ANATOMY OF A CAFR Comprehensive Annual Financial Report Karen Tenace CPA, CMA City of Tucson
Objectives <ul><li>Learn what is mandated by GAAP versus is what is encouraged by GAAP </li></ul><ul><li>Understand the co...
Do we have to do a CAFR? <ul><li>Need 3 things to comply with GAAP: </li></ul><ul><li>Management Discussion and Analysis (...
CAFR Comprehensive Annual Financial Report <ul><li>3 Major Sections </li></ul>Introductory  Section Financial  Section Sta...
Order of Presentation <ul><li>Table of Contents </li></ul><ul><li>Introductory Section </li></ul><ul><li>A. Letter of Tran...
Title Page-Specific Requirements <ul><li>Comprehensive Annual Financial Report (not “Annual Report”) </li></ul><ul><li>Nam...
Introductory Section-Purpose? Provides background and context of CAFR NOT included in scope of audit
Introductory Section-Contents <ul><li>Certificate of Achievement for Excellence in Financial Reporting-Prior Year </li></u...
Letter of Transmittal-4 Sections <ul><li>Formal transmittal of the CAFR </li></ul><ul><li>Profile of the government </li><...
Letter of Transmittal-Other Details <ul><li>Minimum-Signed by CFO </li></ul><ul><li>Dated on the date the CAFR is first ma...
Financial Section-Purpose? Provides critical information regarding the financial condition of the government through the p...
Finance Section-Contents <ul><li>Independent Auditor’s Report </li></ul><ul><li>Management Discussion and Analysis (MD&A) ...
Basic Financial Statements A Quick Detour to Review Basic Terminology & Concepts…
Review -Unique Characteristics of Governmental Accounting <ul><li>Use of Fund Accounting </li></ul><ul><li>Measurement Foc...
Review-What’s a Fund? <ul><li>Fund:  A self contained accounting entity with its own asset, liability, revenue, expenditur...
Review-Measurement Focus & Basis of Accounting (MFBA) <ul><li>Measurement Focus tells you WHAT to recognize </li></ul><ul>...
Review-Two Types of MFBA’s in Governmental Accounting #1 <ul><li>Economic Resources Measurement Focus and Accrual Basis of...
<ul><li>Full Accrual Basis Cont. </li></ul><ul><li>WHEN: Accrual basis of accounting recognizes the financial effect of tr...
<ul><li>Current Financial Resources Measurement Focus and Modified Accrual Basis of Accounting </li></ul><ul><li>WHAT: Cur...
How can you tell MFBA by looking at a financial statement? <ul><li>Modified </li></ul><ul><li>Short-term View  </li></ul><...
Review-Fund Types <ul><li>GOVERNMENTAL FUNDS </li></ul><ul><li>(Current Resources/Modified) </li></ul><ul><li>General Fund...
Review-GASB Statement No. 34 The “New” Model (2002) <ul><li>PRE-GASB 34: </li></ul><ul><li>General Purpose F/S </li></ul><...
Basic Financial Statements-Order of Presentation <ul><li>Government-wide Financial Statements </li></ul><ul><li>Fund Finan...
Government-wide Financial Statements-Major Points <ul><li>Includes all governmental activity and business-type activity </...
Government-wide Statements <ul><li>Statement of Net Assets </li></ul><ul><li>Statement of Activities </li></ul>All financi...
Gov’t-wide Statement of Net Assets-Major Points <ul><li>Assets & Liabilities- present in order of liquidity or split betwe...
Gov’t-wide Statement of Net Assets-Major Points Cont. <ul><li>Net Assets is broken into 3 categories: </li></ul><ul><li>In...
Gov’t Wide Statement of Activities-Major Points <ul><li>Purpose is to show the extent of how each governmental function su...
Gov’t Wide Statement of Activities-Expenses <ul><li>Direct expenses – by function </li></ul><ul><li>Depreciation – by func...
Gov’t Wide Statement of Activities-Program Revenues <ul><li>Reported by Function & Shown in 3 Columns: </li></ul><ul><li>C...
Gov’t Wide Statement of Activities-Net Expenses <ul><li>What you would expect, in theory… </li></ul><ul><li>Governmental a...
Gov’t Wide Statement of Activities-General Revenues & Other Line Items <ul><li>Tax revenues are reported by type of tax </...
Gov’t Wide Statement of Activities-General Revenues & Other Line Items <ul><li>Endowment and Permanent Fund Contributions-...
XYZ CITY EXAMPLE STATEMENT OF ACTIVITIES FOR THE PERIOD ENDING JUNE 30, 2007
Fund Financial Statements <ul><li>GOVERNMENTAL FUNDS </li></ul><ul><li>(Current Resources/Modified) </li></ul><ul><li>Bala...
Governmental Fund Financial Statements-Major Points <ul><li>Separates funds – Major vs. Nonmajor </li></ul><ul><li>MFBA=Cu...
Basic Financial Statements Major Fund Test <ul><ul><ul><li>Total assets, liabilities, revenues, or expenditures/expenses o...
Major Fund Test Example
Financial Section - Notes <ul><li>Summary of Significant Accounting Policies </li></ul><ul><li>Budgetary Information </li>...
Financial Section – Notes Cont. <ul><li>Fund Balances </li></ul><ul><li>Interfund Activity </li></ul><ul><li>Component Uni...
RSI-Other than MD&A <ul><li>Budgetary Comparisons (General Fund & Major Special Revenue Funds) </li></ul><ul><li>Infrastru...
Combining Statements & Individual Schedules- Detail of Aggregate Data <ul><li>Nonmajor governmental funds </li></ul><ul><l...
The End-Financial Section Whew!
Statistical Section GASB 44 – 10 Yr Trending <ul><li>Financial Trends </li></ul><ul><li>Revenue Capacity </li></ul><ul><li...
Optional Sections to the CAFR Common Examples <ul><li>Investment Section (Pension Plans or Investment Pools) </li></ul><ul...
Financial Disclosure <ul><li>GFOA has formally recognized that the CAFR format meets the SEC Rule 15c2-12 (financial state...
Questions?
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  • Define the acronym CAFR
  • .ppt - 343 kb

    1. 1. ANATOMY OF A CAFR Comprehensive Annual Financial Report Karen Tenace CPA, CMA City of Tucson
    2. 2. Objectives <ul><li>Learn what is mandated by GAAP versus is what is encouraged by GAAP </li></ul><ul><li>Understand the components of the CAFR and the order in which they should be presented </li></ul><ul><li>Discover additional resources that can help your jurisdiction prepare a great CAFR </li></ul>
    3. 3. Do we have to do a CAFR? <ul><li>Need 3 things to comply with GAAP: </li></ul><ul><li>Management Discussion and Analysis (MD&A) </li></ul><ul><li>Basic Financial Statements </li></ul><ul><li>Required Supplementary Information (RSI) </li></ul><ul><li>GAAP, however, encourages the production of the broader presentation in the format of CAFR. </li></ul>
    4. 4. CAFR Comprehensive Annual Financial Report <ul><li>3 Major Sections </li></ul>Introductory Section Financial Section Statistical Section
    5. 5. Order of Presentation <ul><li>Table of Contents </li></ul><ul><li>Introductory Section </li></ul><ul><li>A. Letter of Transmittal </li></ul><ul><li>B. Organizational Chart </li></ul><ul><li>C. GFOA’s Certificate of Achievement </li></ul><ul><li>Financial Section </li></ul><ul><li>A. Auditor’s Opinion </li></ul><ul><li>B. Management Discussion and Analysis (MD&A) </li></ul><ul><li>C. Basic Financial Statements </li></ul><ul><li>D. Notes </li></ul><ul><li>E. Required Supplementary Information (Other than MD&A) </li></ul><ul><li>F. Other Information (Combining & Individual Statements) </li></ul><ul><li>Statistical Section </li></ul><ul><li>Optional Sections </li></ul>
    6. 6. Title Page-Specific Requirements <ul><li>Comprehensive Annual Financial Report (not “Annual Report”) </li></ul><ul><li>Name of primary government </li></ul><ul><li>State where government is located </li></ul><ul><li>Fiscal period covered </li></ul><ul><li>Department responsible for preparing the report </li></ul>
    7. 7. Introductory Section-Purpose? Provides background and context of CAFR NOT included in scope of audit
    8. 8. Introductory Section-Contents <ul><li>Certificate of Achievement for Excellence in Financial Reporting-Prior Year </li></ul><ul><li>List of Principal Officials </li></ul><ul><li>Letter of Transmittal </li></ul><ul><li>Organizational Chart </li></ul>
    9. 9. Letter of Transmittal-4 Sections <ul><li>Formal transmittal of the CAFR </li></ul><ul><li>Profile of the government </li></ul><ul><li>Economic Condition (Subjective Element) </li></ul><ul><li>Awards & Acknowledgements </li></ul>
    10. 10. Letter of Transmittal-Other Details <ul><li>Minimum-Signed by CFO </li></ul><ul><li>Dated on the date the CAFR is first made available to the public (AFTER the auditor’s report) </li></ul><ul><li>NOT audited </li></ul><ul><li>Should be on letterhead </li></ul><ul><li>Should be addressed to the citizens </li></ul><ul><li>Concise with charts and graphs </li></ul>
    11. 11. 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)
    12. 12. Finance Section-Contents <ul><li>Independent Auditor’s Report </li></ul><ul><li>Management Discussion and Analysis (MD&A) </li></ul><ul><li>Basic Financial Statements </li></ul><ul><li>Required Supplementary Information (Other than MD&A) </li></ul><ul><li>Combining and Individual Fund Presentations & Supplementary Info </li></ul>
    13. 13. Basic Financial Statements A Quick Detour to Review Basic Terminology & Concepts…
    14. 14. Review -Unique Characteristics of Governmental Accounting <ul><li>Use of Fund Accounting </li></ul><ul><li>Measurement Focus and Basis of Accounting or MFBA </li></ul><ul><li>Full Accrual AND Modified Accrual </li></ul>
    15. 15. Review-What’s a Fund? <ul><li>Fund: A self contained accounting entity with its own asset, liability, revenue, expenditure or expense and fund balance or other equity accounts. </li></ul>
    16. 16. Review-Measurement Focus & Basis of Accounting (MFBA) <ul><li>Measurement Focus tells you WHAT to recognize </li></ul><ul><li>Basis of Accounting tells you WHEN to recognize it </li></ul>
    17. 17. Review-Two Types of MFBA’s in Governmental Accounting #1 <ul><li>Economic Resources Measurement Focus and Accrual Basis of Accounting </li></ul><ul><li>WHAT: Economic resource measurement focus considers ALL inflows, outflows and balances affecting or reflecting on an entity’s net assets. </li></ul>
    18. 18. <ul><li>Full Accrual Basis Cont. </li></ul><ul><li>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. </li></ul>Review-Two Types of MFBA’s in Governmental Accounting #1
    19. 19. <ul><li>Current Financial Resources Measurement Focus and Modified Accrual Basis of Accounting </li></ul><ul><li>WHAT: Current financial resource measurement focus only considers SHORT-TERM or CURRENT inflows, outflows and balances of expendable financial resources. </li></ul>Review-Two Types of MFBA’s in Governmental Accounting #2
    20. 20. How can you tell MFBA by looking at a financial statement? <ul><li>Modified </li></ul><ul><li>Short-term View </li></ul><ul><li>Expenditures (Capital Outlay and Principal Payments) </li></ul><ul><li>Assets-Liabilities=Fund Balance </li></ul><ul><li>Only Current Assets and Current Liabilities Shown </li></ul><ul><li>No Long-term Assets means no Depreciation Expense </li></ul><ul><li>Full Accrual </li></ul><ul><li>Long-term View </li></ul><ul><li>Expenses </li></ul><ul><li>Assets-Liabilities=Net Assets </li></ul><ul><li>Current AND Long-Term Assets and Liabilities Shown </li></ul><ul><li>Depreciation Expense Included in Operating </li></ul>
    21. 21. Review-Fund Types <ul><li>GOVERNMENTAL FUNDS </li></ul><ul><li>(Current Resources/Modified) </li></ul><ul><li>General Fund </li></ul><ul><li>Special Revenue Fund </li></ul><ul><li>Capital Project Fund </li></ul><ul><li>Debt Service Fund </li></ul><ul><li>Permanent Fund </li></ul><ul><li>PROPRIETARY FUNDS </li></ul><ul><li>(Economic Resources/Full Accrual) </li></ul><ul><li>Enterprise Funds </li></ul><ul><li>Internal Service Funds </li></ul><ul><li>FIDUCIARY FUNDS </li></ul><ul><li>(Economic Resources/Full Accrual) </li></ul><ul><li>Agency Funds </li></ul><ul><li>Pension Funds </li></ul><ul><li>Investment Trust Funds </li></ul><ul><li>Private Purpose Trust Funds </li></ul>
    22. 22. Review-GASB Statement No. 34 The “New” Model (2002) <ul><li>PRE-GASB 34: </li></ul><ul><li>General Purpose F/S </li></ul><ul><li>Emphasis on FUND TYPE </li></ul><ul><li>Governmental Fund Financial Statements were ONLY presented using modified accrual accounting basis </li></ul><ul><li>POST-GASB 34: </li></ul><ul><li>Basic F/S </li></ul><ul><li>Emphasis on MAJOR Fund vs. NONMAJOR Fund </li></ul><ul><li>Governmental Fund Financial Statements presented in BOTH modified and full accrual accounting basis ( Gov’t-wide Statements ) </li></ul>END OF DETOUR …BACK TO BASIC FINANCIAL STATEMENTS.....
    23. 23. Basic Financial Statements-Order of Presentation <ul><li>Government-wide Financial Statements </li></ul><ul><li>Fund Financial Statements </li></ul><ul><li>Required Supplementary Information </li></ul><ul><li>Combining and Individual Fund Statements and Schedules </li></ul>
    24. 24. Government-wide Financial Statements-Major Points <ul><li>Includes all governmental activity and business-type activity </li></ul><ul><li>Includes discretely presented component units </li></ul><ul><li>Excludes fiduciary activities </li></ul><ul><li>MFBA=Economic Resources, Full Accrual Accounting </li></ul><ul><li>Gov’t Activity + Business Type Activity = Primary Government </li></ul>
    25. 25. Government-wide Statements <ul><li>Statement of Net Assets </li></ul><ul><li>Statement of Activities </li></ul>All financial statements should refer to Notes!
    26. 26. Gov’t-wide Statement of Net Assets-Major Points <ul><li>Assets & Liabilities- present in order of liquidity or split between current and noncurrent (classified approach) </li></ul><ul><li>Capital assets being depreciated must be shown separately from assets that are not being depreciated </li></ul><ul><li>Assets – Liabilities = Net Assets </li></ul>
    27. 27. Gov’t-wide Statement of Net Assets-Major Points Cont. <ul><li>Net Assets is broken into 3 categories: </li></ul><ul><li>Invested in Capital Assets Net of Related Debt </li></ul><ul><li>Restricted (Narrower than purpose of reporting unit) </li></ul><ul><li>Unrestricted </li></ul>
    28. 28. Gov’t Wide Statement of Activities-Major Points <ul><li>Purpose is to show the extent of how each governmental function supports itself, before general tax dollars kick in </li></ul><ul><li>Order of Presentation: </li></ul><ul><li>Expenses </li></ul><ul><li>Program Revenues </li></ul><ul><li>Net (Expense) Revenue </li></ul><ul><li>General Revenues </li></ul>
    29. 29. Gov’t Wide Statement of Activities-Expenses <ul><li>Direct expenses – by function </li></ul><ul><li>Depreciation – by function </li></ul><ul><li>Indirect expenses – General Government or allocate in separate column </li></ul><ul><li>Interest Expense – not associated with a function, separate line </li></ul>
    30. 30. Gov’t Wide Statement of Activities-Program Revenues <ul><li>Reported by Function & Shown in 3 Columns: </li></ul><ul><li>Charges for Services </li></ul><ul><li>Operating Grants and Contributions </li></ul><ul><li>Capital Grants and Contributions </li></ul>
    31. 31. Gov’t Wide Statement of Activities-Net Expenses <ul><li>What you would expect, in theory… </li></ul><ul><li>Governmental activities carry net expenses and depend on tax revenues </li></ul><ul><li>Business-type activities either break even or carry net revenues </li></ul>
    32. 32. Gov’t Wide Statement of Activities-General Revenues & Other Line Items <ul><li>Tax revenues are reported by type of tax </li></ul><ul><li>Material gains on sale of capital assets for governmental activities </li></ul><ul><ul><li>Immaterial gains on governmental assets can be an adjustment to depreciation </li></ul></ul><ul><ul><li>Gains on assets in enterprise activities should be shown under functional expense </li></ul></ul><ul><ul><li>Impairments to assets, program expense or special/extraordinary item </li></ul></ul>
    33. 33. Gov’t Wide Statement of Activities-General Revenues & Other Line Items <ul><li>Endowment and Permanent Fund Contributions- reported after General Revenues </li></ul><ul><li>Special Items – significant, subject to management’s control, and either unusual OR infrequent (Sale of Land) </li></ul><ul><li>Extraordinary Items – significant, unusual AND infrequent (Earthquake) </li></ul><ul><li>Transfers </li></ul>
    34. 34. XYZ CITY EXAMPLE STATEMENT OF ACTIVITIES FOR THE PERIOD ENDING JUNE 30, 2007
    35. 35. Fund Financial Statements <ul><li>GOVERNMENTAL FUNDS </li></ul><ul><li>(Current Resources/Modified) </li></ul><ul><li>Balance Sheet </li></ul><ul><li>Statement of Revenues, Expenditures and Changes in Fund Balance </li></ul><ul><li>Reconciliation to Government-wide Statements </li></ul><ul><li>PROPRIETARY FUNDS </li></ul><ul><li>(Economic Resources/Full Accrual) </li></ul><ul><li>Statement of Net Assets </li></ul><ul><li>Statement of Revenues, Expenses and Changes in Fund Net Assets </li></ul><ul><li>Statement of Cash Flows </li></ul><ul><li>FIDUCIARY FUNDS </li></ul><ul><li>(Economic Resources/Full Accrual) </li></ul><ul><li>Statement of Fiduciary Net Assets </li></ul><ul><li>Statement of Changes in Fiduciary Net Assets </li></ul>All financial statements should refer to Notes!
    36. 36. Governmental Fund Financial Statements-Major Points <ul><li>Separates funds – Major vs. Nonmajor </li></ul><ul><li>MFBA=Current Resources, Modified Accrual Accounting </li></ul><ul><li>Includes reconciliation back to governmental activities for both financial statements </li></ul>
    37. 37. Basic Financial Statements Major Fund Test <ul><ul><ul><li>Total assets, liabilities, revenues, or expenditures/expenses of that individual governmental or enterprise fund constitute 10% of the governmental or enterprise activity </li></ul></ul></ul><ul><ul><ul><li>AND </li></ul></ul></ul><ul><ul><ul><li>Total assets, liabilities, revenues, or expenditures/expenses are 5% of the total governmental and enterprise category combined </li></ul></ul></ul>
    38. 38. Major Fund Test Example
    39. 39. Financial Section - Notes <ul><li>Summary of Significant Accounting Policies </li></ul><ul><li>Budgetary Information </li></ul><ul><li>Cash Deposits w/ Financial Institutions </li></ul><ul><li>Investments </li></ul><ul><li>Derivatives </li></ul><ul><li>Contingent Liabilities </li></ul><ul><li>Encumbrances </li></ul><ul><li>Subsequent Events </li></ul><ul><li>Defined benefit pensions and post employment benefit plans </li></ul><ul><li>Capital Assets and Long-term Liabilities </li></ul><ul><li>Significant Commitments </li></ul>
    40. 40. Financial Section – Notes Cont. <ul><li>Fund Balances </li></ul><ul><li>Interfund Activity </li></ul><ul><li>Component Units </li></ul><ul><li>Endowments </li></ul><ul><li>Risk Financing </li></ul><ul><li>Fiscal Year Inconsistencies </li></ul><ul><li>Landfill Closure & Post closure </li></ul><ul><li>Property Taxes </li></ul><ul><li>Segment Information </li></ul><ul><li>Related Party Transactions </li></ul><ul><li>Joint Ventures </li></ul><ul><li>Fund Balances </li></ul><ul><li>Prior Period Adjustments </li></ul>
    41. 41. RSI-Other than MD&A <ul><li>Budgetary Comparisons (General Fund & Major Special Revenue Funds) </li></ul><ul><li>Infrastructure Condition and Maintenance (Modified Approach) </li></ul><ul><li>Pension/Other Post Employment Benefits </li></ul><ul><li>Revenue & Claims Development Trend Data (Public Entity Risk Pools) </li></ul>
    42. 42. Combining Statements & Individual Schedules- Detail of Aggregate Data <ul><li>Nonmajor governmental funds </li></ul><ul><li>Nonmajor enterprise funds </li></ul><ul><li>Internal Service Funds & Fiduciary Funds </li></ul><ul><li>Nonmajor discretely presented component units </li></ul>
    43. 43. The End-Financial Section Whew!
    44. 44. Statistical Section GASB 44 – 10 Yr Trending <ul><li>Financial Trends </li></ul><ul><li>Revenue Capacity </li></ul><ul><li>Debt Capacity </li></ul><ul><li>Demographics and Economy </li></ul><ul><li>Operating Information </li></ul>
    45. 45. Optional Sections to the CAFR Common Examples <ul><li>Investment Section (Pension Plans or Investment Pools) </li></ul><ul><li>Actuarial Section (Pension Plans) </li></ul><ul><li>Single Audit (Federal Awards) </li></ul>
    46. 46. Financial Disclosure <ul><li>GFOA has formally recognized that the CAFR format meets the SEC Rule 15c2-12 (financial statement disclosure to investors) </li></ul><ul><li>Place on website </li></ul><ul><li>Checklist is at: http://www.gfoa.org/downloads/GENERALPURPOSECHECKLIST.pdf </li></ul>
    47. 47. Questions?

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