ACC 4043/6043 Governmental Accounting CAFR CASES Instructions: Obtain a copy of a recent Comprehensive Annual Financial Report (CAFR). You are to answer the attached questions for CAFRs 1 to 5. You do not have to do the other ones. In responding to the questions, recognize that yes and no answers are generally not sufficient. I am allocating significant points to these cases, and I want your answers to indicate that you have read and understood the information presented in your CAFR.
For example, in question (d) in Chapter 1, don’t just say yes the CARF does contain an organizational chart, a table of contents, a list of principal officials, and so on, but list them and be descriptive of what you find. If you run into terms that you are not familiar with, check the index at the back of the book to find where it is discussed, or you can ask me. I am available to help if you have questions or run into difficulties. CAFR 1 Obtain a copy of a recent Comprehensive Annual Financial Report.
If I don’t have sufficient numbers for everyone, these may be obtained by writing or calling the director of finance in a city or state of your choice. You will have questions related to the annual report dealing with a number of the chapters in the textbook. Answer the following questions related to your CAFR. a. What are the inclusive dates of the fiscal year? b. Write the name and address of the independent auditor. Is the auditor’s opinion unqualified” If not, describe the qualification.
Is the opinion limited to the basic financial statements, or does the opinion include combining and individual fund statements? c. Is the report separated into the three distinct sections: introductory, financial, and statistical? Does the report have a “single audit” section at the end? (A few CAFRs include their single audit report in the CAFR—see Chapter 13 for more detail of the single audit requirements. ) d. Does the report contain an organization chart? A table of contents?
A list of principal officials? A letter of transmittal? Is the letter of transmittal dated and signed by the chief financial officer? List the major items of discussion in the letter of transmittal. e. Does the report include a Management’s Discussion and Analysis? List the major items of discussion. f. Does the report include the government-wide statements (Statement of Net Assets and Statement of Activities)? g. Does the report reflect fund financial statements for governmental, proprietary, and fiduciary funds?
List those statements. List the major governmental and proprietary funds (the funds that have separate columns in the governmental and proprietary fund statements. ) CAFR 2 Using your CARF, answer the following questions: a. Compare the items discussed in the MD&A in your CAFR with the list of items in this chapter. Which topics listed in this chapter are not in your CAFR? Which topics are in CAFR that are not listed in this chapter? Do you think your CAFR has a reasonably complete discussion? b.
From the MD&A in your report, write a short summary of (1) the financial condition of your government, (2) a comparison of revenues compared with the prior year, (3) a comparison of expenses compared with the prior year, and (4) a comparison of budgeted and actual activity. c. From the Statement of Net Assets, write down the following: (1) unrestricted net assets—governmental activities; (2) unrestricted net assets—business-type activities; (3)restricted net assets by restriction—governmental activities; (4) restricted net assets by restriction—business-type activities; and (5) unrestricted and restricted net assets—component units. . From the Statement of Activities, write down the following: (1) net program expense (or revenue)—governmental activities; (2) net program expense (or revenue)—business-type activities; (3) net program expense (or revenue)—component units; (4) change in net assets—governmental activities; (5) change in net assets—business-type activities; and (6) change in net assets—components units. Do the ending net asset figures in this statement agree with the net asset figures in the Statement of Net Assets? e.
From the Statement of Revenues, Expenditures, and Changes in Fun Balances for Governmental Funds, identify the names of the major governmental funds. CAFR 3 A. ) Look at the Statement of Revenues, Expenditures, and Changes in Fund Balances for the governmental funds. List the revenue source classes. Do they agree with those sources discussed in this chapter? Are expenditures reported by character? List the functional classifications under the current character classification. Do those classifications agree with those listed in the example shown in this chapter? Are Other Financing Sources and Uses presented separately?
Does your report show transfers in? Transfers out? Capital leases? Proceeds of bonds? B. ) Look at the Budgetary Comparison Schedule in the RSI section of your annual Report (or Budgetary Comparison Statement, if that is used by your government) for the General Fund. Is the budgetary format used, or is the schedule in the format used for the Statement of Revenues, Expenditures, and Changes in Fund Balances? Does the report reflect the original budget, revised budget, and actual figures? Are variance columns presented comparing the actual with the revised budget? Comparing the original with the revised budget?
Is a reconciliation between the budgetary basis of accounting and GAAP presented on the budgetary comparison schedule or in a separate schedule? What are the major differences, if any? Are budgetary comparison schedules (or statements) presented for special revenue funds? Are all special revenue funds included? C. ) Look at the note that describes the basis of budgeting (usually in the Summary of Significant Accounting Policies). Is the budget prepared on the GAAP basis or some other basis? Are the differences, if any between the budgetary basis and GAAP clearly explained?
Do unexpected encumbrances lapse at year-end? If unexpected lapse, are they normally expropriated in the following year? Do the notes describe the budget calendar (a separate note may have this information)? Do the notes describe the legal level of budgetary control and the levels at which certain budget revisions might be made? Were budget revisions necessary during the year? CAFR 4 A. ) Look at the General Fund column of the Balance Sheet for governmental funds. What are the major assets? Liabilities? What reserves have been established for fund balance? Are any designations shown?
Are taxes receivable offset by Deferred Revenues? Are the amounts the same? (If so, this would indicate cash accounting for property taxes. ) B. ) Look at the General Fund column of the governmental funds Statement of Revenues, Expenditures, and Changes in Fund Balances. Prepare a schedule showing percentages of revenues by source. Prepare a schedule showing percentages of expenditures by function. Does your government have significant transfers in or out? Can you identify the fund that provide or receives these resources? Does your government have any other financing sources or uses?
Special and/or extraordinary items? C. ) Does your government report any special revenue funds as major funds in the governmental fund statements? What are they? What are the major revenue sources? Expenditure functions? D. ) Review the notes to the financial statements to determine the measurement focus and basis of accounting used to prepare the governmental fund financial statement. Do the notes describe modified accrual accounting in a manner consistent with this book? Which revenue sources are subject to accrual? Are expenditures generally recognized when goods and services are received?
Which specific modifications to accrual accounting are mentioned in the notes? E. ) Look at the General Fund column of the governmental fund statements from the point of view of a financial analyst. Is the Fund Balance as the balance sheet dater larger or smaller than at the beginning of the year? Are reasons for the change apparent from the statements? Compute a ratio of fund balance/general fund revenues and compare it with your class member’s. CAFR 5 A. ) Look at the governmental fund financial statements. Are any major capital projects funds included? If so, list them.
Attempt to find out the nature and purpose of the projects from the letter of transmittal, the notes, or MD&A. What are major sources of funding, such as bond sales, intergovernmental grants, and transfers from other funds? Were the projects completed during the year? B. ) Again looking at the governmental fund financial statements, are any major debt service funds included? If so list them. What are the sources of funding for these debt service payments? C. ) Does your report include supplemental information including combining statements for nonmajor funds? If so, are any capital projects and debt service funds included?
If so, list them. Indicate the major revenue and other financing source categories for these funds. D. ) Look at the governmental fund Statement of Revenues, Expenditures, and Changes in Fund Balances, specifically the expenditure classification. Compute a ratio of capital outlay/total expenditures. Again compute a ratio of debt service/total expenditures. Compare those with your classmates’ ratios. Comment on the possible meaning of these ratios. E. ) Look at the notes to the financial statements, specifically the note (in the summary of significant accounting policies) regarding the definition of modified accrual accounting.
Does the note specifically indicate that modified accrual accounting is used for capital projects and debt service funds? Does the note indicate that debt serve payments, both principal and interest, are recorded as an expenditure when due? F. ) Does your government report capital lease payable in the government-wide Statement of Net Assets? If so, can you determine if new capital leases were initiated during the year? Can you trace the payments related to capital leases? G. ) Does your government report permanent funds, either major or nonmajor? If so, list them.
What are the amounts of the permanent resources available for governmental purposes? What is/are the governmental purpose(s)? CAFR 6 A. ) Find the Statement of Net Assets for the proprietary funds. Is the Net Asset or the Balance Sheet format used? List the major enterprise funds from that statement. Is the statement classified between current and noncurrent assets and liabilities? Are net assets broken down into the three classifications shown in your text? Is a separate column shown for internal service funds? B. ) Find the Statement of Revenues, Expenses, and Changes in Net Assets for the proprietary funds.
Is the “all-inclusive” format used? Are revenues reported by source? Are expenses (not expenditures reported by function or by object classification? Is depreciation reported separately? Is operating income, or a similar title, displayed? Are nonoperating revenues and expenses shown separately after operating income? Are capital contributions, extraordinary and special items, and transfers shown separately? List any extraordinary and special items. C. ) Find the Statement of Cash Flows for the proprietary funds. List the four categories of cash flows. Are they the same as shown in the text?
Are interest receipts reported as cash flows from investing activities? Are interest payments shown as financing activities? Is the direct method used? Is a reconciliation shown from operating income to net cash provided by operations? Are capital assets acquired from financing activities shown as decreases in cash flows from financing activities? Does the ending cash balance agree with the cash balance shown in the Statement of Net Assets (note that restricted assets may be included)? D. ) If your government has a CAFR, look to any combining statements and list the nonmajor enterprise funds.
List the internal service funds. E. ) Look at the financial statements from the point of view of a financial analyst. Write down the unrestricted net assets balances for each of the major enterprise funds, and (if you have a CAFR) the nonmajor enterprise funds and internal service funds. Look at the long-term debt of major enterprise funds. Can you tell from the statements or the notes whether the debt is general obligation or revenue in nature? Write down transfers for each of the funds. Compare these numbers with prior years, if the information is provided in your financial statements.
Look at the transfers. Can you tell if the general government is subsidizing or is a subsidized by enterprise funds? CAFR 7 A. ) Look at the Statement of Fiduciary Net Assets. Which fund types are included? Is the Statement prepared in a format in which Assets – Liabilities = Net Assets? Are net assets shown as being held in trust for employee benefits and other purposes? Look at the Statement of Changes in Fiduciary Net Assets. Has the government refrained from including agency funds in that statement? Are increases and decreases shown as additions and deductions, rather than revenues and expenses?
What are the main additions? What are the main deductions? B. ) Are agency funds included in the Statement of Fiduciary Net Assets? If so, look to the notes or combining schedules and list the individual agency funds. Has the government limited itself to agency funds that are held for individuals, organizations, or other governments—not for other government funds? Do agency funds report only assets and liabilities, not net assets? Does the government report a Statement or Schedule of Changes in Assets and Liabilities for agency funds? C. ) Does the government have private-purpose funds?
If so, list them. Describe the purposes for which they exist. Can you tell if any of those funds are endowments, and have resources permanently restricted? How much income was generated by each of the private purpose funds, and how much was released for use? Does the government report escheat property as private-purpose funds? Is so, indicate the nature of the process by which property is released and for what purpose. D. ) Does the government report investment trust funds? If so, describe the nature of the external investment pool. Which other governments are included?
Has your government refrained from including its own investments in the investment trust funds? E. ) List the pension funds included in the financial statements. From the notes, list the other pension plans that are available to employees of your governmental unit. Are those plans agent plans or cost-sharing plans? Defined contributions or defined benefit? Are required disclosures made in the notes for all pension plans, whether or not the plans are included as trust funds? Are the two RSI Schedules included in your report (when defined benefit plans are reported)?
Look at the actuarial status of the plans and comment about the potential impact of pensions on the financial condition of the government. F. ) Look at the note disclosures regarding investments. Are investments reported at fair value? Do the notes disclose the realized gains or losses on investments? Do the notes categorize investments based on risk? When the government created internal investment pools for management purposes, does the government report the individual investments and income from those investments in the funds that provided the resources?
CAFR 8 A. ) Find the reconciliation between the governmental fund balances and the governmental-type activities net assets. This might be on the governmental fund Balance Sheet or in a separate schedule in the basic financial statements. List the major differences. What is the amount shown for capital assets? How much is due to the incorporation of internal service funds? Was an adjustment made for deferred property taxes or any other revenue? What is the adjustment due to the inclusion of long-term liabilities? What other adjustments are made?
B. ) Find the reconciliation between the governmental fund changes in fund balances and the governmental-type activities changes in net assets. This might be on the governmental Statement of Revenues, Expenditures, and Changes in Fund Balances or in a separate schedule. List the major differences. How much is due to the difference between depreciation reported on the Statement of Activities and the reported expenditures for capital outlays on the Statement of Revenues, Expenditures, and Changes in Fund Balances?
How much is due to differences in reporting expenditures versus expenses for debt service? How much is due to the incorporation of internal service funds? How much is due to differences in reporting proceeds versus gains on sale of capital assets? How much is due to additional revenue accruals? How much is due to additional expense accruals? What other items are listed? C. ) Look at the Statement of Net Assets, especially the net asset section. Attempt to prove the Net Assets Invested in Capital Assets, Net of Related Debt figure from the information in the statement or the notes.
List the individual items of net assets that are restricted; this might require examination of the notes to the financial statements. D. ) Look at the Statement of Activities. List the net exenses (revenues) for governmental activities, business-type activities, and component units. List the change in net assets for governmental activities, business-type activities, and component units. Attempt to find from the notes the component units that are discretely presented. E. ) Look throughout the annual report for disclosures related to capital assets.
This would include the notes to the financial statements, any schedules, and information in the MD&A. Summarize what is included. What depreciation method is used? Are lives of major classes of capital assets disclosed? F. ) Look throughout the annual report for disclosures related to long-term debt. This would include the notes to the financial statements, any schedules in the financial and statistical sections, and the MD&A. Summarize what is included. Are the schedules listed in this chapter included? What is the debt limit and margin? What is the direct debt per capita? The direct and overlapping debt per capita?