MAJOR
Fund vs. NONMAJOR
Fund
Governmental Fund
Financial Statements
presented in BOTH
modified and full
accrual accounting
basis (Gov’t-wide
Statements)
END OF DETOUR…BACK TO BASIC FINANCIAL STATEMENTS.....
Basic Financial StatementsOrder of Presentation
1.
2.
3.
4.
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. Program Revenues
3. Net (Expense) Revenue
4. 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 ActivitiesGeneral 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 ActivitiesGeneral Revenues & Other Line Items
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
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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
XYZ CITY EXAMPLE
STATEMENT OF ACTIVITIES
FOR THE PERIOD ENDING JUNE 30, 2007
PRIMARY GOVERNMENT
Governmental Activities:
General Government
Public Safety
Highways & Streets
Health & Sanitation
Other
Interest & Fiscal Agent Fees
Total Governmental Activities
Expenses
$
86,900
$ 467,000
$ 377,700
$
53,400
$
21,600
$ 108,600
$ 1,115,200
Business Type Activities:
Golf
$
TOTAL PRIMARY GOVERNMENT
COMPONENT UNITS
$
Program Revenues
Charges
for
Operating
Capital
Services
Grants
Grants
$ 38,000
$ 120,000
$ 2,066,000
$ 89,000
$ 127,000
565,000
$ 700,000
400,000
$ 350,000
$ 120,000
$ 200,000
$ 2,066,000
$
-
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
Net (Expense) Revenues
Business
Governmental
Type
Activities
Activities
Total
$
$
$
$
$
$
$
(86,900)
(309,000)
1,688,300
35,600
(21,600)
(108,600)
1,197,800
$
$
$
$
$
$
$
$
$
1,197,800
$ 135,000
$ 135,000
$ 135,000
$ 1,332,800
$
$
$
$
$
$
$
$
$
$
$
$
$
-
980,800
105,000
52,500
10,000
2,000
18,000
1,168,300
2,366,100
905,514
3,271,614
$
$
$
$
$
$
$
$
$
$
-
Component
Units
-
(18,000)
(18,000)
117,000
765,000
882,000
$
(86,900)
$ (309,000)
$ 1,688,300
$
35,600
$
(21,600)
$ (108,600)
$ 1,197,800
$
$
$
$
$
$
$
$
$
$
-
980,800
105,000
52,500
10,000
2,000
1,150,300
2,483,100
1,670,514
4,153,614
$
$
$
$
$
$
$
-
$
150,000
$
$
$
$
$
$
$
$
$
$
150,000
300,000
450,000
Fund Financial Statements
GOVERNMENTAL FUNDS
(Current Resources/Modified)
PROPRIETARY FUNDS
(Economic Resources/Full Accrual)
1.
1.
2.
3.
Balance Sheet
Statement of Revenues,
Expenditures and
Changes in Fund Balance
Reconciliation to
Government-wide
Statements
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%?
Governmental Funds:
General Fund
Library
Public Safety Fund
Subtotal Governmental Funds
200,000
10,000
35,000
245,000
82% *
4% No
14% Yes
100%
67% *
3% No
12% Yes
Yes
No
Yes
42,000
10,000
52,000
81% Yes
19% Yes
100%
14% Yes
3% No
Yes
No
Enterprise Funds:
Golf
Zoo
Subtotal Enterprise Funds
Total Gov't and Enterprise Funds
297,000
* Irrelevant - General Fund is ALWAYS a Major Fund
%T
100%
Pass 5%
Major Fund?
Financial Section - Notes
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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.

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Fund Balances
Interfund Activity
Component Units
Endowments
Risk Financing
Fiscal Year
Inconsistencies
Landfill Closure &
Post closure

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


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
Questions?

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