The New CAFR

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The New CAFR

• Under
• GASB Statement No. 34

Laura E. Cowburn, PRSBA Business Manager/Board
Secretary Columbia Borough School District PASBO
Clinic Table March 2003
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Major Changes Associated with the New Financial
Reporting Model

• Managements Discussion and Analysis
• Government-wide statements
• Fund Financial Statements

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Managements Discussion and Analysis

• An brief, objective, easily readable analysis of
  the school districts financial activities.
• Located before the basic financial statements.
• Information contained in the MD A is based on
  currently known facts, decisions, and conditions
  as of the date of the auditors report

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• MDA Requirements
• The MDA should precede the basic financial
  statements
• The MDA is presented as Required Supplemental
  Information (RSI)
• The MDA must be presented separately from and
  without duplication of the CAFR Letter of
  Transmittal

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• Audit Responsibilities
• The MDA is considered part of the Financial
  Section of the Report as RSI
• Audited, but at a reasonable cost listed
  information to be addressed to limit information
  thereby limiting extensive audit procedures

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• SAS52 provides guidance for auditor
  responsibility
• Inquire of management about the methods used to
  prepare the information
• Compare information with the audited financial
  statements and other information obtained during
  the audit
• Consider whether the RSI should be covered in the
  management letter of representation
• Apply additional procedures prescribed for
  specific types of RSI
• Make additional inquiries if the foregoing
  procedures dictate

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• MDA requirements established by GASB 34 are
  discussed in Paragraph 11, Items a - h, in
  general rather than specific terms to encourage
  financial managers to effectively report only the
  most relevant information and to avoid
  boiler-plate discussion.
• The information presented should be confined to
  the topics discussed in a through h, as follows

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GASB 34, Paragraph 11, Items a - h (a) A brief
discussion of the basic financial statements,
including the relationships of the statements to
each other, and the significant differences in
the information they provide. (This discussion
should include analyses that assist readers in
understanding why measurements and results
reported in fund financial statements either
reinforce information in government-wide
statements or provide additional information.)
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GASB 34, Paragraph 11, Items a-h (continued)
(b) Condensed financial information derived from
government-wide financial statements comparing
the current year to the prior year. (Exception in
first year of implementation). Governments should
present the information needed to support the
analysis of financial position and results of
operations required in c, below, including the
following elements, if relevant
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GASB 34, Paragraph 11, Items a-h (continued)
b) continued
(1) Total assets, distinguishing between capital
and other assets(2) Total liabilities,
distinguishing between long-term liabilities and
other liabilities(3) Total net assets,
distinguishing among amounts invested in capital
assets, net of related debt restricted amounts
and unrestricted amounts(4) Program revenues,
by major source(5) General revenues, by major
source(6) Total revenues(7) Program expenses,
at a minimum by function(8) Total expenses(9)
Excess (deficiency) before contributions to term
and permanent endowments or permanent fund
principal, special and extraordinary items, and
transfers(10) Contributions(11) Special and
extraordinary items(12) Transfers(13) Change in
net assets(14) Ending net assets
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GASB 34, Paragraph 11, Items a-h (continued)
( c ) An analysis of the government overall
financial position and results of operations to
assist users in assessing whether financial
position has improved or deteriorated as a result
of the years operations. The analysis should
address both governmental and business-type
activities as reported in the government-wide
financial statements and should include reasons
for significant changes from the prior year, not
simply the amounts or percentages of change. In
addition, important economic factors, such as
changes in the tax or employment bases, that
significantly affected operating results for the
year should be discussed.
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GASB 34, Paragraph 11, Items a-h (continued)
(d) An analysis of balances and transactions of
individual funds. The analysis should address
the reasons for significant changes in fund
balances or fund net assets and whether
restrictions, commitments, or other limitations
significantly affect the availability of fund
resources for future use.
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GASB 34, Paragraph 11, Items a-h (continued)
(e) An analysis of significant variations
between original and final budget amounts and
between final budget amounts and actual budget
results for the general fund (or its equivalent).
The analysis should include any currently known
reasons for those variations that are expected to
have a significant effect on future services or
liquidity.
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GASB 34, Paragraph 11, Items a-h (continued)
(f) A description of capital asset and long-term
debt activity during the year, including a
discussion of material commitments for capital
expenditures, any changes in credit ratings, and
whether debt limitations may affect the financing
of planning facilities or services.
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GASB 34, Paragraph 11, Items a-h (continued)
(g) A discussion by governments that use the
modified approach to report some or all of their
infrastructure assets including (1) Significant
changes in the assessed condition of eligible
infrastructure assets from previous condition
assessments (2) How the current assessed
condition compares with the condition level the
government has established (3) Any significant
differences from the estimated annual amount to
maintain / preserve eligible infrastructure
assets compared with the actual amounts spent
during the current period. Modified approach is
discussed in paragraphs 23-25 of GASB 34
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GASB 34, Paragraph 11, Items a-h (continued)
(h) A description of currently known facts,
decisions, or conditions that are expected to
have a material effect on financial position (net
assets) or results of operations (revenues,
expenses, and other changes in net assets).
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GASB 34, Paragraph 11, Items a-h (continued)

• Governments can provide additional details about
  the required topics in (a) through (h).
  Information that does not relate to the required
  topics should not be included in MDA, but may be
  provided elsewhere, such as in the Letter of
  Transmittal or in other forms of supplementary
  information.

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Charts and Graphs Welcome additional information
to aid the reader in understanding the results.
Exception 11 (b) data should be presented in
the form of condensed financial statements, and
then graphs may be added.
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Notes to the Financial Statements

• Avoid duplication of information.
• Notes to the financial statements may disclose
  currently known facts as subsequent events or
  contingencies.
• The MDA should highlight but not repeat the
  information required to be disclosed in the
  notes.

MDA
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Government-wide financial statements

• Consists of two statements
• Statement of Net Assets
• Statement of Activities
• Measurement Focus and Basis of Accounting
• Economic resources reported
• Includes capital assets
• Full accrual
• Includes depreciation and long-term assets and
  liabilities

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Introduction to changes in fund level accounting
and reporting

• Changes in financial reporting requirements.
• Focus on major funds.
• Elimination of some reporting.
• Segregation of Governmental, Proprietary and
  Fiduciary Fund Statements.
• Changes in some fund structures and definitions
  of funds.

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Listing of Funds
Governmental Fund Type Governmental Fund Type
Prior to Statement 34 Implementation Statement 34 Implementation
General Fund General Fund
Special Revenue Funds Special Revenue Funds
Capital Projects Fund Capital Projects Fund
Debt Service Fund Debt Service Fund
Permanent Fund
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Listing of Funds
Proprietary Funds Proprietary Funds
Prior to Statement 34 Implementation Statement 34 Implementation
Enterprise Funds Enterprise Funds
Internal Service Funds Internal Service Funds
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Listing of Funds
Fiduciary Funds Fiduciary Funds
Prior to Statement 34 Implementation Statement 34 Implementation
Expendable Trust Funds Pension Trust Funds
Nonexpendable Trust Funds Investment Trust Fund
Agency Funds Agency Funds
Private-purpose Trust Funds
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Listing of Funds
Account Groups Account Groups
Prior to Statement 34 Implementation Statement 34 Implementation
Long-term Debt ---
General Fixed Assets ---
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Changes to the Fiduciary Fund Accounting
Statement 34 Fiduciary funds should be used to
report assets held in a trustee or agency
capacity for others and therefore cannot be used
to support the school districts own programs.
Current Language Fiduciary funds are used to
account for assets when a school district is
functioning either as a trustee or as an agent
for another party.
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Pension Trust Funds
Used to report resources that are required to be
held in trust for the members and beneficiaries
of defined benefit pension plans, defined
contribution plans, other postemployment benefit
plans, or other employee benefit plans.
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Investment Trust funds

• Used to report the external portion of investment
  pools reported by the sponsoring school district

29
Private Purpose Trust Funds

• Used to report escheat property, should be used
  to report all other trust arrangements under
  which principal and income benefit individuals,
  private organizations, or other governments

30
Agency Funds

• Used to report resources held by the reporting
  school district in a purely custodial capacity.
  Agency funds typically involve only the receipt,
  temporary investment, and remittance of fiduciary
  resources to individuals, private organizations,
  or other governments.

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Proprietary Funds

• Focuses on the determination of operating income,
  changes in net assets, financial position, and
  cash flows.

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Enterprise Funds

• Activities are required to be reported as
  enterprise funds if any one of the following
  criteria is met. School Districts should apply
  each of these criteria in the context of the
  activitys principal revenue sources.
• The activity is financed with debt that is
  secured by a pledge of the net revenues from fees
  and charges of the activity.
• Laws or regulations require that the activitys
  costs of providing services, including capital
  costs be recovered with fees and charges, rather
  than with taxes or similar revenues.
• The pricing policies of the activities establish
  fees and charges designed to recover its costs,
  including capital costs.

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Internal Service Funds

• Used to report any activity that provides goods
  or services to other funds, departments, or
  agencies of the primary government and its
  component units, or other governments, on a
  cost-reimbursement basis. Internal service funds
  should only if the reporting government is the
  predominant participant in the activity.

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Permanent Funds

• Used to report resources that are legally
  restricted to the extent that only earnings, and
  not principal, may be used for the purposes that
  support the reporting school districts
  programs-that is, for the benefit of the
  government or its citizenry.

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Fund Level Financial Reporting

• Measurement focus and the basis of accounting
  remains the same.
• Focus of the financial statements will be on
  major funds.
• Financial statements are less aggregated than in
  the past.

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Measurement focus and the basis of accounting
remains the same.

• Governmental funds will use the current financial
  resource measurement focus and the modified
  accrual basis of accounting.
• Proprietary funds will use the economic resource
  measurement focus and the full accrual basis of
  accounting.
• Fiduciary funds will use the economic resource
  measurement focus and the full accrual basis of
  accounting.

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Focus on Major Funds

• General Fund is always reported as a major fund.
• Other funds should be reported in separate
  columns as major funds based on these criteria
• Total assets, liabilities, revenues, or
  expenditures/expenses of that individual
  governmental or enterprise fund are at least 10
  percent of the corresponding total for all funds
  of that category or type, and
• Total assets, liabilities, revenues, or
  expenditures/expenses of the individual
  governmental fund or enterprise fund are at least
  5 percent of the corresponding total for all
  governmental and enterprise funds combined.
• Also, any other fund that the school districts
  officials believe is particularly important to
  financial statement users.

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Financial statements are less aggregated than in
the past.
Prior to Statement 34 Implementation Statement 34 Implementation
Highly Aggregated. Fund Type statements are segregated.
Budgetary comparison required part of basic financial statements. Budgetary comparison required supplemental information.
Account Groups reported in financial statement. Account groups only reported at the Government Level statements.