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ElementsOfAnACFR.pdf
- 2. 2 Presenter Alan D. “A.J.” Bowers, Jr., CPA, CITP Partner Carr, Riggs & Ingram ‐ Albuquerque, NM Professional Affiliations • Association of International Certified Professional Accountants (AICPA) • New Mexico Society of Certified Public Accountants (NMSCPA) • Association of Government Accountants (AGA) – Albuquerque Chapter – President • Government Financial Officers Association (GFOA’s) Special Review Committee (SRC) for the Certificate of Achievement of Excellence in Financial Reporting Program • Approved to answer questions for the AICPA’s Center for Plain English in the Government Area • AICPA PCPS Technical Issues Committee Member 505.883.2727 (o) abowers@CRIcpa.com
- 3. 3 Agenda • Introduction • Opinion Units • ACFR Program and Requirements • GFOA Common Financial Reporting Deficiencies
- 4. Introduction
- 5. 5 Scope of the SLG Sector 2017 U.S. Bureau of the Census (Census of Governments) identified more than 90,000 units of government, in addition to the 50 states Entity Type Count County 3,031 Municipality 19,495 Township 16,253 School District 12,754 Special District 38,542 Total 90,075
- 7. 7 Opinion Units • Concept is unique to governments • Plan, perform, and evaluate the results of auditor procedures on a governments basic financial statements based on opinion units • Technically conducting one audit but providing multiple opinions. • Proper identification of opinion units is predicated on proper identification of the financial reporting entity
- 12. 12 ACFR Program • Governmental Accounting, Auditing, and Financial Reporting (GAAFR) – “Blue Book” – 2020 Edition • Updates for 25 GASB Statements and 9 Implementation Guides issued since 2012 Edition (through GASB 91) – Designed to serve as: • Comprehensive introduction to public sector accounting • A practical reference tool
- 13. 13 ACFR Program
- 14. 14 ACFR Program • ACFR Statistics for 2020 (fiscal year ends during calendar year 2019) – 4,346 awards – NM = 20 – Approximately 450 reviewers
- 16. 16 Eligibility Requirements • Type of Report. The report submitted to the program must be the published (either in electronic or hard copy format) annual comprehensive financial report (ACFR) of a state or local governmental entity, which includes: – Special‐purpose entities such as public employee retirement systems, public colleges and universities, government investment pools, stand‐alone business‐ type activities, and school districts. – Component units and departments are eligible to submit their ACFR, provided that they meet certain requirements.
- 17. 17 Eligibility Requirements • Scope. To qualify as “comprehensive”, the ACFR must include all funds and component units of the entity, in accordance with generally accepted accounting principles. • Separate component unit reports. – A component unit that publishes a ACFR is eligible to submit its report to the program for review, provided that it includes all of the component unit’s own funds and (sub) component units. – Furthermore, except for a blended component unit’s general fund (which properly is reclassified as a special revenue fund in the primary government’s report), the fund types used in the component unit’ s report must be the same as those used to account for its activities in the primary government’s report (e.g., a component unit may not use proprietary fund accounting in its separate report if its activities are reported in governmental funds in the primary government’s report).
- 18. 18 Eligibility Requirements • Scope – Separate departmental reports • A department of a government that publishes a ACFR is eligible to submit its report to the program for review, provided that the department is composed of one or more separate funds. – Thus, a department reported as a separate special revenue fund is eligible to participate, but a department that is included as part of the general fund is ineligible. Once again, the fund type(s) used in the department’s report must be consistent with the fund type(s) used in the government’s report. – Furthermore, the certificate program recommends that departmental reports always be accompanied by management’s discussion and analysis.
- 19. 19 Eligibility Requirements • Audit requirements. – The financial section of the ACFR must include an independent auditor’s report on the fair presentation of the financial statements. – The auditor must have performed the audit in accordance with either generally accepted auditing standards (GAAS) or generally accepted government auditing standards (GAGAS) as set forth in the Government Accountability Office’s Government Auditing Standards. – Also, the scope of the independent auditor’s opinion must encompass, at a minimum, the fair presentation of the basic financial statements (BFS). – In addition, the independent auditor’s report must provide at least “in relation” audit coverage for all other contents of the financial section of the ACFR. – In most cases, a modified opinion or a disclaimer of opinion based upon the inadequacy or unavailability of the government’s accounting records will render a report ineligible, as will the omission of a fund type, individual fund, or component unit from the scope of the auditor’s opinion.
- 21. 21 Eligibility Requirements • Demonstration of legal compliance. – If the ACFR references a separately issued budgetary report to demonstrate budgetary compliance at the legal level of control, it must submit one copy of that report as part of its submission package. – Any such report should • 1) be bound, • 2) present all individual governmental funds for which an annual appropriated budget is adopted, • 3) present separate columns: – a) for the final budget and – b) for actual expenditures on a budgetary basis at the legal level of control, • 4) present information at the legal level of control within the individual fund, as appropriate, and, • 5) identify names of all individual funds and accounts, as appropriate, included on the report (may also present fund/account numbers, however, fund and account numbers alone are not acceptable).
- 22. 22 Eligibility Requirements • Submission Deadline. – All appropriate items must be postmarked or e‐mailed to the Government Finance Officers Association (GFOA) no later than six months after the government's fiscal year end • A government may request a 30‐day extension of the submission deadline for the Certificate of Excellence in Financial Reporting program, Popular Annual Financial Reporting program, or the Distinguished Budget Presentation Award program by completing the form below. When a deadline falls on a weekend or holiday the submission is due the next business day. – Please note: the Certificate of Excellence in Financial Reporting program policy prohibits granting an extension in two consecutive years for essentially the same reason.
- 23. 23 Judging Process • Reports submitted to the ACFR program are reviewed by – Selected members of the GFOA professional staff – GFOA Special Review Committee (SRC), which comprises individuals with expertise in public sector financial reporting and includes • financial statement preparers, independent auditors, academics, and other finance professionals.
- 24. 24 Judging Process • Each ACFR is reviewed using a checklist designed to determine compliance with both generally accepted accounting principles (GAAP) and program policy as established by the GFOA's Special Review Executive Committee and the GFOA Executive Board. • Reviews are performed by GFOA staff and members of the GFOA's Special Review Committee, which comprises individuals from government, the public accounting profession, and academe who possess specialized expertise in governmental financial reporting, typically as a result of either preparing or auditing a ACFR that has received the Certificate of Achievement. • Reviewers are never selected from the same state as the ACFR being reviewed or from the same firm that performed the independent audit.
- 26. 26 Checklists • Comprehensive General‐purpose checklist – Last updated December 8, 2021 • Post employment benefit systems and investments pools – Last updated December 8, 2021
- 28. 28 MD&A • Deficiency: Missing an analysis for all major funds to disclose the reasons for significant changes in fund balances • [GASB 34, Paragraph 11d] ‐ An analysis of balances and transactions of individual funds. The analysis should address the reasons for significant changes in fund balances or fund net position and whether restrictions, commitments, or other limitations significantly affect the availability of fund resources for future use
- 29. 29 MD&A • Deficiency: Missing an analysis of significant variations between original and final budget amounts, and between final budget amounts and actual budget results for the general fund • [GASB 34, Paragraph 11e] ‐ An analysis of significant variations between original and final budget amounts, and between final budget amounts and actual budget results for the general fund (or its equivalent). The analysis should include any currently known reasons for those variations that are expected to have a significant effect on future services or liquidity.
- 30. 30 MD&A • Deficiency: Combining deferred inflows and deferred outflows with assets and liabilities in the condensed financial statements • [GASB 63, Paragraph 7] ‐ Amounts that are required to be reported as deferred outflows of resources should be reported in a statement of financial position in a separate section following assets. Similarly, amounts that are required to be reported as deferred inflows of resources should be reported in a separate section following liabilities.
- 31. 31 Statement of Net Position • Net Investment in Capital Assets calculation – Deficiency: Incorrect calculation of the net investment in capital assets due to some of the following: • Not including deferred amounts from refundings in the calculation; • Not including all the capital assets like land and construction in progress; or • Not including retainage payable in the calculation – [GASB 34, Paragraph 33] ‐This component of net position consists of capital assets, including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets.
- 32. 32 Statement of Net Position • Net Investment in Capital Assets calculation – Deficiency: Incorrect calculation of the net investment in capital assets due to some of the following: • Including debt that has unspent proceeds in the calculation; • Also, the liability related to the unspent portion of a debt issuance is not included in the same component of net position as the asset relating to the unspent proceeds. It’s included either in the calculation of the net investment in capital assets or in the calculation of unrestricted net position. – [GASB 34, Paragraph 33] ‐ If there are significant unspent related debt proceeds at year‐end, the portion of the debt attributable to the unspent proceeds should not be included in the calculation of net investment in capital assets. Rather, that portion of the debt should be included in the same net assets component as the unspent proceeds— for example, restricted for capital projects.
- 37. 37 Statement of Net Position • Deficiency: Not reporting a deferred amount for a refunding in the current year • [GASB 65, Paragraph 6] ‐ For current refundings and advance refundings resulting in defeasance of debt reported by governmental activities, business‐type activities, and proprietary funds, the difference between the reacquisition price and the net carrying amount of the old debt should be reported as a deferred outflow of resources or a deferred inflow of resources.
- 38. 38 Statement of Net Position • Deficiency: – Not differentiating between unearned revenues and deferred inflows. For example, reporting unearned revenues (liabilities) as deferred inflows – Reporting deferred outflows/inflows as part of assets/liabilities – Using the reference as unavailable
- 39. 39 Statistical Section • Deficiency: – The amounts presented in the debt capacity schedules should be the same amounts reported in the basic financial statements. Premiums and discounts are not being included in the amounts in the statistical section. – Not including all of the governmental activities debt for the direct debt in the direct and overlapping debt statistical table.
- 40. 40 Statistical Section • Deficiency: – The ratio of debt service as a percentage of noncapital expenditures is not calculated correctly. Use the capital outlay amount from the reconciliation of the statement of revenues, expenditures and changes in fund balances to the statement of activities. In other instances, not including debt service expenditures in the noncapital expenditures. – Amounts do not trace to the basic financial statements
- 41. 41 Statistical Section • Deficiency: – Missing narratives to describe atypical changes and anomalous data – [GASB 44, Paragraph 42d] ‐ …may result from infrequent incidents, changes in underlying assumptions or accounting methods, organizational restructuring, major policy changes, or other events.
- 42. 42 Governmental Fund Statements • Not reporting a major fund when it meets the criteria for this fiscal year to be reported as a major fund. Remember to include deferred inflows and deferred outflows when calculating major funds. • [GASB 65, Paragraph 32,33] ‐ Paragraph 76 of Statement 34 establishes the criteria for major fund determination. Assets should be combined with deferred outflows and liabilities with deferred inflows, for purposes of determining major funds.
- 43. 43 Governmental Fund Statements • Not including a budgetary comparison for a major special revenue fund when the government legally adopts an annual budget for this fund. (Note: This is more common in initial submissions.) • [GASB 34, Paragraph 130] ‐ Budgetary comparison schedules should be presented as RSI (may elect to report in basic financial statements) for the general fund and for each major special revenue fund that has a legally adopted annual budget.
- 44. 44 Governmental Fund Statements • Reporting a nonspendable fund balance for a loan or notes receivable in other governmental funds. • [GASB 54, Paragraph 6] – …If the use of the proceeds from the collection of those receivables is restricted, committed or assigned, then they should be included in those fund balance classifications, rather than nonspendable fund balance
- 45. 45 Proprietary Fund Statements • Capital contributions are reported as nonoperating revenues on the statement of revenues, expenses and changes in net position, however they are correctly reported as capital grants and contributions on the statement of activities. • [GASB 34, Paragraph 100] – Capital contributions should be reported separately, after nonoperating revenues and expenses.
- 46. 46 Required Supplementary Information • Disclose the budgetary basis in the notes to the RSI when general and major special revenue funds budgetary comparisons are reported as RSI. • [NCGA‐I6:5; GAAFR, page 580] – When budgetary comparisons are presented as RSI, they must be accompanied by notes to RSI that describe the basis of budgeting, and any excess budgetary expenditures over appropriations not visible on the face of the budgetary comparison.
- 48. 48 Other Supplementary Information • Not including budgetary comparison reporting at the legal level of budgetary control. • [NCGA‐S1:9c; NCGA‐I10:14; GAAFR, page 599] ‐ The legal level of budgetary control is the lowest level at which a government's management may not reallocate resources without special approval.
- 50. 50 Disclosures – Component Units • Not including the full criteria in GASB Statement 61 as to why a component unit is blended or discretely presented. • [GASB 61, Paragraph 11a] ‐ The notes should include a brief description of the component units and their relationships to the primary government. This disclosure should include a discussion of the rationale for including each component unit, and whether it is discretely presented, blended, or included in the fiduciary fund financial statements.
- 51. 51 Disclosures – Other • The note disclosure should indicate that donated capital assets are reported at acquisition value. Many governments disclose that donated capital assets are reported at fair value. • [GASB 72, Paragraph 79a] – The following assets should be measured at acquisition value: donated capital assets.
- 52. 52 Disclosures – Other • Not including the pledged revenue disclosures from paragraph 21 in GASB 48. • [GASB 48, Paragraph 21] – For each period in which secured debt remains outstanding, pledging governments should disclose, in the notes to financial statements, information about specific revenues pledged.
- 53. 53 Disclosures – Other • Specific revenue pledged and approximate amount • Identification and purpose of the debt secured by pledged revenue • Term of the commitment • Relationship of pledged amount to total revenue stream • Comparison of pledged revenues recognized during the period to the principal and interest requirements for the debt collateralized by those revenues
- 54. 54 Disclosures – Other • The notes should disclose significant encumbrances by major funds and nonmajor funds, in conjunction with required disclosures about other commitments. • [GASB 54, Paragraph 24] ‐ Verbatim
- 55. 55 Disclosures – Other • The notes should disclose the purpose of interfund balances and transfers. These disclosures should be specific to the government, rather than generic. • [GASB 38, Paragraphs 14b, 15b; GAAFR, pages 381, 384] ‐ Verbatim
- 56. 56 Additional • GASB Statement No. 84 – Fiduciary fund financials statements • “All ‘custodial funds’ should be reported in a single column on the statement of fiduciary net position [statement of changes in fiduciary net position]. A combining statement should be included in the supplementary information section of the ACFR to support that columns if more than one custodial fund is included. – GASB‐S34: 106, GASB‐S84: 18
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