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Prepared for: Government Finance Officers Association of Arizona
May 17, 2012By: Dawn Jenkins & Dan Leahy
Basic Financial StatementsRequired Supplementary Information (RSI)
Comprehensive Annual Financial Report (CAFR)
The Reporting Entity
BFS is the minimum requirement of financial reporting
Elements of BFS◦Government-wide financial statements◦Fund financial statements
Governmental funds Proprietary funds Fiduciary funds
◦Footnotes to the financial statements
Governmental Fund Financial Statements◦Use flow of current financial resources
measurement focus and modified accrual basis of accounting
◦Focus on major funds (non-major combined into one column)
◦Required statements Balance Sheet Statement of revenues, expenditures, and
change in fund balance
Governmental Fund Financial Statements (continued)◦Balance Sheet
Format is assets + deferred outflows = liabilities + deferred inflows + fund balance
Generally in order of liquidity Fund balance categories
Nonspendable, Restricted Committed Assigned Unassigned
Balance Sheet Major Funds
Governmental Funds General Fund
Half-Cent Fund
Non-MajorGov’t Funds
Total Gov’tFunds
Assets – cash $93,230 $21,131 $69,633 $183,994
Assets – Prepaid 76,428 0 30,205 106,633
Total assets $169,658 $21,131 $99,838 $290,627
Liabilities – AP 51,659 3,964 1,496 57,119
Liabilities – Deferred Rev
27,823 0 1,521 29,344
Total Liab. 79,482 3,964 3,017 86,463
Fund balance
Unspendable 76,428 0 30,205 106,633
Restricted 6,030 0 23,927 29,957
Committed 1,388 0 15,690 17,078
Assigned to 1,830 0 1,817 3,647
Unassigned 4,500 17,167 25,182 46,849
Total fund balance 90,176 17,167 96,821 204,164
Total Liab & Fund bal. $169,658 $21,131 $99,838 $290,627
Governmental Fund Financial Statements (continued)◦Statement of revenues, expenditures,
and changes in fund balance Format is revenues [by type] – expenditures
[current by function, debt service, & capital outlay] +/- other financing sources/(uses) [debt issuance, transfers in/out, etc.] = change in fund balance
Statement of Revenues, Major Funds
Expenditures, and Changes in Fund Balance
General Fund
Half-Cent Fund
Non-MajorGov’t Funds
Total Gov’tFunds
Taxes $32,073 $14,323 $2,255 $48,651
State Shared 11,649 0 0 11,649
Total revenues 43,722 14,323 2,255 60,300
General Government 15,080 398 208 15,686
Capital Outlay 3,927 282 20,838 25,047
Total expenditures 19,007 680 21,046 40,733
Excess (deficiency) of revenues
24,715 13,643 (18,791) 19,567
Transfers in 6,748 0 20,299 27,047
Transfers out (1,767) (10,092) (10,387) (22,246)
Total other financing sources/uses
4,981 (10,092) 9,912 4,801
Net change in fund balance 29,696 3,551 (8,879) 24,368
Fund balances - beginning 60,480 13,616 105,700 179,796
Fund balances - ending $90,176 $17,167 $96,821 $204,164
Proprietary Fund Financial Statements◦Use flow of economic resources measurement
focus and accrual basis of accounting◦Enterprise funds by major fund (non-major
combined)◦ Internal service funds – one combined column◦Required statements
Statement of Net Position Statement of revenues, expenses, and changes in
fund net position Statement of cash flows
Proprietary Fund Financial Statements (continued)◦Statement of Net Position
Format is assets (current & non-current) + deferred outflows – liabilities (current & non-current) – deferred inflows = net position
Statement of Net Position Business-type Major Funds
Proprietary FundsWater Fund
Wastewater Fund
Total
Govtl-Activities
Internal Srvc Funds
Assets – current $50,636 $28,404 $79,040 $30,112
Assets – Non-current 286,567 311,158 597,725 43,384
Total assets 337,203 339,562 676,765 73,496
Liabilities – current 5,776 7,433 13,209 5,324
Liabilities – Non-current 48,558 89,399 137,957 126
Total Liab. 54,334 96,832 151,166 5,324
Net Assets
Invested in capital, net of related debt
245,949 226,324 451,720 37,384
Restricted – Capital 10,413 3,244 13,657 0
Unrestricted 26,507 13,162 39,669 30,788
Total net position $282,869 $242,730 $525,599 $68,172
Proprietary Fund Financial Statements (continued)◦Statement of revenues, expenses &
changes in fund net position Format is operating revenues – operating
expenses, +/- non-operating revenues (expenses) + capital contributions +/- transfers in (out) = change in net position
Statement of Revenues, Business-type Major Funds
Expenditures, and Changes in Net Position
Water FundWastewater
FundTotal
Govtl-Activities
Internal Srvc Funds
Charges for services $29,974 $15,876 $45,850 $32,547
Miscellaneous 15 56 71 204
Total operating revenues 29,989 15,932 45,921 32,751
Salaries, wages, benefits 4,613 2,209 6,822 7,995
Contractual 15,497 6,289 21,786 10,381
Total operating expenses 20,110 8,498 28,608 18,376
Capital Contributions 3,943 1,343 5,286 68
Transfers in 8,909 3,749 12,658 3,340
Transfers out (3,128) (99) (3,227) (774)
Change in Net Position 19,603 12,427 3,690 17,009
Total net position – beginning 263,266 230,303 493,569 51,163
Total net position – ending $282,869 $242,730 $525,599 $68,172
Proprietary Fund Financial Statements (continued)◦Statement of cash flows
By category Cash flows from operating activity Cash flows from noncapital financing activities Cash flows from capital & related financing activities Cash flows from investing activities
Ending cash must = cash on statement of net position
Reconciliation of operating income (loss) to net cash provided by (used in) operating activities
Statement of Cash FlowsBusiness-type Major
Funds
Proprietary FundsWater Fund
Wastewater Fund
Total
Govtl-Activities
Internal Srvc Funds
Receipts from customers $30,090 $15,955 $46,045 $32,931
Payments to suppliers (13,549) (5,592) (19,141) (11,942)
Cash Flows from Operating 16,541 10,363 26,904 20,989
Cash Flows from Non-Capital Financing Activities Transfers In/Out 5,780 3,649 9,429 2,566
Acquisition and construction (4,163) (3,706) (7,869) (3,993)
Disposal of capital assets 16 0 16 179
Cash Flows from Capital and Related Financing Activities (4,147) (3,706) (7,853) (3,814)
Purchase of investments (41,256) (17,602) (58,858) (32,913)
Proceeds from sale of investments 38,839 17,303 56,142 32,991
Cash Flows from Investing Activities (2,417) (299) (2,716) 78
Net increase (decrease) in cash 15,757 10,007 25,764 19,819
Fiduciary Fund Financial Statements (if applicable)◦Pension & other trusts, & agency funds◦Use flow of economic resources
measurement focus and accrual basis of accounting, except agency funds have no measurement focus
◦Required statements Statement of fiduciary net position Statement of changes in fiduciary net position
Fiduciary Fund Financial Statements (if applicable) (continued)◦Statement of fiduciary net position
Assets (by category) – liabilities (by category) = net position (agency funds have only assets & liabilities – no net position)
Net position labeled “Held in trust for …” (pension, pool participants, etc.)
◦Statement of changes in fiduciary net position Trust funds only in format additions – deductions =
change in net position
Statement of Fiduciary
Net Position Pension Fund
Agency Funds
Cash and cash equivalents $57,989 $164,280
Investments (pooled), at fair value 99,061 280,631
Interest receivable 261 0
Total assets 157,311 $444,911
Liabilities – AP 0 222
Liabilities – Other 0 444,689
Total Liabilities 0 444,911
Net Assets $157,311
Statement of Changes in
Fiduciary net Position Pension Fund
Additions -Contributions
State insurance premium tax rebate $613
Total contributions 613
Additions -Investment earnings
Interest and investment income $792
Total investment earnings 792
Less investment expenses
Investment management fees 62
Net investment earnings 730
Total additions 1,43
Deductions – Retirement payments 25,500
Total deductions 25,500
Change in net position (24,157)
Net position – beginning of the year 181,468
Net position – end of year $157,311
Two required statements◦Statement of Net Position◦Statement of Activities
Use flow of economic resources measurement focus and accrual basis of accounting
Distinguish between◦Governmental activities Must provide reconciliation between
governmental fund financial statements & governmental activities on government-wide financial statements
◦Business-type activities◦Total primary government◦Discretely presented component units◦Does not include Fiduciary Funds
Statement of Net Position◦Preferred format is Assets + deferred
outflows – liabilities- deferred inflows = net position
◦Net position must be presented in three components Net investment in capital assets
To show that part of net position is not available for use Restricted (may display categories of restrictions)
Restriction created by outside parties (bond covenants, other governments, enabling legislation, etc.
Unrestricted
Statement of net Position Government-Wide
Primary GovernmentComponent
Units
Govtl Activities
Business-type
ActivitiesTotal
Assets – Cash/Equivalents $378,602 $326,711 $705,313 Discretely Component Units would
be presented in this column
(if applicable)
Assets – A/R net 446,710 405,989 852,699
Assets – Restricted investments
734,600 0 734,600
Total Assets 1,559,912 732,700 2,292,612
Liabilities – Accounts Payable 55,927 41,972 97,899
Liabilities – Customer Deposits 23,515 17,455 40,970
Liabilities – Non-current 554,708 117,519 672,227
Total Liabilities 634,150 176,946 811,096
Invested in capital assets net of related debt 687,835 329,230 1,017,065
Restricted 155,857 172,080 327,937
Unrestricted 82,070 54,444 136,514
Total net position $925,762 $555,754 $1,481,516
Statement of Activities◦ Presented in a format that reports the net (expense)
revenue of individual functions Objective – to report the relative financial burden of each
function on the taxpayers. How much each function relies on general revenues.
Expenses – all direct expenses identifiable to a function Items like interest expense and unallocated depreciation
shown separately Program revenues vs. general revenues
If clearly associated with a function, or restricted for a function, then program revenue, otherwise general revenue
Taxes are always general revenues Net (expense) revenue
Statement of Activities (continued)◦ Governmental activities reported at least at the
level of detail (function) required in the governmental fund statement of revenues, expenditures & changes in fund balances
◦ Business-type activities should be reported at least by segment (an identifiable activity reported as or within an enterprise fund)
Statement of Activities
Net (Expense) Revenue and Changes in Net Assets
Gov’t-wide Program Revenues Primary Government
Functions / Programs
Expenses
Fees, Fines & Services
Operating Grants
Capital Grants
Govt’l Activitie
s
Business-type
Activities
Total
Governmental Activities $160,730 $17,722 $13,709 $34,932 $(94,364) $(94,364)
Business-type Activities 64,635 60,597 209 5,408 1,579 1,579
Total PG 225,365 78,319 13,918 40,340 (94,364) 1,579 (92,785)
General Revenues – Property Taxes $117,758 $0.00 $117,758
General Revenues – Auto in-lieu taxes 1,354 306 1,660
Transfers in (out) (11,119) 11,119 0.00
Total general revenues and transfers 107,993 11,425 119,418
Change in net position 13,629 13,004 26,633
Net position – beginning 912,133 542,750 1,454,883
Net position - ending $925,762 $555,754 $1,481,516
GAAP also requires certain other information referred to as Required Supplementary Information (RSI)
Auditors cannot give a “clean” opinion on financial statements presented in conformity with GAAP if RSI is missing or deficient
Elements of RSI◦Management’s Discussion and Analysis
(MD&A)◦Budgetary comparisons◦Trend data on infrastructure condition (only
if using the modified approach instead of depreciation)
◦Trend data on funding of pension & other post employment benefits
◦Claims development data for public-entity risk pools (not likely to have)
MD&A◦Provide an objective and easily readable
analysis of the government’s financial activities based on currently known facts Known facts as of the date of the auditor’s report
◦Must compare current and past year, with emphasis on current year
◦Charts, graphs, and tables are encouraged to enhance understandability
Required elements of MD&A◦ Brief discussion of basic financial statements
Relationships, significant differences◦ Condensed financial information◦ Analysis of government’s overall financial position
and results of operation◦ Analysis of balances and transactions of individual
funds◦ Analysis of significant variations between original
budgets and final budgets and between final budgets and actual results for general fund
Required elements of MD&A (continued)
◦ Description of significant capital asset and long-term debt activity during the reporting year
◦ If government uses modified approach: Significant changes in the assessed condition How current condition compares to target level set by the
government Significant differences between the estimated annual
amount to maintain/preserve eligible infrastructure assets compared with the actual amounts spent during the reporting period
◦ Description of currently know facts, decisions, or conditions that are expected to have a significant effect on financial position or results of operations
Important points◦Currently know facts◦Analysis, not just numbers◦GFOA Certificate of Achievement
program hot button◦The minimum = the maximum
Required for general fund and any major special revenue funds with an appropriated budget
Option to include within the basic financial statements, or as RSI following the footnotes◦ GFOA recommended practice to include in BFS◦ Only the required statements may be included in
BFS. Any others presented must be outside BFS or RSI
Must include:◦ Column for original budget
First complete appropriated budget May be adjusted before the beginning of the fiscal
year, or by automatic carry over appropriations◦ Column for final budget
After all budget amendments processed during the fiscal year
◦ Column for actual amounts On budgetary basis that may differ from GAAP basis
amounts shown on fund statements
Must include: (continued)◦ Column for variance between final budget and
actual results [over/(under)] May not be labeled favorable/unfavorable
◦ A reconciliation between budgetary inflows and outflows and GAAP revenues and expenditures
Provide certain information on the funding of pension benefits or OPEB if the reporting government:◦ Sponsors a single-employer defined benefit plan,
or◦ Participates in an agent multiple-employer
defined benefit plan (P.S.P.R.S.) Required data
◦ Schedule of funding progress◦ Schedule of employer contributions
Beyond the basic financial statements and RSI, if you desire to issue a Comprehensive Annual Financial Report (CAFR), there are additional requirements
Required sections of a CAFR◦ Introductory Section◦ Financial Section◦ Statistical Section
At the beginning:◦ Report cover and title page
Must use “Comprehensive Annual Financial Report” terminology
Name of reporting entity If component unit, must disclose Should list the state that the reporting government is
in Show fiscal year covered by the report – i.e. For the
Fiscal Year Ended June 30, 2012
At the beginning: (continued)◦ Title page
Repeat information on cover Indicate the party responsible for preparation of the
report May indicate principal officials (usually less of a list
than in introductory section)◦ Table of contents
Provides general information of the government’s structure, services, and environment
Contents◦ Transmittal letter
Formal transmittal of document (responsibility, etc.) Profile of government Economic condition information Awards and acknowledgements Date & signature
◦ Awards for report if applicable◦ List of principal officials◦ Organizational chart
Independent auditor’s report MD&A Basic financial statements RSI other than the MD&A Combining and individual fund presentations
◦ Including other budgetary comparison Schedules◦ Combining statement of changes in assets & liabilities
– all agency funds Supplementary information
◦ Federal Financial Data Schedule (if applicable)◦ Schedules like long-term debt, capital assets,
transfers, etc.
Information regarding economic condition of the reporting government◦ Provide information on financial trends◦ Provide information on revenue capacity◦ Provide information on debt capacity◦ Provide demographic and economic information◦ Provide operating information
Generally 10 years of data
Information about net position (10 years)◦ Three components of net position shown separately for
governmental activities, business-type activities, and total government
Information about changes in net position (10 yrs)◦ Shown separately for governmental activities,
business-type activities, and total government Expenses – by function, program, or identifiable activity Program revenues by category Total net (expense)/revenue General revenues and other items by type Total change in net position
Information about governmental funds (10 yrs)◦ Present fund balance by type for both general
fund and all other governmental funds (combined)◦ For total governmental funds
Revenues by source Expenditures by function
Debt service principal and interest must be shown separately
Other financing sources/uses Other changes to fund balance Ratio of total debt service expenditures to noncapital
expenditures
At a minimum, should report three aspects of the government’s most significant own-source revenue◦ Revenue base (10 yrs)◦ Revenue Rates (10 yrs)◦ Principal revenue payers (current yr & 9 yrs ago)
If presenting info about property taxes, should present both assessed value of taxable property by component and the total estimated actual value of taxable property. Also disclose tax levied, amount collected in tax year and % of levy collected, and subsequent collections & % of levy
At a minimum, should report four types of information ◦ Ratios of outstanding debt (10 yrs)
Report debt by governmental & business-type by type & total debt
Debt per capita Total debt as a percentage of personal income Additional ratios if outstanding general bonded debt
Minimum (continued) ◦ Direct & overlapping debt (current yr and 10 yrs)
Governmental activities debt only◦ Debt limitations (10 yrs)◦ Pledged revenue coverage (10 yrs)
For each type with pledged revenues other than general obligation debt
Demographic & economic indicators (10 yrs)◦ Population, total personal income, per capita
personal income, and unemployment rate Principal Employers (current yr & 9 yrs ago)
◦ Top 10 unless fewer gets to 50% of total employment
At a minimum, three types of information (at least at level required for expenses on F/S)◦ Number of government employees (10 yrs)
By function, program, or identifiable activity◦ Operating indicators (10 yrs)
By function/program Indicators of demand or level of service
◦ Capital asset information (10 yrs) By function/program Volume, usage, or nature of capital assets
Must provide required information if applicable to reporting government
May also include other stat tables of local interest or to meet other needs (bond disclosures, etc.)
Should include sources, assumptions, methodologies, and narrative explanations (as necessary) on stat tables
Concept is to ensure that financial reporting is inclusive of other legal entities for which the primary government is financially accountable
Component units are by definition separate legal entities, but GAAP stresses substance over form◦ Fact that the separate entity exists solely to
benefit the primary government (substance) is more important than legal form for financial reporting
Reporting Entity consists of ◦ The primary government◦ Organizations for which the primary
government is financially responsible◦ Other organizations for which the nature and
significance of their relationship with the primary government are such that exclusion would cause the reporting entity’s financial statements to be misleading or incomplete
Two methods of including component units in financial reporting ◦ Discrete presentation
Default methodology Show as separate column(s) on face of
government-wide financial statements◦ Blending
Only allowed if meet specific requirements Treat as fund(s) of the primary government
For guidance on component units and discrete vs. blending presentation, see GASB14 and GASB61
Questions ???
Governmental Accounting, Auditing, and Financial Reporting (GAAFR) published by GFOA (Gfoa.org)
Statements of the Governmental Accounting Standards Board (GASB) (Gasb.org)
Comprehensive Implementation Guide published by GASB
Governmental Accounting Research Software (GARS) published by GASB
Dawn Jenkins, Senior Accountant [email protected] P 623-773-7334
Dan Leahy, CPA, Accounting Supervisor [email protected] P 623-773-7023
