What are the required sections of the CAFR?
|
Show The Government Finance Officers Association (GFOA) reports that 4,231 organizations received the Certificate of Achievement for Excellence in Financial Reporting in 2016. That is just over 4 percent of all governments in the US. Today, most governments prepare only the basic financial statement, which is the minimum necessary for fair presentation in conformity with generally accepted accounting principles. So, what is a CAFR? According to the GFOA, a CAFR consists of three sections: introductory, financial, and statistical. Each has benefits that the basic financial statement does not. Introductory section A key benefit to the CAFR is that the introductory section includes a letter of transmittal. Unlike the management’s discussion and analysis, which is included in the financial section and contains specified required elements, the transmittal letter may contain subjective information. This allows a government’s management to highlight accomplishments and discuss major initiatives. Management may include prospective information and discuss long-range planning for the government. According to Governmental Accounting, Auditing, and Financial Reporting published by the GFOA, an effective transmittal letter should discuss a profile of the government and the economy in which it operates. Other elements of the introductory section include the table of contents, organizational chart, and list of officials. Financial sectionThe financial section contains most of what is required for basic financial statements. What differentiates the CAFR is that this section includes individual fund statements for all of a government’s funds. A benefit of including individual fund financial statements is that management can present more detailed budget information and comparative data, both of which make the information much more useful to people who will read the CAFR. In basic financial statements, budgetary information is presented only for major funds. Statistical sectionThe final section is the statistical section, which allows operational, economic, and historical data to be included. This provides a context for assessing a government’s economic condition. The statistical section is made up of the following broad categories:
To prepare a CAFR or not to prepare a CAFR When considering this decision, keep in mind that a major benefit of preparing a CAFR is that it gives governments the opportunity to participate in the GFOA’s Certificate of Achievement for Excellence in Financial Reporting program. This program allows management to earn a certificate and recognition for its preparation of the CAFR. If you are interested in preparing a CAFR, we recommend first visiting the GFOA’s website. We also encourage you to contact members of LaPorte’s Public Sector Industry Group. We welcome the opportunity to assist you in planning for, preparing, or reviewing your first comprehensive annual financial report. Post navigationWhat is a Comprehensive Annual Financial Report and what are the benefits of preparing one? Preparing a Comprehensive Annual Financial Report allows the unit of government to participate in the Government Finance Officers Association's (GFOA's) Certificate of Achievement for Excellence in Financial Reporting program joining over 4,200 other government (about 4% of all governments in America). This program is most beneficial to entities that already, or soon will be, required to report financial statements in accordance with Generally Accepted Accounting Principles in order to issue debt, have a continuing disclosure requirement for audited financial statements and/or receive an audit each year. A Comprehensive Annual Financial Report has three main sections: introductory, financial and statistical. The Introductory Section includes letters of transmittal that give management the opportunity to discuss what the entity has done and plans that will have an effect on the future. This subjective dialogue is an important feature that is not available in a traditional audit of basic financial statements. The Financial Section includes the Independent Auditor’s Report, Management Discussion and Analysis (MD&A), Basic Financial Statements, Required Supplementary Information and other Supplementary Information. The MD & A is another opportunity to discuss performance but it is more restrictive than a transmittal letter and must contain specified required information. A benefit of the financial section of the Comprehensive Annual Financial Report is the opportunity for management to present expanded fund level financial statements and increased information on budgetary performance beyond what is required in a basic financial statement audit. Lastly, the Statistical Section gives context about financial trends, revenue capacity, debt capacity, demographic and economic information and operating information. This allows readers of the financial statements to assess economic condition over time. For more information on this topic, or to learn how Baker Tilly municipal specialists can help, contact our team. Baker Tilly Municipal Advisors, LLC is a registered municipal advisor and wholly-owned subsidiary of Baker Tilly US, LLP, an accounting firm. Baker Tilly US, LLP, trading as Baker Tilly, is a member of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. What are the five required sections of a CAFR?Contents of a Comprehensive Annual Financial Report (CAFR). Financial Trends Information.. Revenue Capacity Information.. Debt Capacity Information.. Demographic and Economic Information.. Operating Information.. What are the three main sections of the CAFR report?The Annual Comprehensive Financial Report consists of three sections: Introductory, Financial and Statistical.
What mandatory items must be included in the annual report?An annual report begins with a letter to the shareholders, then a brief description of the business and industry. Following that, the report should include the audited financial statements: balance sheet, income statement, and statement of cash flows.
What is in the financial section of the CAFR?Financial section - includes the independent auditor's report and contains management's discussion and analysis, government-wide financial statements, fund financial statements, notes to the financial statements, required supplementary information, combining financial statements, and schedules.
|
