Elements of aComprehensive Annual  Financial Report and    Common Mistakes     2013 TASBO Annual            Conference    ...
About Your Presenters• Ann Westbrooks, CPA, RTSBA• Spring Independent School District   – Assistant Superintendent of Fina...
About Your Presenters• Lupe Garcia, CPA• Whitley Penn, LLP   – Assurance and Advisory Services | Manager• Licensed CPA in ...
Generally Accepted Accounting Principles(GAAP)• GAAP provides criteria for whether financial  reports are fairly presented...
Three Basic Sections of a CAFR5
Introductory Section• Designed to provide background and context that  users need to fully profit from information provide...
Financial Section• Provides the following information (in this order):   – Independent Auditor’s Report   – MD&A   – Basic...
Independent Auditor’s Report• Provides assurance that the financial statements  are reliable• Opines on opinion units   – ...
Management’s Discussion and Analysis(MD&A)• Provide users with a narrative introduction,  overview and analysis of the bas...
Contents of MD&A10
Basic Financial Statements• Core of CAFR’s financial section and has three  components:   – Government-wide financial stat...
Financial Section• RSI (other than MD&A)   – Budgetary comparisons   – Trend data on infrastructure condition and     main...
Financial Section• Combining and individual fund presentation and  other supplementary information   – CAFR should include...
Statistical Section14
Statistical Section15
Common Errors – Introductory Section• Cover   – Districts should indicate on the cover the state     in which they are loc...
Common Errors – Introductory Section• Table of contents   – The titles of the statements and schedules in the     report s...
Common Errors – Basic Financial Statements• All basic financial statements   – Each of the statements should include a ref...
Common Errors – Basic Financial Statements• Statement of net assets   – Unearned revenue should be used and not     deferr...
Common Errors – Basic Financial Statements• Proprietary fund financial statements   – If the district has no debt related ...
Common Errors – Basic Financial Statements• Notes to the financial statements   – Narrative explanations of combining and ...
Common Errors – Basic Financial Statements• Notes to the financial statements  – Specify action to establish, modify, or r...
Common Errors – Other Supplementary Info.• Schedule of delinquent taxes receivable (Exhibit J-  1)   – Should agree to pro...
Common Errors – Statistical Section• Principal taxpayers, principal employers,  demographic and economic information   – I...
Common Errors – Statistical Section• Changes in fund balances – governmental funds   – Debt service as a % of noncapital e...
Contact Us!   Ann Westbrooks, CPA,                 RTSBA wwestbro@springisd.org         Lupe Garcia, CPAlupe.garcia@whitle...
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Elements of a CAFR and Common Mistakes

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Elements of a CAFR and Common Mistakes

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Elements of a CAFR and Common Mistakes

  1. 1. Elements of aComprehensive Annual Financial Report and Common Mistakes 2013 TASBO Annual Conference February 21, 2013
  2. 2. About Your Presenters• Ann Westbrooks, CPA, RTSBA• Spring Independent School District – Assistant Superintendent of Finance• Licensed CPA in the State of Texas• Seven years of school district accounting experience2
  3. 3. About Your Presenters• Lupe Garcia, CPA• Whitley Penn, LLP – Assurance and Advisory Services | Manager• Licensed CPA in the State of Texas• Six years experience performing audits and other engagements for counties, cities, school districts, and other special-purpose governments3
  4. 4. Generally Accepted Accounting Principles(GAAP)• GAAP provides criteria for whether financial reports are fairly presented• Minimum standard of acceptable financial reporting for state and local governments – Basic financial statements – Note disclosures – Certain required supplementary information (RSI)• GAAP encourages presentation of a CAFR4
  5. 5. Three Basic Sections of a CAFR5
  6. 6. Introductory Section• Designed to provide background and context that users need to fully profit from information provided in the financial section• Not included within the scope of the audit, but…• What you will find in this section: – Certificate of Achievement for Excellence in Financial Reporting (GFOA, ASBO, etc.) – List of Principal Officials – Organizational Chart – Letter of Transmittal6
  7. 7. Financial Section• Provides the following information (in this order): – Independent Auditor’s Report – MD&A – Basic Financial Statements (including the notes) – RSI (other than MD&A) – Combining and individual fund presentation and supplementary information7
  8. 8. Independent Auditor’s Report• Provides assurance that the financial statements are reliable• Opines on opinion units – Governmental activities, business-type activities, major governmental funds, major enterprise funds, all other funds/discretely presented component units• In-relation-to Opinions• No opinion: introductory and statistical sections8
  9. 9. Management’s Discussion and Analysis(MD&A)• Provide users with a narrative introduction, overview and analysis of the basic financial statements• The concept of MD&A originated in the private sector, the SEC required MD&A in connection with the financial reports of publicly traded companies• GAAP indentifies specific topics that should be addressed in MD&A; additional topics not on this list should not be addressed in MD&A9
  10. 10. Contents of MD&A10
  11. 11. Basic Financial Statements• Core of CAFR’s financial section and has three components: – Government-wide financial statements • Presented using the economic resources measurement focus and accrual basis of accounting – Fund financial statements • Presented using the current financial resources measurement focus and modified accrual basis of accounting (governmental funds only) – Notes to the financial statements11
  12. 12. Financial Section• RSI (other than MD&A) – Budgetary comparisons – Trend data on infrastructure condition and maintenance (only if modified approach is used to account for infrastructure) – Trend data on the funding of pension and other postemployment benefits (OPEB) – Revenue and claims development trend data for public-entity risk pools12
  13. 13. Financial Section• Combining and individual fund presentation and other supplementary information – CAFR should include a combining statement to support each column in the basic financial statements that aggregates data from more than one fund – Supplementary information not required by GAAP but needed to comply with the TEA’s reporting requirements: • Schedule of Delinquent Taxes Receivable • Indirect Cost Computation Schedule13
  14. 14. Statistical Section14
  15. 15. Statistical Section15
  16. 16. Common Errors – Introductory Section• Cover – Districts should indicate on the cover the state in which they are located• Transmittal letter – Should be dated no earlier than the date of the report of independent auditors16
  17. 17. Common Errors – Introductory Section• Table of contents – The titles of the statements and schedules in the report should agree to those listed in the Table of Contents• MD&A – Amounts discussed should agree to those presented in the financial statements – Discussion should explain the underlying reasons for significant changes rather than focusing solely on the size of the change – Careful on use of terminology (i.e. expenses vs. expenditures; net assets vs. fund balance)17
  18. 18. Common Errors – Basic Financial Statements• All basic financial statements – Each of the statements should include a reference to the notes – Nonmajor governmental funds should be used rather than other governmental funds• Statement of activities – Except for interest and unallocated depreciation, expenses related to governmental activities should be classified by function rather than by object of expenditure (ex. Function 81) – Expenditures associated with the issuance of debt should not be included – Capital assets should be disclosed by major asset class (i.e. capital leases)18
  19. 19. Common Errors – Basic Financial Statements• Statement of net assets – Unearned revenue should be used and not deferred revenue• Governmental balance sheet and statement of revenues, expenditures, and changes in fund balance – Governmental funds that report more than 10% of the total governmental funds assets, liabilities, revenues, or expenditures and more than 5% of the combined total of governmental and enterprise funds for the same element, have to be reported as a major fund19
  20. 20. Common Errors – Basic Financial Statements• Proprietary fund financial statements – If the district has no debt related to capital assets, the district should use the caption: Net Assets, Invested in Capital Assets20
  21. 21. Common Errors – Basic Financial Statements• Notes to the financial statements – Narrative explanations of combining and individual fund statements and schedules describing the nature and purpose of the funds should be included – Additions to long-term debt disclosed in the notes should agree to the Proceeds from the Issuance of Debt presented in the fund financial statements – Depreciation expense charged by function should agree to current year increases to accumulated depreciation21
  22. 22. Common Errors – Basic Financial Statements• Notes to the financial statements – Specify action to establish, modify, or rescind fund balance commitments; disclose body or official authorized to assign fund balance (GASBS No. 54) – Disclose increases and decreases to compensated absences rather than the net change; also, disclose amount due within one year (even if an estimate must be made)22
  23. 23. Common Errors – Other Supplementary Info.• Schedule of delinquent taxes receivable (Exhibit J- 1) – Should agree to property tax receivable per governmental funds balance sheet (Exhibit C-1)23
  24. 24. Common Errors – Statistical Section• Principal taxpayers, principal employers, demographic and economic information – If the information for the period nine or ten year prior to the current period is not available, then include data from the earliest year from which information is available and disclose the reason for the exception• Property tax levies and collections – Total tax collections as a percentage of the annual levy should not exceed 100%24
  25. 25. Common Errors – Statistical Section• Changes in fund balances – governmental funds – Debt service as a % of noncapital expenditures – use the amount of capital outlay from the reconciliation of government-wide financials to fund financials; also, bond issuance costs and fees should not be included (principal and interest only)• Outstanding debt by type – Should only include long-term debt instruments, not all long-term liabilities (i.e. compensated absences)25
  26. 26. Contact Us! Ann Westbrooks, CPA, RTSBA wwestbro@springisd.org Lupe Garcia, CPAlupe.garcia@whitleypenn. com

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