Improving Financial
Reporting –
Transmittal Letter
 Hit all the required elements
• Profile of the Government
• The economy and outlook -
Get visual!
• Major initiatives - Infrastructure,
Health Care, Environment,
Technology
• Awards & acknowledgements

Charts and Graphs
 Average or Median Home Price
 Population per Capita Income
 Funded LT Liabilities – OPEB or
Pension
 Trends for Significant Revenues
 Look to the Statistical Section


Involve others outside of Finance…

 Budget Office

 Economic Development
 Provide helpful references for readers etc…
• Adopted Budget, Capital Planning,
Who reviews the Transmittal Letter?
Dated after audit opinion
 On your letterhead

The MD&A
 Quantify changes but don’t forget the why?
 Create an analytical tool to assist with MD&A
 Challenges with large $ amount & % change
• Where to start, how to hone in?
 Don’t wait until the end

The MD&A
 Budget Analysis For The General
Fund Should Be Comprehensive
• Should Address Variances Between
Both The Original And Final Amended
Budget
GCG
• Final Amended Budget And
Actual Results
61

The MD&A
 Data for comparative basic financial statements should be complete
– Complete means that each year must comply with the authoritative standards and essentially stand alone as a set of basic financial statements.
– Include condensed financial data and comparative analysis for each of the last 3 years
GCG 71

The MD&A
 Data for comparative basic financial statements should be complete
 Merely presenting the numbers does not satisfy this requirement. A narrative analysis of changes between both sets of years is also mandatory.
Current year vs. previous year
Previous year vs. two years prior
GCG 81

The MD&A
 Includes a Discussion Of Capital
Assets And Long-term Debt Activity
 Reference To Notes Does Not Replace
Discussion
 The purpose of the discussion is to recap specific capital asset and long-term debt activity that occurred during the year.
GCG 91

MD & A – Capital Activity
 Don’t leave this out. Readers want to know!
• What was purchased during the year?
• What’s been disposed of during the year?
 Plans for the future? Capital budget plan?

Capital Asset Narrative Example
 The major capital events during the current fiscal year were additions to infrastructure of $9.9 million, remodeling costs to the County’s federally qualified health center for $1.1 million and the Public Health Facility for $2.6 million, and
$0.7 million in renovation costs for the new Public
Works Customer Service Center.
GCG
Additional information on the County’s capital assets can be found in Note III.C. in the Notes to
Basic Financial Statements section of this report.
111

Long-term Debt Narrative Example
 Bonded debt decreased overall by $5.7 million primarily due to ongoing debt service payments for the 1998 Wastewater
System and the Authority’s 2002
Certificates of Participation. Additional information on long-term liabilities can be found on pages 70-76 in the notes to basic financial statements.
GCG 121

 Net pension/OPEB obligation are netted with pension/OPEB assets
 Net pension/OPEB obligation not presented as long-term
– Should be noncurrent in classified approach
– Should be reported as “due in more than one year” under the relative order of liquidity
 Debt not net of related premiums and discounts
– Should be netted to present debt carrying value
GCG 131

 Miscalculation Of Net Investment In
Capital Assets
– Unspent Proceeds Should be Excluded
– Significant Retainage Should be
Included
– Significant Accounts and Contracts
Payable Should be Included
– Bond Issuance Costs Should be
Excluded
GCG 141


– Accrued Liabilities Should be Excluded
– Intangible Assets Should be Included
– Refunding Bonds Should be Included
When Refunded Debt Was Capitalrelated
GCG 151

 Reasons for reporting a part of net position as restricted should be presented in detail
 By major category
–
Significant amounts of net assets should not be subdivided into generic categories such as other purposes or special purposes.
– Restricted for use by special revenue funds is too generic.


Display on the face of the statement of net position
Disclosure in the notes is not a substitute for display
(see Q&A 7.22.8)
GCG 161

G-W Statement of Activities
 Recipients Of Shared Taxes Generally
Report Them As Tax General Revenues in
Error (i.e., cities receiving SPLOST from counties)
– Not A Tax From Viewpoint Of Recipient
– Should Be Classified As Program Revenue (If
Restricted To A Function) Otherwise It Is
General Revenue
GCG 171

G-W Statement of Activities
 Includes Special Items That Are Not
Significant
– Significance Of The Special Item Is Judged
Based On Where It Is Reported (Q&A 7.67.2)
– Item Can Be Significant In The Fund Financial
Statements But Not The Government-wide
(And Vice Versa)
GCG 181

G-W Statement of Activities

GCG 191

G-W Statement of Activities
 Intergovernmental Expenses Should
Not Be Presented As A Separate
Function
 Expenses Should Be By Function
Except For Extraordinary And
Special Items
GCG 201

G-W Statement of Activities
 Significant “Other” Program
Revenues Reported
 If Other Has Become Significant,
Consider a Breakout for Additional
Revenue Line Items
GCG 211

 Funds That Meet The Threshold Of A
Major Fund Are Reported As Nonmajor
– Calculation To Determine Major
Funds Must Be Performed Each Year
– Classification Can Change From One
Fiscal Year To The Next Without Any
Consistency Concern
GCG 221

 Funds That Meet The Threshold Of A
Major Fund Are Reported As
Nonmajor
– Threshold Applies To The Final
Numbers Reported In The Fund
Financial Statements
GCG 231

 Inflows and outflows related to current and advance refundings should be separately presented on the operating statement
–
Debt issuance should be an other financing source
– Use of the proceeds for the refunding should be reported appropriately based on the type of refunding :
• Current refunding = expenditure
• Advance refunding = other financing use
GCG 241

 Report liabilities that are not due and payable as of the end of the fiscal year
 Compensated absences (determination made based on whether the employee separated from service on or before fiscal year end)
 Claims and judgments
GCG 251

 Other financing sources/uses reported for items not identified in GAAP. Other financing sources are:
 The issuance of long-term debt
 Bond premiums
 Material sales of capital assets (unless they qualify as a special item)
 Proceeds from insurance recoveries
 Interfund transfers in
GCG 261

 Other financing uses are:
 Original issue discounts on the issuance of debt,
 The application of the proceeds of the refunding bonds to refund the existing debt
 Interfund transfers out,
GCG 271

 Special revenue funds
– Should not have significant expenditures for capital outlays
– Must be supported by specific revenues that comprise a substantial amount of the inflows into the fund.
 Substantial ≠ majority
GCG

 Restricted, committed, assigned, and unassigned
– Negative restricted or committed fund balance is inappropriate
– Only the General Fund can have positive unassigned fund balance
– Assignment of fund balance only appropriate if there is available unassigned fund balance to assign
GCG 291

GCG
• Reconciliations to governmentwide financial statements have inadequate detail
• Detail should be provided for combined or net reconciling items
• If not displayed the detail should be in the notes to the financial statements
301

Proprietary Funds
 Reasons for reporting a part of net position as restricted should be presented in detail
– By major category
• Significant amounts of net position should not be subdivided into generic categories such as other purposes or special purposes.
GCG 311

Proprietary Funds
 Capital Contributions Should Be
Consistently Reported Between The
Proprietary Fund And Government-wide
Financial Statements
– No Difference In Measurement Focus
Between These Statements So The
Amounts Should Be Identical
– “Negative capital contributions” should not be reported
GCG 321

Proprietary Funds
 Miscellaneous Or Other Cash Flows Are
Included In An Inappropriate Category
(E.G., Noncapital Financing)
 If The Definition Of Any Of The Four
Categories Is Not Met The Cash Flow Is
Reported In Operating Activities As The
Residual Category
GCG 331

Transfer of Capital Assets
 Governmental activities to Business-type
Activities
– Capital contribution reported
 Business-type activities to Governmental
Activities
– Nonoperating expense reported (no longer considered an interfund activity)
GCG 341

Fiduciary Funds
 Pension plans and OPEB plans should be reported in one pension and other postemployment benefit trust “column” in the basic financial statements
 The principal subdivisions of investments should be reported as separate line-items
GCG 351

Note Disclosures
 Generic Description Of The Criteria
Used To Include Component Units
– Criteria Needs To Be Specific To The
Component Unit Whether It’s Blended
Or Discretely Presented
GCG 361

 Relevant Investment Policies For Various
Applicable Risks Are Not Disclosed (Credit
Risk, Concentration Risk, Interest Rate Risk,
Foreign Currency Risk)
 Needs To Be An Adopted Policy Not A
Description Of Practice
 If No Such Policy, Disclose That Fact
GCG 371

Note Disclosures
 Changes In Long-term Liabilities
Netted
– Increases And Decreases Should Be
Separately Displayed
GCG 381

Note Disclosures
 Long-term liabilities note disclosure
– It is recommended that the purpose of each debt issuance be disclosed
GCG 391

Note Disclosures
 Long-term liabilities note disclosure
 It is required that the notes disclose which funds liquidate each long-term liability other than debt
• compensated absence
• claims and judgments
• termination benefits
• pension and OPEB liabilities
GCG 401

Note Disclosures
 Disclosures For Future Revenues Pledged
To Support Debt Should Include:
 Specific Revenue Source And Approximate
Amount
 Secured Debt And Its Purpose
 Period Of Commitment
 Proportion Of Revenue Stream Pledges
 Comparison Of Pledged Revenue To Debt
Service
GCG 411

RSI

– May Only Include General Fund And Major
Special Revenue Fund Budgetary
Comparisons In RSI
– May Not Include Other Governmental Fund
Types Or Nonmajor Special Revenue
Funds
• In A CAFR These Are Other Supplementary Information
GCG 421

RSI

– If Budgetary Comparisons Are RSI The
Disclosures Are Notes To The RSI
– However, Any Significant Violation Of
Finance-related Legal Provisions Must
Always Be Included Within The Notes To
The Financial Statements
GCG 431

RSI
 Funding Progress Incomplete When
A Separate Single-employer Or Agent
Multiple-employer Postemployment
Benefit Plan Report Is Not Issued
 Employer Reporting The Pension
Trust Fund Must Include Six Years Of
Funding Progress Information
GCG 441

Other SI
 Necessary Budgetary Comparisons
Missing For Nonmajor Special Revenue
Funds, Debt Service Funds, Capital
Projects Funds, And Permanent Funds
 Pre-GASSB 34 Rule Still Applies. CAFR Must
Have A Comparison For Any:
 Governmental Fund
– Appropriated/Legally Adopted
– Annual/Biennial Operating Budget
GCG 451

Other SI
 Inadequate Detail For The Budgetary
Comparisons
 Must Be At The Legal Level Of
Budgetary Control For Comparisons
Only Shown In OSI (Nonmajor Special
Revenue Funds, Debt Service Funds,
Capital Projects Funds, And Permanent
Funds)
GCG 461

Other SI
 General Fund And Major Special
Revenue Funds Need Schedules In
OSI If Comparisons Mandated For
Basic Financial Statements Do Not
Have Detail At The Legal Level Of
Control
GCG 471

Other SI
 Negative amounts are being presented for all components in combining statements

– A negative asset should be reported as a liability
– A negative liability should be reported as an asset
– A negative revenue is only appropriate for investment losses
– A negative expenditure should be reported as a revenue
GCG 481

Other SI
 Statement of changes in assets and liabilities for agency funds
 Changes must be presented for each asset and liability line-item
 Showing changes for assets and liabilities in the aggregate does not present a complete statement as required
GCG 491

Statistical Section
– Miscalculation Of Debt Service As A
Percentage Of Noncapital Expenditures
For Governmental Funds
• Debt Service = Principal + Interest
• Should Not Include Issuance Costs
• Noncapital = Total Expenditures -
Expenditures That Are Capitalized For
Government-wide Financial Statements
–
Calculated For Conversion From Modified Accrual To Accrual
Basis
GCG 501

Statistical Section
 Incomplete Information Presented For:
– Largest Own-source Revenue (E.G., Property
Tax Or Sales Tax)
– Information For Second Own-source Revenue
That Is Electively Presented
• No Need For Property Tax Collections
Unless It Is Largest Own-source Revenue Or
Information Is Electively Presented
 All Applicable Tables Must Be Included For Each
Revenue Source That Is Presented
GCG 511

Statistical Section
• When Applicable, Both Per Capita
Debt Ratios Are Not Presented
• Total Outstanding Debt
• All Types Of Debt
• Both Governmental And Business-type
Activities
• Total General Bonded Debt
GCG 521

Statistical Section
 Overlapping deb t
– Should not include business-type activities.
– A subtotal should be presented for the portion of the debt that is overlapping
– Include a footnote explaining what
“overlapping” means
GCG 531

Statistical Section

– Description Of The Five Objectives
– Explanation Of Why 10 Years Of Data Was
Not Included
– Atypical Trends And Anomalous Data
• GASB Statement No. 44 Identifies Four
Types Of Narrative Explanations That
Should Be Included
GCG 541

 MD&A to basic financial statements
 Operating statements to balance sheet
 Fund financial statement reconciliations to government-wide financial statement
 Statistical section to basic financial statements
GCG 551

We Are Finally Finished
Any Questions pglick@mindspring.com