Comprehensive Annual Financial Report Tyies Wells ACC/548 June 27, 2010 William J. Carter III, MSA Comprehensive Annual Financial Report The Office of Financial Management provides vital information, fiscal services and policy support that the Governor, Legislature and state agencies need to serve the people of Washington State (Investopedia, 2010). Included in this briefing, a comparison of the governmental and for-profit financial accounting will be discussed, an understanding of the government reporting and reporting entity, and an overview of the Management Discussion & Analysis report for the state of Washington. The Comprehensive Annual Financial Report (CAFR) requires statistical evaluation, whereas for-profit accounting does not. A government budget document is a blueprint for a specific grouping of government agencies spending over the course of an annual financial period. The major differences between governments and for-profit financial accounting are they have different purposes, processes of generating revenues, stakeholders, budgetary obligations, and propensity for longevity. These differences require separate accounting and financial reporting standards in order to provide information to meet the needs of stakeholders to assess government accountability and to make political, social, and economic decisions (FASB, 2010). A reporting entity is any unit or activity that uses resources to provide goods or services. A reporting entity is an organization that is obliged to prepare general purpose financial reports (PSAB, 2010). The government uses the CAFR along with a budget document to compare the total financial standing to the general purpose annual budget with every thing else. The CAFR shows the total of all financial accounting the basic general purpose budget reports do not and should not be confused with any rainy day funds that are but one of many investment accounts included in government budgetary reports and process. In November 2007, Washington State voters ratified Engrossed Substitute Senate Joint Resolution 8206, amending the state’s Constitution and establishing the Budget Stabilization Account (BSA). On July 1, 2008, the balance in the Emergency Reserve Fund of $303 million was transferred to the newly created BSA. An additional $115 million was transferred from the General Fund to the BSA in Fiscal Year 2009 in accordance with the provisions of the Constitution. The Constitution details a limited number of circumstances under which funds can be appropriated from the BSA, one of which is a favorable vote of at least three-fifths of the members of each house of the Legislature (State of Washington, CAFR, 2009). The Management Discussion and Analysis section of the CAFR provides an overview of the previous year of operations and how the company fared in that time period. Management will usually also touch on the upcoming year, outlining future goals and approaches to new projects (Investopedia, 2010). The state of Washington’s MD&A offers a narrative overview and analysis of the financial activities for the fiscal year ended June 30, 2009. The information is presented in conjunction with the information include in the letter of transmittal and with the state’s financial statements. The three components discussed in the MD&A includes: 1: government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the state of Washington’s finances. The concept of government wide reporting is the most dramatic change in the new approach. This is a significant move because, until now, government followed only the modified-accrual basis of accounting. The change is important to potential lenders and taxpayers because of the need to capitalize and depreciate general capital assets or infrastructure. Information concerning infrastructure will include the cost and anticipated life of roads, bridges, sewer and water systems and other capital assets. Since state and local governments invest $1 out of every $10 dollars ($140 billion to $150 billion annually) in the construction, improvement, and rehabilitation of capital assets, that information should be very interesting to local taxpayers (Business Encyclopedia, 2010). The government-wide financial statement includes: • Statement of Net Assets – Information on all of the state of Washington’s assets and liabilities, with the differences between the two reported as net assets. Statement of Activities – Information showing how the state’s net assets changed during the most recent fiscal year. The fund financial statement is a group of accounts used to maintain control over resources that are segregated for specific activities or objectives. The state of Washington uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. The state uses 649 accounts that are combined into 54 rollup funds. The state presents separate financial statements for governmental funds, proprietary funds, and fiduciary funds. Major individual governmental funds and major individual proprietary funds are reported in separate columns in the fund financial statements, with nonmajor funds being combined into a single column regardless of fund type. Internal service and fiduciary funds are reported by fund type (State of Washington, CAFR, 2010). Some of the major funds that are supported by the state of Washington are: • General Fund • Higher Education Special Revenue Fund • Higher Education Endowment Permanent Fund • Workers’ Compensation Fund • Unemployment Compensation Fund • Higher Education Student Services Fund The notes to the financial statements provide additional that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The Constitution details a limited number of circumstances under which funds can be appropriated from the BSA, one of which is a favorable vote of at least three-fifths of the members of each house of the Legislature (State of Washington, CAFR, 2010). In the government-wide and proprietary fund financial statements, long-term obligations of the state are reported as liabilities on the Statement of Net Assets. Bonds payable are reported net of applicable original issuance premium or discount. When material, bond premiums, discounts, and issue costs are deferred and amortized over the life of the bonds. Conclusion While a budget might indicate that a specific government or agency has financial trouble and debt because of excess spending or mismanagement within the select grouping of general fund accounts presented, the CAFR may indicate, in whole, the same government entity, has many facets possessing large holdings considerably over what is shown in a budget report. References Business Encyclopedia. (2010). Government Financial Reporting. Retrieved from https://www. answers. com/topic/government-financial-reporting Financial Accounting Standards Board. (2010). Why Governmental Accounting and Financial Reporting is-and should be-Different. Retrieved from https://www. gasb. org/white_paper_full. pdf Investopedia. (2010). Management Discussion and Analysis – MD&A. Retrieved from https://www. investopedia. com/terms/m/mdanalysis. asp Public Sector Accounting Board. (2010). About the Government Reporting Entity. Retrieved from https://www. psab-ccsp. ca/item14956. pdf Washington State Office of Financial Management. (2010). Comprehensive Annual Financial Report. Retrieved from https://www. ofm. wa. gov/cafr/2009/CAFR09. pdf Comprehensive Annual Financial Report Briefing |Content |Points Available |Points Earned | |60% |4. 8 |3. | |Overview clearly and effectively demonstrates the following: | | | |• Differences in governmental accounting and for-profit | | | |financial accounting | | | |• An understanding of the government reporting and reporting | | | |entity | | | |• An assessment of the Management Discussion & Analysis | | | |reporting unit (MD&A). | | |Organization/Development |Points Available |Points Earned | |20% |1. 6 |1. 4 | |• Overview is at least 1,050 and no more than 1,400 words in | | | |length. | | | |• Overview contains sufficient background on the selected | | | |organization and previews major points. | | |• Overview is logical, flows, and reviews the major points, for | | | |example | | | | | | | | – Major Revenues | | | |- Major Debts | | | |- Risk Management | | | |Mechanics |Points Available |Points Earned | |20% |1. 6 |1. 6 | |• Formatting or layout and graphics are pleasing to the eye (font,| | | |colors, and spacing). | | |• Rules of grammar, usage, and punctuation are followed, and | | | |spelling is correct. | | | |• APA guidelines are followed. | | | | |Total Available |Total Earned | | |8 | 6. 8 | Instructor Comments Content – One of the requirements for content was comparing and contrasting government entities, not for profits, and businesses. I would have liked to see more details in this regard. There was a limited amount of information detailing the differences. I would have like to see the board members referenced so we know who the audience is. You did a good job assessing the MD&A of Washington State. Organization/Development – Organization and development was good. I would have like to have seen more specifics in terms of revenue, expenditures and any major issues for the state of Washington. There were no detailed numbers to give an understanding of the financial health of the state. Mechanics – Your mechanics were great, no problems here.
A professional writer will make a clear, mistake-free paper for you!Get help with your assigment
Please check your inbox
I'm Chatbot Amy :)
I can help you save hours on your homework. Let's start by finding a writer.Find Writer