1. ANATOMY OF A CAFR Comprehensive Annual Financial Report
Karen Tenace CPA, CMA
City of Tucson
Define the acronym CAFR

2. Objectives
Learn what is mandated by GAAP versus is what is encouraged by GAAP
Understand the components of the CAFR and the order in which they should be presented
Discover additional resources that can help your jurisdiction prepare a great CAFR

3. Do we have to do a CAFR? Need 3 things to comply with GAAP:
Management Discussion and Analysis (MD&A)
Basic Financial Statements
Required Supplementary Information (RSI)
GAAP, however, encourages the production of the broader presentation in the format of CAFR.

4. CAFR Comprehensive Annual Financial Report
3 Major Sections
Introductory
Section
Financial
Section
Statistical
Section

5. Order of Presentation Table of Contents Introductory Section
A. Letter of Transmittal
B. Organizational Chart
C. GFOA’s Certificate of Achievement
Financial Section
A. Auditor’s Opinion
B. Management Discussion and Analysis (MD&A)
C. Basic Financial Statements
D. Notes
E. Required Supplementary Information (Other than MD&A)
F. Other Information (Combining & Individual Statements)
Statistical Section
Optional Sections

6. Title Page-Specific Requirements
Comprehensive Annual Financial Report (not “Annual Report”)
Name of primary government
State where government is located
Fiscal period covered
Department responsible for preparing the report

7. Introductory Section-Purpose?
Provides background and context of CAFR
NOT included in scope of audit

8. Introductory Section-Contents
Certificate of Achievement for Excellence in Financial Reporting-Prior Year
List of Principal Officials
Letter of Transmittal
Organizational Chart

9. Letter of Transmittal-4 Sections
Formal transmittal of the CAFR
Profile of the government
Economic Condition (Subjective Element)
Awards & Acknowledgements

10. Letter of Transmittal-Other Details
Minimum-Signed by CFO
Dated on the date the CAFR is first made available to the public (AFTER the auditor’s report)
NOT audited
Should be on letterhead
Should be addressed to the citizens
Concise with charts and graphs

11. Financial Section-Purpose?
Provides critical information regarding the financial condition of the government through the presentation of financial statements and schedules, note disclosures and narratives (MD&A)

12. Finance Section-Contents
Independent Auditor’s Report
Management Discussion and Analysis (MD&A)
Basic Financial Statements
Required Supplementary Information (Other than MD&A)
Combining and Individual Fund Presentations & Supplementary Info

13. Basic Financial Statements
A Quick Detour to Review Basic Terminology & Concepts…

14. Review-Unique Characteristics of Governmental Accounting
Use of Fund Accounting
Measurement Focus and Basis of Accounting or MFBA
Full Accrual AND Modified Accrual

15. Review-What’s a Fund?
Fund: A self contained accounting entity with its own asset, liability, revenue, expenditure or expense and fund balance or other equity accounts.

16. Review-Measurement Focus & Basis of Accounting (MFBA)
Measurement Focus tells you WHAT to recognize
Basis of Accounting tells you WHEN to recognize it

17. Review-Two Types of MFBA’s in Governmental Accounting #1
Economic Resources Measurement Focus and Accrual Basis of Accounting
WHAT: Economic resource measurement focus considers ALL inflows, outflows and balances affecting or reflecting on an entity’s net assets.

18. Review-Two Types of MFBA’s in Governmental Accounting #1
Full Accrual Basis Cont.
WHEN: Accrual basis of accounting recognizes the financial effect of transactions, events, and interfund activities when they occur, regardless of the timing of related cash flows.

19. Review-Two Types of MFBA’s in Governmental Accounting #2
Current Financial Resources Measurement Focus and Modified Accrual Basis of Accounting
WHAT: Current financial resource measurement focus only considers SHORT-TERM or CURRENT inflows, outflows and balances of expendable financial resources.

20. How can you tell MFBA by looking at a financial statement?
Modified
Short-term View
Expenditures (Capital Outlay and Principal Payments)
Assets-Liabilities=Fund Balance
Only Current Assets and Current Liabilities Shown
No Long-term Assets means no Depreciation Expense
Full Accrual
Long-term View
Expenses
Assets-Liabilities=Net Assets
Current AND Long-Term Assets and Liabilities Shown
Depreciation Expense Included in Operating

21. Review-Fund Types GOVERNMENTAL FUNDS General Fund Special Revenue Fund
(Current Resources/Modified)
General Fund
Special Revenue Fund
Capital Project Fund
Debt Service Fund
Permanent Fund
PROPRIETARY FUNDS
(Economic Resources/Full Accrual)
Enterprise Funds
Internal Service Funds
FIDUCIARY FUNDS
Agency Funds
Pension Funds
Investment Trust Funds
Private Purpose Trust Funds

22. Review-GASB Statement No. 34 The “New” Model (2002)
PRE-GASB 34:
General Purpose F/S
Emphasis on FUND TYPE
Governmental Fund Financial Statements were ONLY presented using modified accrual accounting basis
POST-GASB 34:
Basic F/S
Emphasis on MAJOR Fund vs. NONMAJOR Fund
Governmental Fund Financial Statements presented in BOTH modified and full accrual accounting basis (Gov’t-wide Statements)
END OF DETOUR…BACK TO BASIC FINANCIAL STATEMENTS.....

23. Basic Financial Statements-Order of Presentation
Government-wide Financial Statements
Fund Financial Statements
Required Supplementary Information
Combining and Individual Fund Statements and Schedules

24. Government-wide Financial Statements-Major Points
Includes all governmental activity and business-type activity
Includes discretely presented component units
Excludes fiduciary activities
MFBA=Economic Resources, Full Accrual Accounting
Gov’t Activity + Business Type Activity = Primary Government

25. Government-wide Statements
Statement of Net Assets
Statement of Activities
All financial statements should refer to Notes!

26. Gov’t-wide Statement of Net Assets-Major Points
Assets & Liabilities- present in order of liquidity or split between current and noncurrent (classified approach)
Capital assets being depreciated must be shown separately from assets that are not being depreciated
Assets – Liabilities = Net Assets

27. Gov’t-wide Statement of Net Assets-Major Points Cont.
Net Assets is broken into 3 categories:
Invested in Capital Assets Net of Related Debt
Restricted (Narrower than purpose of reporting unit)
Unrestricted

28. Gov’t Wide Statement of Activities-Major Points
Purpose is to show the extent of how each governmental function supports itself, before general tax dollars kick in
Order of Presentation:
Expenses
Program Revenues
Net (Expense) Revenue
General Revenues

29. Gov’t Wide Statement of Activities-Expenses
Direct expenses – by function
Depreciation – by function
Indirect expenses – General Government or allocate in separate column
Interest Expense – not associated with a function, separate line

30. Gov’t Wide Statement of Activities-Program Revenues
Reported by Function & Shown in 3 Columns:
Charges for Services
Operating Grants and Contributions
Capital Grants and Contributions

31. Gov’t Wide Statement of Activities-Net Expenses
What you would expect, in theory…
Governmental activities carry net expenses and depend on tax revenues
Business-type activities either break even or carry net revenues

32. Gov’t Wide Statement of Activities-General Revenues & Other Line Items
Tax revenues are reported by type of tax
Material gains on sale of capital assets for governmental activities
Immaterial gains on governmental assets can be an adjustment to depreciation
Gains on assets in enterprise activities should be shown under functional expense
Impairments to assets, program expense or special/extraordinary item

33. Gov’t Wide Statement of Activities-General Revenues & Other Line Items
Endowment and Permanent Fund Contributions- reported after General Revenues
Special Items – significant, subject to management’s control, and either unusual OR infrequent (Sale of Land)
Extraordinary Items – significant, unusual AND infrequent (Earthquake)
Transfers

34. STATEMENT OF ACTIVITIES FOR THE PERIOD ENDING JUNE 30, 2007
XYZ CITY EXAMPLE
STATEMENT OF ACTIVITIES
FOR THE PERIOD ENDING JUNE 30, 2007

35. Fund Financial Statements
GOVERNMENTAL FUNDS
(Current Resources/Modified)
Balance Sheet
Statement of Revenues, Expenditures and Changes in Fund Balance
Reconciliation to Government-wide Statements
PROPRIETARY FUNDS
(Economic Resources/Full Accrual)
Statement of Net Assets
Statement of Revenues, Expenses and Changes in Fund Net Assets
Statement of Cash Flows
FIDUCIARY FUNDS
Statement of Fiduciary Net Assets
Statement of Changes in Fiduciary Net Assets
All financial statements should refer to Notes!

36. Governmental Fund Financial Statements-Major Points
Separates funds – Major vs. Nonmajor
MFBA=Current Resources, Modified Accrual Accounting
Includes reconciliation back to governmental activities for both financial statements

37. Basic Financial Statements Major Fund Test
Total assets, liabilities, revenues, or expenditures/expenses of that individual governmental or enterprise fund constitute 10% of the governmental or enterprise activity
AND
Total assets, liabilities, revenues, or expenditures/expenses are 5% of the total governmental and enterprise category combined

38. Major Fund Test Example

39. Financial Section - Notes
Summary of Significant Accounting Policies
Budgetary Information
Cash Deposits w/ Financial Institutions
Investments
Derivatives
Contingent Liabilities
Encumbrances
Subsequent Events
Defined benefit pensions and post employment benefit plans
Capital Assets and Long-term Liabilities
Significant Commitments

40. Financial Section – Notes Cont.
Fund Balances
Interfund Activity
Component Units
Endowments
Risk Financing
Fiscal Year Inconsistencies
Landfill Closure & Post closure
Property Taxes
Segment Information
Related Party Transactions
Joint Ventures
Fund Balances
Prior Period Adjustments

41. RSI-Other than MD&A
Budgetary Comparisons (General Fund & Major Special Revenue Funds)
Infrastructure Condition and Maintenance (Modified Approach)
Pension/Other Post Employment Benefits
Revenue & Claims Development Trend Data (Public Entity Risk Pools)

42. Combining Statements & Individual Schedules- Detail of Aggregate Data
Nonmajor governmental funds
Nonmajor enterprise funds
Internal Service Funds & Fiduciary Funds
Nonmajor discretely presented component units

43. The End-Financial Section
Whew!

44. Statistical Section GASB 44 – 10 Yr Trending
Financial Trends
Revenue Capacity
Debt Capacity
Demographics and Economy
Operating Information

45. Optional Sections to the CAFR Common Examples
Investment Section (Pension Plans or Investment Pools)
Actuarial Section (Pension Plans)
Single Audit (Federal Awards)

46. Financial Disclosure
GFOA has formally recognized that the CAFR format meets the SEC Rule 15c2-12 (financial statement disclosure to investors)
Place on website
Checklist is at:

47. Questions?