1. YOUR ANNUAL FINANCIAL STATEMENTS: WHAT TO LOOK FOR AND HOW TO LOOK FOR IT? Presentation for Association of Government Accountants
CORDOVA CPAs LLC
Bobby Cordova, CPA
and
Robert Gonzales, CPA
April 6, 2018

2. Introduction Objectives
Brief Overview of What Is Included Your Financial Statements
Regulatory Reporting versus GAAP
Roadmap to Arriving at Your Review Checklist
Auditor Interaction

3. Introduction How will we achieve our Objectives?
What is included in the Financial Statements
Arrive at a checklist type approach and learn the factors to consider and review when reviewing your annual financial statements
How are the financial statements different from what is reported to DFA/HED/PED
Discuss account balances that are in your financial statements
Give guidance and share some best practices
Discuss examples with interaction

4. Composition/Layout of Your Financial Statements
Introductory Section
Table of contents
Official Roster
Financial Section
Independent Auditors’ Report
Management’s Discussion Analysis
Basic Financial Statements
Government-Wide
Fund Financial Statements
Budgetary Statements for General Fund and major special revenue funds
Notes to Financial Statements

5. Overview of Your Financial Statements
Supplementary Information
Combining and Individual Fund Statements and Schedules
Nonmajor Combining Governmental Funds
Nonmajor Combining Capital Projects Funds
Nonmajor Combining Debt Service Funds
Nonmajor Proprietary Funds
Supporting Schedules
Schedule of Collateral Pledged by Depository for Public Funds
Schedule of Deposit and Investment Accounts
Schedule of Changes in Fiduciary Assets and Liabilities – Agency Funds
Other Schedules Required by OSA Audit Rule

6. Overview of Your Financial Statements
Compliance Section
Report on Internal Control and on Compliance
Federal Financial Assistance
Report on Compliance and Internal Controls over Compliance
Schedule of Expenditures of Federal Awards
Schedule of Findings and Questioned Costs

7. Cash vs. Modified Accrual Basis of Accounting
Cash Basis
Budgetary (Non-GAAP Basis)
Account for cash received and cash disbursed
Modified Accrual Basis (Current Financial Resources Focus)
Accounts for cash received and cash disbursed
Recognize revenue when it is available and measurable, recognize expense in a fund when liability is incurred
Also includes other accrual amounts
Accounts Receivable
Inventory
Accounts Payable
Accrued Liabilities
Unearned/Unavailable Revenue
Does not include capital assets or components of general long-term debt

8. Modified Accrual vs. Full Accrual Basis of Accounting
Full Accrual Basis (Economic Resources Measurement Focus)
Same as modified accrual, however all aspects of the Government's operations are included to give a full picture of the financial position and results from operations
Includes
Capital Assets
General Long-term Debt (and components)
Eliminates Interfund Activity

9. Cash is King! Regulatory DFA/HED/PED Reporting
Cash per Financial Statements
Using the budgetary statements (harder now as they are not all included) as a check

10. Account Balance and Disclosure Review
Cash and Investments
Unrestricted vs. Restricted
GASB 40 Note Disclosure Requirements
Accounts Receivable
Perform RFR analysis and subsequent receipt procedures
Property taxes receivable
Amount should be the same on Government-Wide and Governmental Fund Statements
Revenue amounts will be different by amount that is not collected within 60 days

11. Account Balance and Disclosure Review
Inventory
Other Assets
Due to/froms
Capital Assets
State Requirements
Depreciation Schedules
Deferred Outflows

12. Account Balance and Disclosure Review
Accounts Payable
Perform search for unrecorded liabilities
Goods and services received before year end (not necessarily invoice date or encumbrances) and paid for subsequent to year end
Accrued Payroll
Liabilities (Payroll) for services rendered prior to year end, however payment is made after year end.
Other Accruals
Unearned / Unavailable Revenue
Property Taxes

13. Account Balance and Disclosure Review
Long Term Debt
Amounts that must agree
Debt proceeds on Stmt of Revenues, Expenditures and Changes in Fund Balances to principal additions (debt issuance) in the note disclosure
Principal payments on Stmt of Revenues, Expenditures and Changes in Fund Balances to principal deletions
Issuance Costs, Premiums, Discounts
Net Pension Liabilities
PERA/ERB Audited Financial Statements
Agreeing the various components and how they should tie out
Deferred Inflows

14. Account Balance and Disclosure Review
Net Position and Fund Balance
Cash vs. Accrual
Restricted vs. Unrestricted
Invested in capital assets, net of related debt
Restricted for
Special Revenue Funds
Capital Projects Funds
Debt Service Funds
Unrestricted
GASB Statement No. 54
Spendable vs. Nonspendable i.e. inventory, or any item not available for appropriation
Rebudgeted Cash

15. Account Balance and Disclosure Review
Income Statement Components
Revenues
Expenditures 15

16. Budgetary Statements Budgetary vs. Actual Statements
Original Budget vs. Final Budget vs. Actual
Budget Adjustment Requests
Budget to actual variances at the expenses
Overexpending at the fund or function level results in a finding per NMSA, 1978
Original adopted budget vs. beginning cash plus any receivable balance
Presentation
Budgets should have no profit or loss
Any excess/deficiency will result in increase or designated amount of prior year cash
Reconciliation of change in net assets (budgetary basis) to combining financial statements (modified accrual or GAAP basis)
Ending fund balance

17. Interaction with Auditors
Provide auditor with
Accounts Receivable
Accounts Payable
Accruals
Accrued Compensated Absences
Capital Asset Listing and Rollforward
Include depreciation by function
Infrastructure
Construction in Progress
Long-term Debt Rollforward

18. Interaction with Auditors
Provide auditor with all note disclosure information
Provide auditor with fund balance rollforward to cash basis, modified accrual basis and full accrual basis
Disclosure Checklist (AICPA and OSA)
Analytical Procedures

19. Interaction with Auditors
Adjustments
Analysis
Reconciling to the Financial Statements
Communication is Key

20. Albuquerque, New Mexico
Bobby Cordova, CPA
Principal
Cordova CPAs LLC
Albuquerque, New Mexico
Robert Gonzales, CPA
Building strong and genuine, long-term relationships with our clients and team members.