1. Prepared for: Government Finance Officers Association of Arizona May 17, 2012 By: Dawn Jenkins & Dan Leahy

2.  Basic Financial Statements  Required Supplementary Information (RSI)  Comprehensive Annual Financial Report (CAFR)  The Reporting Entity

3.  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

4.  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

5.  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

6. Balance Sheet Major Funds Governmental Funds General FundHalf-Cent Fund Non-Major Gov’t Funds Total Gov’t Funds Assets – cash$93,230$21,131$69,633$183,994 Assets – Prepaid76,428030,205106,633 Total assets$169,658$21,131$99,838$290,627 Liabilities – AP51,6593,9641,49657,119 Liabilities – Deferred Rev27,82301,52129,344 Total Liab.79,4823,9643,01786,463 Fund balance Unspendable76,428030,205106,633 Restricted6,030023,92729,957 Committed1,388015,69017,078 Assigned to1,83001,8173,647 Unassigned4,50017,16725,18246,849 Total fund balance90,17617,16796,821204,164 Total Liab & Fund bal.$169,658$21,131$99,838$290,627

7.  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

8. Statement of Revenues, Major Funds Expenditures, and Changes in Fund Balance General Fund Half-Cent Fund Non-Major Gov’t Funds Total Gov’t Funds Taxes$32,073$14,323$2,255$48,651 State Shared11,64900 Total revenues43,72214,3232,25560,300 General Government15,08039820815,686 Capital Outlay3,92728220,83825,047 Total expenditures19,00768021,04640,733 Excess (deficiency) of revenues24,71513,643(18,791)19,567 Transfers in6,748020,29927,047 Transfers out(1,767)(10,092)(10,387)(22,246) Total other financing sources/uses4,981(10,092)9,9124,801 Net change in fund balance29,6963,551(8,879)24,368 Fund balances - beginning60,48013,616105,700179,796 Fund balances - ending$90,176$17,167$96,821$204,164

9.  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

10.  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

11. Statement of Net PositionBusiness-type Major Funds Proprietary Funds Water Fund Wastewater Fund Total Govtl-Activities Internal Srvc Funds Assets – current$50,636$28,404$79,040$30,112 Assets – Non-current286,567311,158597,72543,384 Total assets337,203339,562676,76573,496 Liabilities – current5,7767,43313,2095,324 Liabilities – Non-current48,55889,399137,957126 Total Liab.54,33496,832151,1665,324 Net Assets Invested in capital, net of related debt245,949226,324451,72037,384 Restricted – Capital10,4133,24413,6570 Unrestricted26,50713,16239,66930,788 Total net position$282,869$242,730$525,599$68,172

12.  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

13. Statement of Revenues, Business-type Major Funds Expenditures, and Changes in Net Position Water Fund Wastewater Fund Total Govtl-Activities Internal Srvc Funds Charges for services$29,974$15,876$45,850$32,547 Miscellaneous155671204 Total operating revenues29,98915,93245,92132,751 Salaries, wages, benefits4,6132,2096,8227,995 Contractual15,4976,28921,78610,381 Total operating expenses20,1108,49828,60818,376 Capital Contributions3,9431,3435,28668 Transfers in8,9093,74912,6583,340 Transfers out(3,128) (99)(3,227)(774) Change in Net Position19,60312,4273,69017,009 Total net position – beginning263,266230,303493,56951,163 Total net position – ending$282,869$242,730$525,599$68,172

14.  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

15. Statement of Cash Flows Business-type Major Funds Proprietary Funds Water 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 Operating16,54110,36326,90420,989 Cash Flows from Non-Capital Financing Activities Transfers In/Out5,7803,6499,4292,566 Acquisition and construction(4,163)(3,706)(7,869)(3,993) Disposal of capital assets160 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 38,83917,30356,14232,991 Cash Flows from Investing Activities (2,417)(299)(2,716)78 Net increase (decrease) in cash 15,75710,00725,76419,819

16.  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

17.  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

18. Statement of Fiduciary Net Position Pension FundAgency Funds Cash and cash equivalents$57,989$164,280 Investments (pooled), at fair value99,061280,631 Interest receivable2610 Total assets157,311$444,911 Liabilities – AP0 222 Liabilities – Other0444,689 Total Liabilities0444,911 Net Assets$157,311

19. Statement of Changes in Fiduciary net PositionPension Fund Additions -Contributions State insurance premium tax rebate$613 Total contributions613 Additions -Investment earnings Interest and investment income$792 Total investment earnings792 Less investment expenses Investment management fees62 Net investment earnings730 Total additions1,43 Deductions – Retirement payments25,500 Total deductions25,500 Change in net position(24,157) Net position – beginning of the year181,468 Net position – end of year$157,311

20.  Two required statements ◦ Statement of Net Position ◦ Statement of Activities  Use flow of economic resources measurement focus and accrual basis of accounting

21.  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

22.  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

23. Statement of net Position Government-Wide Primary Government Component Units Govtl Activities Business-type Activities Total Assets – Cash/Equivalents$378,602$326,711$705,313Discretely Component Units would be presented in this column (if applicable) Assets – A/R net446,710405,989852,699 Assets – Restricted investments734,6000 Total Assets1,559,912732,7002,292,612 Liabilities – Accounts Payable55,92741,97297,899 Liabilities – Customer Deposits23,51517,45540,970 Liabilities – Non-current554,708117,519672,227 Total Liabilities634,150176,946811,096 Invested in capital assets net of related debt 687,835329,2301,017,065 Restricted155,857172,080327,937 Unrestricted82,07054,444136,514 Total net position$925,762$555,754$1,481,516

24.  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

25.  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)

26. Statement of Activities Net (Expense) Revenue and Changes in Net Assets Gov’t-wideProgram RevenuesPrimary Government Functions / Programs Expenses Fees, Fines & Services Operating Grants Capital Grants Govt’l Activities Business- type Activities Total Government al Activities$160,730$17,722$13,709$34,932$(94,364) Business- type Activities64,63560,5972095,4081,579 Total PG225,36578,31913,91840,340(94,364)1,579(92,785) General Revenues – Property Taxes$117,758$0.00$117,758 General Revenues – Auto in-lieu taxes1,3543061,660 Transfers in (out)(11,119)11,1190.00 Total general revenues and transfers107,99311,425119,418 Change in net position13,62913,00426,633 Net position – beginning912,133542,7501,454,883 Net position - ending$925,762$555,754$1,481,516

27.  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

28.  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)

29.  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

30.  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

31.  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

32.  Important points ◦ Currently know facts ◦ Analysis, not just numbers ◦ GFOA Certificate of Achievement program hot button ◦ The minimum = the maximum

33.  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

34.  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

35.  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

36.  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

37.  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

38.  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

39.  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

40.  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

41.  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.

42.  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

43.  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

44.  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

45.  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

46.  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

47.  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

48.  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

49.  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

50.  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

51.  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

52.  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

53.  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

54.  For guidance on component units and discrete vs. blending presentation, see GASB14 and GASB61

55. Questions ???

56.  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

57.  Dawn Jenkins, Senior Accountant dawn.jenkins@peoriaaz.gov P 623-773- 7334 dawn.jenkins@peoriaaz.gov  Dan Leahy, CPA, Accounting Supervisor dan.leahy@peoriaaz.gov P 623-773-7023 dan.leahy@peoriaaz.gov