Government and Non-Profit Accounting

Financial Reporting and Control for State and Local Governments WEEK THREE Financial Reporting and Control for State and Local Governments

Learning Objectives After Week 3, you should be able to: Assess and prepare governmental fund financial statements and government-wide financial statements and understand how to reconcile the two. Evaluate the components of a comprehensive annual financial report (CAFR). Perform key financial analysis of an entities financial position, financial condition, and economic condition. Examine issues related to budgeting and control.

Governmental Financial Reporting A CAFR is the government’s official annual report prepared and published as a matter of public record. Introductory Section This section includes: Table of contents Letter of transmittal Other material deemed appropriate by management

Governmental Financial Reporting (Cont.) Financial Section This section includes: Auditor’s report Management’s discussion and analysis (MD&A), Basic financial statements Government-wide financial statements Fund financial statements Notes to the financial statements Budgetary comparison schedule Combining statements and individual fund statements and schedules

Governmental Financial Reporting (Cont.) Statistical Sections There are five categories defined by the GASB that should be included in the statistical section. The most recent 10 years of data should be presented for each. Financial trends information Revenue capacity information Debt capacity information Demographic and economic information Operating information

Select Financial Ratios for Governmental Funds Revenues Measures Expenditures Measures Operating Position Measures Debt Indicators Unfunded Liability Measures Capital Plant Indicators Financial Position Ratios Financial Performance Ratios Financial Capability Ratios

Budgeting in Governments Budgeting in government is not just a prudent management practice, it’s the law! Budgeting in government can be seen as A prioritization of program and service goals An expression of political values A plan of financial operation A way to facilitate compliance with laws A way to communicate performance effectiveness

Reporting Performance Information GASB offers 16 suggested criteria within 3 categories for reporting on service efforts and accomplishments. Category I: The External Report on Performance Information Category II: What Performance Information to Report Category III: Communication of Performance Information

Questions?