Part A: CAFR
1) Legal debt limits and debt margins
Statement 34 by the Governmental Accounting Standard Board requires that the report of the CAFR contain a statistical section on legal debt restrictions and debt margins. This gives the foundation for examining whether the company or government has provided for its financial responsibility. The legal debt limits and debt margins are also ways for companies to identify potential traps they may fall into. This is in addition to measuring the government debt and its ability to absorb new debt (see Biancone et al., 2019).
2) 10-year trend data
The section on statistics in front of statement 44 listed a 10-year trend later revised by GASB. However, they are most useful in economic analysis and decision-making. There is also some critical background information, such as a history of the fund’s balances and trends over the last ten years. They are employed to evaluate the stability and soundness of the government finances over time and to analyze its performance (GASB 2023).
3) Notes to financial reports
The MDA section of the financial report contains notes for potential access to their financial performance. This will make it easier for analysts and investors considering management performance and economic fundamentals to obtain accurate information. Also, it sets out the government’s financial goals and considers opportunities, conditions, and realities of the current situation (Biancone et al., 2019).
4) Property tax levy and collection information
Those familiar with CAFR will know that the statistics section contains data on property tax schedules, collection rates versus total levy amounts, and other information concerning property taxes. In any case, the tariffs would be based on the assessed value of residents ‘property and their rates scheduled to cover spending needs.
5) Budgetary schedules
The RSI portion of the financial portion has the budgeting schedules. You may obtain additional data here, including a budgetary comparison schedule—a vital component of external government financial reporting. This must disclose any budget information and explain significant variations about how budgetary programs influence it under GASB statement No. 41.
6) Auditor’s Report
The auditor’s report is included in the financial section of the CAFR report. Retolaza and San-Jose (2021) argue that while independent public sector companies often audit government agencies, state government auditing agencies should also do so. In all cases, the financial statements presented in the report must be accompanied by an opinion analysis.
7) Letter of transmittal
CAFR’s instructions include a letter of transmission. This is the conclusion of a government report. This ensures that the accountant signs the letter. It must also provide accurate and legal information regarding the analysis of financial information.
8) Description of the government’s financial condition
The MDA section of the financial section contains a description of the government’s financial position. According to Lesser et al. (2021), MDA is a management discussion that allows the user to understand better the situation’s circumstances, options, and financial situation. In particular, the MDA section of the financial chapter should provide details of the government’s financial situation.
9) Financial highlights for the fiscal year
The MDA section of the financial section will contain the financial details. In MDA, all statements are examined and evaluated by comparing them with other financial and government financial statements. This includes reform, growth, and conflict in the financial sector. This information is available to those with access to financial information for the current fiscal year (Biancone et al., 2019).
10) Defined benefit pension plan schedules
GASB Rules Answer No. For Pension Plans managed by a foundation or similar organizations and meeting certain conditions. 67. Therefore, in addition to the defined benefit and pension plans offered, the defined benefit plan will also be listed on the RSI. Additionally, RSI’s financial statements should include the latest information on annual results (GASB, 2023).
Part B: Question 1
Governmental Funds
Statement of Activities
This table shows changes in government activities during the fiscal year. The difference between income and expenses reported by the state budget is called the employment statement. It explains how changes such as capital assistance and external financing occur.
Statement of Net Assets
The net assets table shows the total amount of government assets and liabilities and the difference between the two. The difference between the state’s assets and liabilities is called “net assets.” The work done by the state after all its obligations are paid is reflected in this financial statement.
Balance Sheet
Government Liabilities The first item in the balance sheet is the state’s assets or the resources it controls and ensures its operation. Provide services. Stocks and mortgage loans are examples of fixed assets used by government funds. The difference between current assets and liabilities and the balance sheet is the balance on the balance sheet.
Statement of Revenue, Expenditure, and Changes in Fund Balances
There are many essential points in this report. It keeps track of how much money comes in and out. Government benefits, taxes, fees, charges, and other income are all included in the list. Operating expenses are reported separately from capital expenses and liabilities.
Proprietary Funds
Statement of Revenue, Expenses, and Changes in Fund Net Assets
All major financial institutions have separate line items and consolidated statements. Internal grants and related funds may appear separately or together on a single line. The statement’s second line will show capital and non-operating income (GASB, 2023).
Proprietary Funds Financial Statement
Financial Funds will prioritize situations where the operating position is higher than the capital guaranteed. The current balance sheet will not change but will reflect the message and category.
Statement of Cash Flows
Revenue, costs, and capital asset changes will be separated from the cash statement. There will be a separate column for each internal service. Statement GASB No. 9 allows entities to report cash flows from operations using the direct method (although the direct method is preferred) or the indirect method.
Fiduciary Funds
Statement of Changes in Fiduciary Net Assets
All assets managed, trust funds, and active retirement funds are recorded in the Statement of Changes in Trust Net Assets. It is essential to keep separate records of all expenses and investment returns. This includes administrative costs.
Fiduciary Fund Financial Statement
Trust Fund Financial Statements are non-impactful documents showing the trust’s activities, net income, liabilities, cash, and assets. When a trust is distributed, the funds are liable should something happen that causes the assets to be distributed.
PART B: Question 2
Retolaza and San-Jose (2021) argue that those who utilize financial statements, such as taxpayers and citizens, ought to get advice on their jurisdiction’s financial health and performance. Supervisors must provide this information and take financial responsibility for the distribution of resources. Ratio analysis can help monitor financial trends. This may be evaluated over time and compared to other government financial figures. External users, such as bond rating agencies, use financial ratios to assess government performance.
My research indicates that financial statement ratios—meant to translate information from a financial statement into a more understandable format for taxpayers, citizens, creditors, and regulatory bodies—are adequate for conducting short-term economic analyses. They are helpful for evaluating the company’s progress over time or comparing its performance to another government agency’s. However, financial ratios lose significance over time as public funds do not disclose long-term obligations and assets.
References
Biancone, P., Secinaro, S. F., Brescia, V., & Iannaci, D. (2019). The Popular Financial Reporting between Theory and Evidence. Iris.unito.it, 12(7), 45–56. https://doi.org/10.5539/ibr.v12n7p45
GASB. (2023). Summary – Statement No. 44. Gasb.org. https://gasb.org/page/PageContent?pageId=/standards-guidance/pronouncements/summary–statement-no-44.html&isStaticPage=true
Leiser, S., Wang, S., & Kargman, C. (2021). Perceptions of Local Government Fiscal Health and Fiscal Stress: Evidence From Quantile Regressions With Michigan Municipalities and Counties. State and Local Government Review, 0160323X2110383. https://doi.org/10.1177/0160323×211038356
Retolaza, J. L., & San-Jose, L. (2021). Understanding Social Accounting Based on Evidence. SAGE Open, 11(2), 215824402110038. https://doi.org/10.1177/21582440211003865
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