Financial Statements –
presentation to municipal
staff and elected officials
Government of Yukon
Community Services
Whitehorse, Yukon
March 30, 2011
Presentation Outline
Users of the Financial Statements (F/S)
F/S Components
Introduction to Public Sector Accounting Board
(PSAB)
Reporting model
Recent change to the reporting model: Tangible
Capital Assets (TCA)
Non-compliance with Generally Accepted
Accounting Principles (GAAP)
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Audit opinion
Subsequent consequences
What to look for in F/S
Users of the Financial Statements
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Community residents
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Mayor and Council
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Resources available to your community and how they
are used
Leadership and management of council
Planning and good decision making
Validated information by professional independent
auditor
Governments
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Funding decisions
F/S Components
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F/S have 4 Statements (plus Notes):
1.
2.
3.
4.
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Statement of Financial Position
Statement of Operations
Statement of Change in Net Financial Assets
Statement of Cash Flows
Also required:
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Schedules – i.e. Tangible Capital Assets and
Segmented Information
Significant accounting policies – i.e. Tangible Capital
Assets, Revenue Recognition
Comparative balances for all statements, notes, and
schedules
Budget figures (approved by Mayor and Council)
TCA Schedule - Example
Introduction to PSAB
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What is PSAB?
External organization, part of the Canadian Institute of
Chartered Accountants
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What does it do?
Sets financial reporting standards for all governments
(Federal, Provincial/Territorial, Local) across Canada
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Why?
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To enhance public confidence in public sector
reporting:
Accountability
Transparency
Comparability
Reporting model
PSAB F/S are reported on a full accrual basis
Expenses are recorded as incurred
Cash does not need to be disbursed for an item to be recorded as
an expense (i.e. sick leave)
Cash basis may be used for budgeting purposes
Remember: Different basis = different results! Budget ≠ F/S
Recent change to the reporting
model: TCA
Tangible Capital Assets (TCA)
Roads
Buildings
Vehicles
Machinery and Equipment
Land
Water and Sewer Infrastructure
Old Financial Statements
PSAB Financial Statements
Expense
Asset / Amortization Expense
Capital expenditures are
charged directly to operations or
transferred to capital fund
Capital payments recorded as
TCA
Cost is amortized over the useful
life of the asset (except land)
Statement of Operations
Asset – Statement of Financial
Position
Amortization – Statement of
operations
Non-compliance with GAAP
Audit report:
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Unqualified – Objective: No significant issues!
Reserved:
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Qualified: positive opinion on the financial statements
as a whole, but qualifies due to a departure from
GAAP or a limitation in the scope of the examination
(departure is not pervasive – can be isolated)
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Adverse: financial statements are not presented fairly
in accordance with GAAP (generalized issue)
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Denial: Unable to form an opinion
Non-compliance with GAAP
Subsequent consequences:
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Could affect financing costs with banks
Could affect receipt of funds from other governments
Public concern over council’s management practices
Federal Gas Tax agreements require that municipalities
comply with PSAB – possibility of funds being held back
Affect eligibility for other federal and territorial programs –
risk of reduced funding
What to look for in F/S
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Audit opinion
Significant differences between current year and prior
year/budgeted figures
Notes should always agree to the F/S
Accumulated Surplus
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o
o
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Key indicator of a municipality’s financial health
Does not represent excess cash
Does represent its net worth
Contingent liabilities (i.e. lawsuits)
Subsequent events: Important events that occurred
after the year-end, but before the date on which
auditor signs opinion (and Council takes responsibility
for the F/S