Donna Collins

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Donna Collins

  1. 1. Getting Prepared to Prepare Your Own Financial Statements Presented by Donna Collins Milestone Professional Services
  2. 2. Why are we even talking about this? <ul><li>Internal Control </li></ul><ul><li>Independence </li></ul>?
  3. 3. Technical Guidance Issued <ul><li>Statement on Auditing Standard (SAS) No. 112 (Communication of Internal Control Related Matters Identified in an Audit) </li></ul><ul><li>Ethics Interpretation 101-3 (Performance of Nonattest Services) </li></ul>
  4. 4. SAS 112 Major Provisions <ul><li>Defines significant deficiencies and material weaknesses </li></ul><ul><li>Provides guidance on evaluating control deficiencies </li></ul><ul><li>Requires written communication to management </li></ul><ul><li>Effective for periods ending on or after 12/15/06 </li></ul>
  5. 5. Significant Deficiency <ul><li>…control deficiency </li></ul><ul><li>…adversely affects ability to initiate, authorize, record, process or report financial data reliably in accordance with GAAP </li></ul><ul><li>…more than remote likelihood that misstatement of financial statements that is more than inconsequential </li></ul><ul><li>…will not be prevented or detected </li></ul>
  6. 6. Material Weakness <ul><li>…a significant deficiency or combination of significant deficiencies </li></ul><ul><li>…results in more than remote likelihood that material misstatement of financials will not be prevented or detected </li></ul>
  7. 7. The Bottom Line <ul><li>Many governments may have a material weakness in internal control due to lack of internal controls over the preparation of their financial statements. </li></ul>
  8. 8. The complicating impact of Independence Standards <ul><li>Auditors must be independent to issue an opinion on financial statements </li></ul><ul><li>Material weakness in internal control over financial reporting creates independence issues under Ethics Interpretation 101-3 </li></ul><ul><li>Auditors may not be able to opine on government’s financials </li></ul>
  9. 9. What are my options? <ul><li>Have auditors prepare financials </li></ul><ul><li>Hire an outside firm to prepare financials </li></ul><ul><li>Prepare financial statements ourselves </li></ul><ul><li>Hybrid of the above </li></ul>
  10. 10. Have the Auditors prepare <ul><li>The auditors can prepare financials if they meet certain guidelines governing their independence. </li></ul><ul><li>There are issues I may want to consider even if my auditors can meet the over arching principles. </li></ul>
  11. 11. Other Factors to Consider <ul><li>Public perception </li></ul><ul><li>Analytical advantage of preparing your own financial statements </li></ul><ul><li>Cost factors </li></ul>
  12. 12. Hire an outside firm <ul><li>My choices include: another audit firm, a consulting firm, or an individual that works for the government on a contractual basis </li></ul><ul><li>Cost is still a factor </li></ul><ul><li>Availability to meet our entity’s deadlines should be a consideration </li></ul>
  13. 13. Prepare the financial statements ourselves <ul><li>Consider the time involved </li></ul><ul><li>Evaluate whether our entity has the technical expertise required </li></ul><ul><li>What is the availability of my auditors to comply with my timetable </li></ul>
  14. 14. Use a Hybrid of the above <ul><li>Prepare my own financial statements with “as needed” assistance </li></ul><ul><li>Prepare my own financial statements but hire a firm to perform a technical review (for adequacy of disclosure and correctness of implementation of new standards) </li></ul>
  15. 15. Preparing my own financial statements – Where do I start? <ul><li>Things to Remember </li></ul><ul><li>Things to Plan for </li></ul><ul><li>Things to Gather </li></ul><ul><li>Things to Coordinate </li></ul>
  16. 16. Things to Remember <ul><li>They are your financial statements </li></ul><ul><li>Don’t be afraid to ask for help (but do it early) </li></ul><ul><li>Leave an audit trail (know what documentation the auditor will require) </li></ul>
  17. 17. Things to Plan for <ul><li>Financial Statement Format </li></ul><ul><ul><li>Annual Financial Statements versus CAFR </li></ul></ul><ul><ul><li>Participation in the Certificate of Achievement for Excellence in Financial Reporting program </li></ul></ul><ul><li>Political Environment </li></ul><ul><ul><li>Others that should be included in the process </li></ul></ul><ul><ul><li>Major fund determination issues </li></ul></ul>
  18. 18. Things to Plan for ( continued ) <ul><li>Clean starting point </li></ul><ul><ul><li>Distinct cut-off for accounts payables </li></ul></ul><ul><ul><li>Inclusion of all journal entries necessary for closing the year </li></ul></ul><ul><ul><li>Posting of all accruals and estimates </li></ul></ul><ul><ul><li>Recording of any audit entries </li></ul></ul>
  19. 19. Things to Plan for ( continued ) <ul><li>Realistic timetable for financial statement preparation </li></ul><ul><ul><li>Include specific tasks </li></ul></ul><ul><ul><li>Clearly identify individuals responsible for each task </li></ul></ul><ul><ul><li>Identify an expected completion date </li></ul></ul><ul><ul><li>Incorporate deadlines for Auditor General, grantor agencies, etc. </li></ul></ul><ul><ul><li>Remember that many things can be done before year-end </li></ul></ul>
  20. 20. Things to Plan for ( continued ) <ul><li>List of tasks that can be accomplished prior to year-end </li></ul><ul><ul><li>Develop a template for your financial statements </li></ul></ul><ul><ul><li>Draft footnote wording for new pronouncements </li></ul></ul><ul><ul><li>Draft descriptions for new funds </li></ul></ul><ul><ul><li>Design cover and dividers and go ahead and order them </li></ul></ul><ul><ul><li>Begin gathering statistical information </li></ul></ul>
  21. 21. Things to Plan for ( continued ) <ul><li>Open communication throughout entity and with third parties regarding: </li></ul><ul><ul><li>Budget schedules </li></ul></ul><ul><ul><li>Grant information (if single audit is applicable) </li></ul></ul><ul><ul><li>Component Unit information </li></ul></ul>
  22. 22. Things to Plan for ( continued ) <ul><li>Communication issues (continued) </li></ul><ul><ul><li>Constitutional Officer Statements roll in and information needed for footnotes (counties) </li></ul></ul><ul><ul><ul><li>Long-term debt (compensated absences and capital leases) </li></ul></ul></ul><ul><ul><ul><li>Capital Assets </li></ul></ul></ul><ul><ul><ul><li>Retirement Contributions </li></ul></ul></ul><ul><ul><li>Information for Statistical Section (CAFRs) </li></ul></ul>
  23. 23. Things to Gather <ul><li>Technical Resources </li></ul><ul><ul><li>Blue Book (GAAFR 2004 or later) </li></ul></ul><ul><ul><li>Codification of GASB pronouncements </li></ul></ul><ul><ul><li>New GASBs not yet in codification </li></ul></ul><ul><ul><li>Implementation Guides </li></ul></ul><ul><ul><li>AICPA Accounting and Reporting Guides </li></ul></ul><ul><li>Copy of prior year financials (and those of other governments for reference) </li></ul>
  24. 24. Things to Gather ( continued ) <ul><li>Disclosure Checklist </li></ul><ul><ul><li>GFOA checklists if applying for the Certificate program </li></ul></ul><ul><ul><li>Others such as PPC (ask auditors) </li></ul></ul><ul><li>Original and Final Amended Budget </li></ul><ul><li>Prior year GFOA comments and auditor comments (if applicable) </li></ul>
  25. 25. Things to Coordinate <ul><li>Actuarial reports (pensions, post-employment benefits, etc.) </li></ul><ul><li>Arbitrage rebate calculations (if applicable) </li></ul><ul><li>Landfill estimates from engineers (if applicable) </li></ul><ul><li>Timetable with auditors </li></ul><ul><ul><li>For audit wrap-up (no more adjustments) </li></ul></ul><ul><ul><li>Financial statement review (auditor comments) </li></ul></ul>
  26. 26. The nitty gritty of financial statement preparation <ul><li>Developing your template </li></ul><ul><ul><li>Don’t forget to add any new funds and delete funds that have been closed </li></ul></ul><ul><ul><li>Determine your major funds </li></ul></ul><ul><ul><ul><li>Use prior year as starting point (remember to check at completion) </li></ul></ul></ul>
  27. 27. Calculation of major funds <ul><li>Total assets, liabilities, revenues, or expenditures/expenses must equal 10% of corresponding total for funds of that category (governmental or enterprise) AND </li></ul><ul><li>Total assets, liabilities, revenues, or expenditures/expenses must be at least 5% of total for all governmental and enterprise funds combined. </li></ul>
  28. 28. Developing your template ( continued ) <ul><li>Determine your major funds (continued) </li></ul><ul><li>Calculation reminders </li></ul><ul><ul><li>Do not include other financing sources and uses </li></ul></ul><ul><ul><li>Use governmental and enterprise funds only in total – no internal service or fiduciary funds </li></ul></ul><ul><ul><li>You can remove interfund and advances </li></ul></ul><ul><ul><li>Guidance is found at paragraph 75 and 76 of GASB 34, 2005 GAAFR page 177, etc. </li></ul></ul><ul><ul><li>Templates available </li></ul></ul>
  29. 29. Developing your template ( continued ) <ul><li>Determine your major funds (continued) </li></ul><ul><ul><li>General fund always a major fund </li></ul></ul><ul><ul><li>Internal Service funds are never major </li></ul></ul><ul><ul><li>Consider other factors </li></ul></ul><ul><ul><ul><ul><li>Political constraints </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Funds that require opinion specifically </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Funds important due to public interest or consistency of presentation </li></ul></ul></ul></ul>
  30. 30. Developing your template ( continued ) <ul><li>Format issues should be decided early </li></ul><ul><ul><li>Font </li></ul></ul><ul><ul><li>Page layouts including indentions and capitalization </li></ul></ul><ul><ul><li>Underlines, dollar signs and “continued” </li></ul></ul><ul><ul><li>Proper titles for statements and schedules </li></ul></ul><ul><ul><li>Consistency of phrasing (ie. Interest income versus investment income) </li></ul></ul><ul><ul><li>Classification of line items (classified or liquidity order) </li></ul></ul>
  31. 31. Developing your template ( continued ) <ul><li>Linking documents is efficient </li></ul><ul><ul><li>Consider the impact of multiple users </li></ul></ul><ul><ul><li>Most common documents to link include </li></ul></ul><ul><ul><ul><li>Combining statements to budget schedules </li></ul></ul></ul><ul><ul><ul><li>Combining statement totals to fund level statements in the basic financial statements </li></ul></ul></ul><ul><ul><ul><li>MD&A, notes and statistical sections to basic financial statements (excel spreadsheets to word documents) </li></ul></ul></ul>
  32. 32. Linking examples - MD&A <ul><li>Net Assets </li></ul><ul><li>Changes in Net Assets </li></ul><ul><li>Expenses and Program Revenues </li></ul><ul><li>Revenues by Source </li></ul><ul><li>Capital Assets </li></ul><ul><li>Bonds and Notes </li></ul>
  33. 33. Linking examples – Statistical Section <ul><li>Link all tables that have information that comes from the Basic Financial Statements </li></ul><ul><ul><li>Net Assets by Component </li></ul></ul><ul><ul><li>Changes in Net Assets </li></ul></ul><ul><ul><li>Fund Balances of Governmental Funds </li></ul></ul><ul><ul><li>Changes in Fund Balance of Governmental Funds </li></ul></ul>
  34. 34. Developing your template ( continued ) <ul><li>Make sure beginning net asset and fund balance numbers agree to the prior year issued financial statements </li></ul><ul><li>DON’T USE PENNIES! </li></ul><ul><li>Consider rounding to thousands for larger entities but be consistent throughout the document </li></ul>
  35. 35. Populating your template <ul><li>Consider starting with the combining statements in the back and moving forward </li></ul><ul><li>Budget to actual schedules can be linked to the combining schedules already input </li></ul><ul><li>Use total columns to verify that established links are bringing correct information forward </li></ul>
  36. 36. Populating your template ( continued ) Combining Statements <ul><li>Begin with trial balance for each fund that is grouped in accordance with the State Chart of Accounts </li></ul><ul><li>Consider your source documents because the auditors will have to verify your groupings </li></ul><ul><li>Remember that major funds will have to be pulled out of any grouped reports for inclusion in the basic financial statements </li></ul>
  37. 37. Populating the Combining Statements ( continued ) <ul><li>Some items should not be grouped via the State Chart of Accounts </li></ul><ul><ul><li>Examples: </li></ul></ul><ul><ul><ul><li>Interfund transfer activity in internal service funds becomes recharacterized as revenue/expense </li></ul></ul></ul><ul><ul><ul><li>Unamortized bond costs are assets but should be netted with the corresponding liability </li></ul></ul></ul><ul><ul><ul><li>Negative cash balances should be classified as a liability </li></ul></ul></ul>
  38. 38. Populating the Combining Statements ( continued ) <ul><li>Remember to add any blended component units (often reflected as special revenue funds) </li></ul><ul><li>For counties, constitutional officers need to be incorporated into combining statements </li></ul><ul><ul><li>Special revenue funds </li></ul></ul><ul><ul><li>Agency funds </li></ul></ul><ul><ul><li>General fund usually rolls into general fund for the Board </li></ul></ul>
  39. 39. Populating your template ( continued ) Budget Presentations <ul><li>When are budget schedule versus budget statements appropriate? </li></ul><ul><li>What makes a budget presentation a schedule? </li></ul><ul><li>When do I include both original and final budget numbers? </li></ul><ul><li>Do I include budget information for all funds? </li></ul>
  40. 40. Populating your template ( continued ) Budget Presentations <ul><li>Budget Statements </li></ul><ul><ul><li>Included in Basic Financial Statements </li></ul></ul><ul><ul><li>Auditor’s opinion includes these statements </li></ul></ul><ul><ul><li>Presented for general fund and major special revenue funds only </li></ul></ul><ul><ul><li>Includes original and final budget </li></ul></ul><ul><ul><li>Other non-major funds have budget presentation in Other Supplemental Information section with final budget only </li></ul></ul>
  41. 41. Populating your template ( continued ) Budget Presentations <ul><li>Budget Schedules </li></ul><ul><ul><li>Presented outside the Basic Financial Statements </li></ul></ul><ul><ul><li>Auditor’s opinion is “in relation to” </li></ul></ul><ul><ul><li>Presentation most often used </li></ul></ul><ul><ul><li>General fund and all major special revenue funds included in RSI with both original and final budget </li></ul></ul>
  42. 42. Populating your template ( continued ) Budget Presentations <ul><li>Budget Schedules (continued) </li></ul><ul><ul><li>Other major governmental funds (debt service and capital projects funds) and non major governmental funds included in Other Supplemental Information with final budget only </li></ul></ul><ul><ul><li>Presentation is only included if legally binding budget is adopted </li></ul></ul>
  43. 43. Populating your template ( continued ) Budget Presentations <ul><li>Helpful Hints </li></ul><ul><ul><li>Link where appropriate to combining or fund level statements </li></ul></ul><ul><ul><li>Coordinate with budget department </li></ul></ul><ul><ul><li>Proprietary funds do not report budgetary comparisons </li></ul></ul>
  44. 44. Populating your template ( continued ) Budget Presentations <ul><li>Helpful Hints (continued) </li></ul><ul><ul><li>Presentation should be at the legal level of control </li></ul></ul><ul><ul><li>Variance column should have neutral terminology (over/under not favorable/unfavorable) </li></ul></ul><ul><ul><li>If included in RSI, add footnote to indicate if prepared on GAAP basis </li></ul></ul>
  45. 45. Populating your template ( continued ) Basic financial Statements <ul><li>Basic Financial Statements include: </li></ul><ul><ul><li>Government-wide financial statements </li></ul></ul><ul><ul><li>Fund Level statements </li></ul></ul><ul><ul><li>Footnotes </li></ul></ul>
  46. 46. Populating your template ( continued ) Fund Level Statements <ul><li>Governmental </li></ul><ul><ul><li>All major funds shown in individual columns </li></ul></ul><ul><ul><li>Non major funds grouped into one aggregate column that should agree to combining statement </li></ul></ul><ul><ul><li>Total column for governmental funds included </li></ul></ul><ul><ul><li>Fund balance must agree between Balance Sheet and Statement of Revenues, Expenditures and Changes in Fund Balance </li></ul></ul>
  47. 47. Populating your template ( continued ) Fund Level Statements <ul><li>Proprietary </li></ul><ul><ul><li>All major funds shown in individual column </li></ul></ul><ul><ul><li>Non major funds grouped into one aggregate column that should agree to combining statement </li></ul></ul><ul><ul><li>Total column for proprietary funds included </li></ul></ul>
  48. 48. Populating your template ( continued ) Fund Level Statements <ul><li>Proprietary (continued) </li></ul><ul><ul><li>Net assets must agree between Statement of Net Assets and Statement of Revenues, Expenses and Changes in Net Assets </li></ul></ul><ul><ul><li>Statement of Activities is divided into operating (charges for services and direct expenses) and non-operating revenues/expenses (grants, interest income and expense, gain/loss on capital assets) </li></ul></ul><ul><ul><li>Statement of Cash Flows is required </li></ul></ul>
  49. 49. Populating your template ( continued ) Fund Level Statements <ul><li>Statement of Cash Flow issues </li></ul><ul><ul><li>Separated into four distinct sections </li></ul></ul><ul><ul><li>Common mistakes </li></ul></ul><ul><ul><ul><li>Failure to back out fixed asset transactions from account payable change in balance </li></ul></ul></ul><ul><ul><ul><li>Misclassification of grants – operating versus capital </li></ul></ul></ul><ul><ul><ul><li>Reporting transaction as net rather than gross </li></ul></ul></ul><ul><ul><li>Non-cash transaction </li></ul></ul><ul><ul><ul><li>Contributed capital </li></ul></ul></ul><ul><ul><ul><li>Change in fair value of investment </li></ul></ul></ul>
  50. 50. Populating your template ( continued ) Fund Level Statements <ul><li>Other reminders </li></ul><ul><ul><li>Fiduciary funds will have Statement of Net Assets and Statement of Changes in Net Assets (except for Agency funds) </li></ul></ul><ul><ul><li>Component units may also have Statement of Net Assets and Statement of Activities in Fund Level presentation </li></ul></ul><ul><ul><li>Insurance recoveries are shown as Other Financing Sources </li></ul></ul><ul><ul><li>Negative net investment activity is shown as a negative revenue </li></ul></ul>
  51. 51. Populating your template ( continued ) Basic Financial Statements <ul><li>Fund Balance Reservations and Net Asset Restrictions </li></ul><ul><ul><li>Fund Balance reservations </li></ul></ul><ul><ul><ul><li>Prepaid balances </li></ul></ul></ul><ul><ul><ul><li>Inventory balances </li></ul></ul></ul><ul><ul><ul><li>Debt Services </li></ul></ul></ul><ul><ul><ul><li>Building department resources unexpended </li></ul></ul></ul><ul><ul><ul><li>Encumbrances </li></ul></ul></ul>
  52. 52. Populating your template ( continued ) Basic Financial Statements <ul><li>Fund Balance Reservations and Net Asset Restrictions (continued) </li></ul><ul><ul><li>Net Asset Restrictions follow GASB 46 </li></ul></ul><ul><ul><ul><li>Must be legally enforceable due to statue or ordinance </li></ul></ul></ul><ul><ul><ul><li>Examples: </li></ul></ul></ul><ul><ul><ul><ul><li>Some grant funds </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Federal and State Police Forfeiture Fund </li></ul></ul></ul></ul>
  53. 53. Populating your template ( continued ) Government-wide statements <ul><li>Set up a conversion spreadsheet that begins with the governmental fund financial statements and reflects all adjustments necessary to arrive at the Statement of Net Assets and Statement of Activities </li></ul><ul><ul><li>Can be separate spreadsheet linked to source and destination documents </li></ul></ul><ul><ul><li>Can be notations on the side of the governmental fund statements </li></ul></ul>
  54. 54. Populating your template ( continued ) Government-wide statements <ul><li>Note that many reconciling items between the fund level and government-wide statements affect both the Statement of Net Assets and the Statement of Activities </li></ul><ul><ul><li>Most common examples are </li></ul></ul><ul><ul><ul><li>capital assets and long-term liabilities </li></ul></ul></ul><ul><li>Interfund activity is eliminated so that only internal balances remain </li></ul>
  55. 55. Populating your template ( continued ) Government-wide statements <ul><li>Interfund activity can result in out of balance position at fund level statements that is resolved only at the government-wide level </li></ul><ul><ul><li>Transfer of capital assets from enterprise fund to governmental fund </li></ul></ul><ul><li>Remember that interfund activity between agency funds and governmental and business-type funds must be reclassified </li></ul>
  56. 56. Populating your template ( continued ) Government-wide statements <ul><li>Indirect costs are removed from functional expense in the government-wide statements </li></ul><ul><ul><li>Except for general government activities </li></ul></ul><ul><ul><li>Indirect cost allocations are reversed for government-wide reporting </li></ul></ul>
  57. 57. Populating your template ( continued ) Government-wide statements <ul><li>Internal service funds can be combined with governmental activities or business-type activities </li></ul><ul><ul><li>It is generally safe to assume consolidation with government activities </li></ul></ul><ul><ul><li>If service is provided solely to enterprise funds, then group with business-type activities </li></ul></ul><ul><ul><li>If service is provided to both government and business-type activities, consolidate with predominant customer of services ( cannot split between activities) </li></ul></ul>
  58. 58. Populating your template ( continued ) Government-wide statements <ul><li>Conversion spreadsheet example – separate spreadsheet </li></ul><ul><ul><li>Begins with governmental balances </li></ul></ul><ul><ul><li>Reflects column for each type of adjustment showing both impact on Statement of Net Assets and Statement of Activities </li></ul></ul><ul><ul><li>Final column can be linked directly into the Government-wide statements </li></ul></ul>
  59. 59. Populating your template ( continued ) Government-wide statements <ul><li>Conversion spreadsheet example – directly on governmental statements </li></ul><ul><ul><li>All significant adjustments from governmental fund statements to arrive at government-wide statements are included in properly labeled calculations outside the print area </li></ul></ul><ul><ul><li>Disadvantage is that it is more difficult to see impact on both top level statements of each type of reconciling item </li></ul></ul>
  60. 60. Populating your template ( continued ) Government-wide statements <ul><li>Statement of Net Assets </li></ul><ul><ul><li>Includes column for governmental activities, business-type activities, a total column and then an aggregated column for all component units no matter what type of fund </li></ul></ul><ul><ul><li>Conversion from fund level statements generally involves: capital assets, long-term liabilities, internal service fund net assets and the impact of deferred revenue transactions </li></ul></ul>
  61. 61. Populating your template ( continued ) Government-wide statements <ul><li>Statement of Activities </li></ul><ul><ul><li>Separately reflects activities of the primary government (including governmental activities and business-type activities) from those of component units </li></ul></ul><ul><ul><li>Expenses by function or activity are shown first </li></ul></ul><ul><ul><li>Program revenues are reflected next to arrive at a net revenue (expense) from each function or activity </li></ul></ul>
  62. 62. Populating your template ( continued ) Government-wide statements <ul><li>Statement of Activities (continued) </li></ul><ul><ul><li>General revenues are shown separate from program expenses and revenues </li></ul></ul><ul><ul><li>Transfers are then added to general revenues to arrive at subtotal </li></ul></ul><ul><ul><li>After adding beginning net assets, the end result should be net assets per the Statement of Net Assets </li></ul></ul>
  63. 63. Populating your template ( continued ) Government-wide statements <ul><li>Statement of Activities (continued) </li></ul><ul><ul><li>Conversion from fund level statements generally involves: capital purchases, long-term liability activity, internal service fund change in net assets, and the impact of grant revenues or other deferred revenue items. </li></ul></ul>
  64. 64. Populating your template ( continued ) Government-wide statements <ul><li>Statement of Activities (continued) </li></ul><ul><li>General revenues versus program revenues? </li></ul><ul><ul><li>Operating special assessments are charges for services while capital special assessments are capital contributions </li></ul></ul><ul><ul><li>All taxes are general revenues </li></ul></ul><ul><ul><li>Charges for services reported as program revenue of function which generated the revenue rather than where it will be spent </li></ul></ul>
  65. 65. Populating your template ( continued ) Government-wide statements <ul><li>Statement of Activities (continued) </li></ul><ul><li>General revenues versus program revenues? </li></ul><ul><ul><li>Grant contributions that can be used for both capital or operating purposes should be classified as operating grants and contributions </li></ul></ul><ul><ul><li>Pass through grants used to finance capital acquisitions should be treated as operating grants and contributions by the primary recipient </li></ul></ul>
  66. 66. Populating your template ( continued ) Footnotes <ul><li>Much of the information needed is already in audit schedules that have been prepared. </li></ul><ul><li>Use the prior year as a starting point but consider: </li></ul><ul><ul><li>Changes in major funds </li></ul></ul><ul><ul><li>Changes in governmental policies </li></ul></ul><ul><ul><li>New pronouncements </li></ul></ul><ul><ul><li>Subsequent events such as debt issuance, capital leases or legal settlements </li></ul></ul>
  67. 67. Populating your template ( continued ) Footnotes <ul><li>Most common challenges </li></ul><ul><ul><li>Amounts that don’t agree to the face of the financial statements </li></ul></ul><ul><ul><li>Exclusion of constitutional officer information (counties) </li></ul></ul><ul><ul><li>Missing or insufficient note disclosures – especially in the area of pensions </li></ul></ul><ul><ul><li>Inclusion of negative disclosure </li></ul></ul><ul><ul><li>Distinction of major versus non-major not present </li></ul></ul>
  68. 68. Populating your template ( continued ) Supplementary information <ul><li>Required supplementary information </li></ul><ul><ul><li>Management’s Discussion and Analysis (MD&A) – comes before the basic financial statements </li></ul></ul><ul><ul><ul><li>Must be consistent with information in financial statements, notes and statistical section </li></ul></ul></ul><ul><ul><ul><li>Include only allowable information </li></ul></ul></ul><ul><ul><ul><li>Many tables can be linked to financial statements </li></ul></ul></ul><ul><ul><ul><li>Must provide comparative data </li></ul></ul></ul><ul><ul><li>Budget comparisons (if not already in the Basic Financial Statements) </li></ul></ul>
  69. 69. Populating your template ( continued ) Supplementary Information <ul><ul><li>Trend data on funding of pension and Other post employment benefits in certain circumstances </li></ul></ul><ul><ul><li>Trend data on infrastructure condition if using the modified approach </li></ul></ul>
  70. 70. Populating your template ( continued ) Statistical Section ( CAFRS only ) <ul><li>GASB 44 is the source of technical guidance </li></ul><ul><li>Templates are available from those who have implemented </li></ul><ul><li>A narrative explaining the schedules in this section is required </li></ul><ul><li>Don’t forget to indicate the source of the information </li></ul>
  71. 71. Populating your template ( continued ) Other Introductory Section Items <ul><li>Most of these items can be prepared early </li></ul><ul><li>Required items are: </li></ul><ul><ul><li>Cover page </li></ul></ul><ul><ul><li>List of officials* </li></ul></ul><ul><ul><li>Table of contents </li></ul></ul><ul><ul><li>Transmittal letter* </li></ul></ul><ul><ul><li>Organizational chart* </li></ul></ul><ul><ul><li>Certificate of Achievement for Excellence in Financial Reporting* from prior year </li></ul></ul><ul><ul><li>* Required for CAFRs only </li></ul></ul>
  72. 72. Reviewing your financial statements <ul><li>Basics of financial statement review </li></ul><ul><ul><li>Consistency throughout document </li></ul></ul><ul><ul><ul><li>Financial amounts </li></ul></ul></ul><ul><ul><ul><li>Descriptions </li></ul></ul></ul><ul><ul><ul><li>Format presentations </li></ul></ul></ul><ul><ul><li>Information flows and is logical in format </li></ul></ul><ul><ul><li>Presentation is easy to read and understand </li></ul></ul><ul><ul><li>Document is technically complete with all required sections and disclosures </li></ul></ul><ul><ul><li>Relationships within the document make sense </li></ul></ul>
  73. 73. Reviewing your financial statements ( continued ) <ul><li>Consistency throughout document </li></ul><ul><ul><li>Individual schedules to combining </li></ul></ul><ul><ul><li>Combining to combined </li></ul></ul><ul><ul><li>Combined to basic financial statements </li></ul></ul><ul><ul><li>Footnotes to basic financial statements </li></ul></ul><ul><ul><li>MD&A to basic financial statements </li></ul></ul><ul><ul><li>Statistical section to statements, notes and MD&A </li></ul></ul>
  74. 74. Reviewing your financial statements ( continued ) <ul><li>Information flows and is logical in format </li></ul><ul><ul><li>Note one incorporates the government’s significant accounting principles </li></ul></ul><ul><ul><ul><li>Certain items are required – use disclosure checklist to make sure required elements are present </li></ul></ul></ul><ul><ul><ul><li>Order generally follows account presentation in statements </li></ul></ul></ul><ul><ul><li>Information generally follows the order in the statements </li></ul></ul><ul><ul><ul><li>After note one, cash and deposits are generally next followed by investments….. </li></ul></ul></ul>
  75. 75. Reviewing your financial statements ( continued ) <ul><li>Presentation is easy to read and understand </li></ul><ul><ul><li>Add totals that tie to the face of the financial statements (where appropriate) </li></ul></ul><ul><ul><li>Check for correct grammar and punctuation </li></ul></ul><ul><ul><li>Consider the readers of your financial statements </li></ul></ul><ul><ul><li>Standard is a person with knowledge </li></ul></ul>
  76. 76. Reviewing your financial statements ( continued ) <ul><li>Document is technically complete with all required sections and disclosures </li></ul><ul><ul><li>Utilize the information gathered during the planning stage </li></ul></ul><ul><ul><li>Ensure new standards are addressed </li></ul></ul><ul><ul><li>Complete a disclosure checklist </li></ul></ul>
  77. 77. Reviewing your financial statements ( continued ) <ul><li>Relationships within the document make sense </li></ul><ul><ul><li>Perform top level analytic to see if the change from the prior year reflects what really happened </li></ul></ul><ul><ul><li>Do the capital asset numbers on the reconciliations for the government-wide statements supported by additions per the capital asset footnote </li></ul></ul><ul><ul><li>For proprietary fund level statements, are there restricted assets identified that are at least equal to liabilities payable from restricted assets </li></ul></ul>
  78. 78. Reviewing your financial statements ( continued ) <ul><li>Problem areas </li></ul><ul><ul><li>Dollar differences (DON’T INPUT PENNIES) </li></ul></ul><ul><ul><li>GFOA prior year comments not addressed </li></ul></ul><ul><ul><li>Different terminology for same item (funds, line items, etc.) </li></ul></ul><ul><ul><li>New requirements not met </li></ul></ul>
  79. 79. Reviewing your financial statements ( continued ) <ul><li>Tools available </li></ul><ul><ul><li>Disclosure checklists (GFOA, PPC, etc.) </li></ul></ul><ul><ul><li>Other financials from similar entities </li></ul></ul><ul><ul><li>Auditors </li></ul></ul><ul><ul><li>GAAFR examples </li></ul></ul>
  80. 80. Wrapping up the process <ul><li>Send your financial statements to: </li></ul><ul><ul><li>Auditor General within 12 months of year end </li></ul></ul><ul><ul><li>Copy is filed with Annual Financial Report to the Department of Financial Services </li></ul></ul><ul><ul><li>Grantor agencies may required copy and the Federal Clearing House if single audit is applicable </li></ul></ul><ul><ul><li>Lendors </li></ul></ul><ul><ul><li>Others involved in interlocal agreements with our government </li></ul></ul>
  81. 81. Wrapping up the process ( continued ) <ul><li>Clean up documentation immediately! </li></ul>

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