GAAFR 9.1
CSMFO
San Francisco, California
Wednesday, February 24, 2011
Overview of Presentation
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History of the “Blue Book”
Change in structure and format
Comparison 2005 v. 2011
Detail on structure of 2011 GAAFR
New GASB guidance incorporated
Contents of individual chapters
History of the
“Blue Book”
Part 1
National Committee on Municipal
Accounting (NCMA)
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Established in 1934
• Municipal Finance Officers Association
(MFOA)
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Later Government Finance Officers
Association (GFOA)
First “Blue Book” issued in 1936
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NCMA Bulletin No. 6, Municipal Accounting
Statements
National Committee on
Governmental Accounting (NCGA)
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Founded in 1948
Second “Blue Book” issued in 1951
• NCGA Bulletin No. 14, Municipal
Accounting and Auditing (1951)
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Third “Blue Book” issued in 1968
• Governmental Accounting, Auditing, and
Financial Reporting
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First to bear the GAAFR title
Transition
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National Council on Governmental
Accounting established in 1974
Result
• Prior to 1974
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“Blue Book” source of authoritative GAAP
• After 1974
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“Blue Book” no longer sets GAAP
• Focus henceforth on practical application of
authoritative standards
MFOA/GFOA
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Fourth “Blue Book” issued in 1980
Fifth “Blue Book” issued in 1988
Sixth “Blue Book” issued in 1995
Seventh “Blue Book” issued in 2001
Eighth “Blue Book” issued in 2005
Ninth “Blue Book” issued in 2011
Summary of a 75-Year Tradition
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1936
1951
1968
1980
1988
1995
2001
2005
2011
First “Blue Book”
Second Blue Book
Third Blue Book (first GAAFR)
Fourth Blue Book
Fifth Blue Book
Sixth Blue Book
Seventh Blue Book
Eighth Blue Book
Ninth Blue Book
Change in Structure and
Format
Part 2
Changes in Structure
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Shorter and more focused chapters
• From 19 chapters to 47 chapters
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Integrated discussion of accounting
and financial reporting
• Accounting chapters (e.g., revenue and
expenditure recognition in governmental
funds)
• Financial reporting chapter (e.g.,
governmental fund financial statements)
Changes in Structure (cont.)
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Separate chapters devoted to major
topics
• Postemployment benefits
• Capital assets
• Debt
• Derivatives
• Landfills and pollution remediation
• Risk financing and insurance
• Other specialized applications
Changes in Structure (cont.)
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Study materials
• Previously provided in separate GAAFR
Study Guide
• Now included at the end of each chapter
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Summary (“chapter in brief”)
Exercises
• Multiple choice
• True/false
Change in Format
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Current format
• Same size as a typical CAFR
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To permit reproduction of full-size
illustrative CAFR (Appendix D)
New format
• Smaller “manual” size
• Illustrative CAFR provided on CD-ROM
Comparison
2005 v. 2011
Part 3
GAAFR 2005
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19 chapters
• Introduction to governmental
accounting (4)
• Accounting (4)
• Financial reporting (7)
• Budgetary integration and performance
measurement (2)
• Internal control and auditing (2)
GAAFR 2011
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47 chapters
1. Background and framework (8)
2. Fund accounting and basic financial
statements (14)
3. Specialized accounting applications (8)
4. Reporting beyond the basic financial
statements (11)
5. Internal control, auditing, and analysis
(6)
Detail on Structure of
2011 GAAFR
Part 4
Part 1 – Background and
Framework
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Basic background (3 chapters)
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Overview of accounting/financial
reporting/auditing cycle
Impact of governmental environment
Sources of authoritative guidance
The Governmental Financial Reporting
Model (3 chapters)
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Funds and fund types
Government-wide financial reporting
Financial reporting entity
Part 1 – Background and
Framework (cont.)
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Basic Recognition Principles (2
chapters)
• Measurement focus and basis of
accounting
• Categories of transactions and events
and their recognition
Part 2 - Fund Accounting and the
Basic Financial Statements
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Governmental Funds (5 chapters)
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Revenue recognition
Expenditure recognition
Other financing sources/uses
Asset and liability recognition
Financial statements
Proprietary Funds (3 chapters)
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Enterprise funds
Internal service funds
Financial statements
Part 2 - Fund Accounting and the
Basic Financial Statements (cont.)
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Fiduciary Funds (2 chapters)
• Trust and agency funds
• Financial statements
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Government-wide Financial Statements (2
chapters)
• Converting and consolidating fund data
• Financial statements
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Disclosure (2 chapters)
• Summary of significant accounting policies
• Notes to the financial statements
Part 3 – Specialized Accounting
Applications
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Specialized Accounting Applications
(8 chapters)
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Postemployment benefits
Budgetary integration
Capital assets
Debt
Derivatives
Landfills and Pollution remediation
Risk financing and insurance
Part 3 – Specialized Accounting
Applications (cont.)
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Other specialized applications
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Compensated absences
Escheat property
Grants
Investments
Joint ventures and similar arrangements
Lease accounting
Special assessments
Sales and pledges of receivables
Sales and pledges of future revenues
Service concession arrangements
Bankruptcies
Part 4 – Reporting Beyond the
Basic Financial Statements
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RSI (3 chapters)
• Management’s discussion and analysis
• Budgetary reporting
• Other RSI
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The CAFR (2 chapters)
• Structure and Contents
• The statistical section
Part 4 – Reporting Beyond the
Basic Financial Statements (cont.)
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Specialized Entities (4 chapters)
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Postemployment benefit plans
Public entity risk pools
School districts
States, investment pools, and specialpurpose governments
Other Reporting (2 chapters)
• Popular reporting
• Performance measurement reporting
Section 5 – Internal Control,
Auditing, and Analysis
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Internal Control (2 chapters)
• Comprehensive framework of internal
control
• Evaluating internal control
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Auditing and Analysis (4 chapters)
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Financial statement audit
Single Audit
Other types of auditing
Analyzing local government financial
statements
Appendices
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Glossary
Illustrative Chart of Accounts
Illustrative Journal Entries
Illustrative Trial Balances
Illustrative Conversion/
Consolidation Worksheet
General Index
Illustrative CAFR (CD-ROM)
New GASB Guidance
Incorporated
Part 5
Incorporation of New Guidance
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Termination benefits
• GASB Statement No. 47
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Chapter on postemployment benefits
Sales and pledges
• GASB Statement No. 48
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Chapter on other specialized applications
Pollution remediation obligations
• GASB Statement No. 49
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Chapter on landfills and pollution remediation
Incorporation of New Guidance
(cont.)
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Pension disclosure
• GASB Statement No. 50
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Chapter on note disclosure
Intangible assets
• GASB Statement No. 51
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Chapter on capital assets
Real estate held by endowments
• GASB Statement No. 52
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Chapter on specialized applications
Incorporation of New Guidance
(cont.)
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Derivatives
• GASB Statement No. 53
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Chapter on derivatives
Fund balance and governmental fund
types
• GASB Statement No. 54
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Chapter on fund types
Chapter on governmental fund financial
statements
Incorporation of New Guidance
(cont.)
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GAAP hierarchy
• GASB Statement No. 55
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Chapter on sources of GAAP
Guidance incorporated from auditing
standards
• GASB Statement No. 56
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Chapter on note disclosure
OPEB measurement
• GASB Statement No. 57
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Chapter on postemployment benefits
Incorporation of New Guidance
(cont.)
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Chapter 9 bankruptcies
• GASB Statement No. 58
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Chapter on specialized applications
Financial instruments
• GASB Statement No. 59
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Chapter on specialized applications
Service concession arrangements
• GASB Statement No. 60
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Chapter on specialized applications
Incorporation of New Guidance
(cont.)
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Financial reporting entity changes
• GASB Statement No. 61
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Chapter on financial reporting entity
Codification of applicable privatesector guidance
• GASB Statement No. 62
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Chapter on sources of GAAP
References throughout publication
Incorporation of New Guidance
(cont.)
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Guidance on Medicare Part D
• GASB Technical Bulletin 06-1
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Chapter on postemployment benefits
Guidance on calculating the annual
required contribution
• GASB Technical Bulletin 08-1
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Chapter on postemployment benefits
Contents of Individual
Chapters
Part 6
Chapter 1 - Overview
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Accounting
Financial reporting
• Internal
• Special-purpose external
• General-purpose external
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Methods of communicating financial
information
• GASB Concepts Statement No. 3
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Definition of financial statement elements
• GASB Concepts Statement No. 4
• Financial statement audit
Chapter 2 – Impact of the
Governmental Environment
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Structure of state and local government
Key environmental differences
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Profit motive v. service motive
Return on investment v. stewardship
Appropriated budget v. financial plan
Impact of environmental differences
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Use of more than one measurement focus
Fund accounting
Budgetary reporting
Chapter 3 – Sources of
Governmental GAAP
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Nature and purpose of GAAP
Legal authority to set standards
Development of GAAP
Structural framework for standard
setting
Due process
GAAP hierarchy
Defining a government
Original pronouncements v. codification
Chapter 4 – Funds, Fund Types,
and Interfund Activity
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Nature and purpose of fund
accounting
Number of funds principle
Fund categories
Fund types
Interfund activity
Chapter 5 – Government-Wide
Financial Reporting
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Background
Relationship to fund financial
statements
• From funds to activities
• From one measurement focus and
basis of accounting to another
• From aggregation to consolidation
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Focus on direct cost
Chapter 6 – The Primary Government
and its Component Units
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Overview of the financial reporting entity
The primary government
Identifying component units
Component units v. fiduciary funds
Potential for dual inclusion
Presenting component units
Component units with a different fiscal
year end
Transactions v. interfund activity
Separate reporting by component units
Chapter 7 – Measurement Focus
and Basis of Accounting
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Measurement focus
• Effect on statement of position
• Effect on statement of resource flows
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Basis of accounting
Application to specific sets of
financial statements
Chapter 8 – Categories of
Transactions and Events
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Exchange and exchange-like
transactions
Nonexchange transactions
Extraordinary and special items
Direct changes to equity
Chapter 9 – Revenue Recognition
in Governmental Funds
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Background
General application
Specific applications
Chapter 10 – Expenditure
Recognition in Governmental Funds
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Background
Basic rule
Exceptions to basic rule
Chapter 11 – Other Financing
Sources and Uses
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Nature and purpose
Other financing sources
Other financing uses
Chapter 12 – Asset and Liability Recognition
and Measurement in Governmental Funds
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Background
Governmental fund assets
Governmental fund liabilities
Chapter 13 – Governmental Fund
Financial Statements
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Focus on major funds
Basic financial statements
Chapter 14 – Enterprise Funds
Differences from private sector
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Transactions unique to the public sector
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Interest capitalization
Capital asset impairments
Refundings
Compensated absences
Postemployment benefits
Cash flows reporting
Segment reporting
Changes in equity/net assets
Categories of equity/net assets
Connection fees
Impact/developer fees
Regulated industries
Chapter 15 – Internal Service
Funds
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Cost reimbursement
Identity of customers
Interest capitalization
Chapter 16 – Proprietary Fund
Financial Statements
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Statement of position
Statement of revenues, expenses,
and changes in fund net
assets/equity
Statement cash flows
Chapter 17 – Fiduciary Fund
Accounting
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General considerations
Practical applications
Chapter 18 – Fiduciary Fund
Financial Statements
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General formatting issues
Statement of fiduciary net assets
Statement of changes in fiduciary
net assets
Chapter 19 – Converting and
Consolidating Fund Data
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Overview
Conversion of governmental fund
data
Consolidation
(Dis)allocation - governmental
activities
Chapter 20 – Government-Wide
Financial Statements
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Scope of reporting
Statement of net assets
Statement of activities
Chapters 21 - 23
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Summary of significant accounting
policies
Notes to the financial statements
Pensions, OPEB, and termination
benefits
Chapter 24 – Budgetary Integration
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Nature and purpose
Budgetary accounts
Budgetary journal entries
Chapter 25 – Capital Assets
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Definition
Basic accounting and financial reporting
Major asset classes
Capitalizable costs
Improvements v. repairs
Valuation
Impairments
Depreciation/amortization
Replacements and retirements
Chapter 26 - Debt
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Basic accounting for debt
Deep discount debt
Refundings
Demand bonds
Special assessment debt
Conduit debt
Long-term borrowings within the
primary government
Proprietary fund debt
Chapter 27 - Derivatives
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Definition and use
Essential characteristics
Hedging
Reporting derivatives in the
statement of position
Reporting derivatives in the
statement of resource flows
Embedded derivatives
Chapter 28 – Landfill Closure and
Pollution Remediation
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Landfill closure and postclosure care
costs
Pollution remediation obligations
Chapter 29 – Risk Financing and
Insurance
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Background
Basic accounting for claims and
judgments
Risk financing activities in fund
financial statement
Insurance
Participation in a public entity risk
pool
Chapter 30 – Other Specialized
Applications
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Compensated absences
Grants (recipient perspective)
Investments
Lease accounting
Special assessments
Sales and pledges of receivables
Joint ventures and similar arrangements
Sales and pledges of future revenues
Escheat property
Service concession arrangements
Bankruptcies
Chapter 31 – Management’s
Discussion and Analysis
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Background
Content
Component units
Relationship to letter of transmittal
Relationship to financial statement
audit
Chapter 32 – Other RSI
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Budgetary reporting
Infrastructure condition and
maintenance data for governments
using the modified approach
Trend data on postemployment
benefits
Trend data on revenue and claims
development for public-entity risk
pools
Chapter 33 – Structure and
Contents of the CAFR
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Purpose
Structure
Contents
GFOA Certificate Program
Chapter 34 – Supplementary
Budgetary Reporting Within the CAFR
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Scope of supplementary budgetary
comparisons
Mandatory comparisons v.
supplementary comparisons
Legal level of budgetary control
Chapter 35 – Statistical Section
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Background
Types of information to be presented
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Information on financial trends
Information on revenue capacity
Information debt capacity
Demographic and economic information
Operating information
Additional considerations
Chapter 36 – Postemployment
Benefit Plans
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Requirement to report individual plans
separately
Basic financial statements
Notes to the financial statements
Required supplementary information
Supplementary schedules
CAFR
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Investment section
Actuarial section
Defined contribution plans
Other recommendations from GFOA
Chapter 37 – Public-Entity Risk
Pools
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Background
Accounting and financial reporting
Chapter 38 – School Districts
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Basic financial statements
Fund financial statements
CAFR
Chapter 39 – States, Investment Pools,
and Special-Purpose Governments
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States
Investment pools
Special purpose governments
Chapter 40 – Popular Financial
Reporting
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Background
Characteristics of an effective PAFR
GFOA PAFR Program
Chapter 41 – Performance
Measurement Reporting
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Nature of performance measurement
reporting
Tie to budgeting
Broader context of performance
management
Guidance
• National Advisory Commission on State and
Local Budgeting
• National Performance Management Advisory
Commission
• GFOA best practice
• GASB suggested guidelines
Chapter 42 – Comprehensive
Framework of Internal Control
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Nature and purpose of internal control
Respective responsibilities of
management, governing board, and
independent auditors
Management objectives
Elements of a comprehensive framework
From internal control to enterprise risk
management
• Expansion of management objectives and
control elements
Chapter 43 – Evaluating Internal
Controls
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Core element of monitoring element
of internal control
Responsibility
Process
Resolution
Chapter 44 – Financial Statement
Audit
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Nature and purpose
Roles
• Management/internal control/governing
board/audit committee/independent
auditor
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Key concepts
Scope
Relevant auditing standards
Auditor reporting
Chapter 45 – Single Audit
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Nature and purpose
Applicability
Major program focus
Specialized reporting
• Internal controls over federal awards
• Compliance for federal awards
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Reporting package
Chapter 46 – Other Types of
Auditing
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Performance auditing
Internal auditing
• Diversity of roles
• Structure of the internal audit function
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Report to management
Report to audit committee
• Alternatives if separate internal audit
function not feasible
Chapter 47 – Financial Statement
Analysis
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Limited relevance of private-sector
techniques
Focus of analysis
• Near-term financing
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Focus on fund financial statements
• Financial position
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Focus on government-wide financial
statements
• Economic condition
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Focus on statistical section
Practical application