How to Achieve Excellence in One Single Bound
by Pamela W. Baker, CPA
By
the time you read this article your budget should be approved, GASB 34
should be under control, Your Schools Your Money seems to be
manageable, at least for now, so you have time on your hands with
nothing to do and the itch for a new project! Of course, you could take
an extra week of vacation, enjoy a few long lunches, or you could
undertake a Comprehensive Annual Financial Report (CAFR). The good news
is that a CAFR report is well within the reach of a district that has
been through the GASB 34 reporting process.
Now
more than ever the CAFR is an easier goal for districts to achieve,
thanks to GASB 34 --- yes, THANKS to GASB 34. The CAFR is a report
designed by and promulgated by the Government Finance Officers'
Association (GFOA) and the American Society of Business Officials
(ASBO) which seeks to communicate financial and related matters of a
governmental entity at a high standard of excellence. Districts who
submit a completed CAFR to the GFOA and ASBO are eligible, once their
reports are reviewed, to receive a Certificate of Excellence in
Financial Reporting award. This prestigious award is presented publicly
and serves to demonstrate an entity's commitment to the highest
standard of financial reporting. Not only does this award provide
prestige and recognition for you and your district, but it is widely
lauded by bond rating agencies as tantamount to a well run
organization, which can only bear positively on bond ratings.
But
why take this on now? Why, also, does GASB 34 make the process better?
To answer those questions, we first need to understand the required
components of a CAFR. The CAFR contains four basic components, or
sections.
The
first section of the CAFR is the introductory section. Included in this
section is general information on the district including a transmittal
letter, an organization chart, listing of key officials and employees,
and other relevant information (i.e., map of the district). Most of you
would have at your fingertips all but the transmittal letter. This is
where the benefits of GASB 34 come into play. Under pre-GASB 34 days,
the transmittal letter became a huge undertaking because it was
designed to, in a narrative format, tell the financial story of an
organization. Relevant components included a list of required financial
information, discussions related to the financial condition of the
entity, analysis of current compared to prior year financial
information, discussions related to capital assets, debt, and budgetary
performance. Additionally, the transmittal letter included a general
discussion of the financial structure of the organization and future
prospects. If you have not already seen the connection, the
Management's Discussion & Analysis (MD&A) included in GASB 34
statements includes about 90% of the transmittal letter information.
Therefore, the transmittal letter now becomes a much smaller
undertaking and easier preparation now that GASB 34 has kicked in. Key
elements of a transmittal letter prepared post-GASB 34 include the
formal transmittal of the CAFR, profile of the district, information
useful in assessing the district's financial condition, and any awards
and acknowledgments.
The
second section of the CAFR is the financial section. This section
includes the independent auditor's report on the financial statement
audit, the MD&A, the basic financial statements, any required
supplementary information (RSI), and combining and individual fund
presentations and supplementary information. In order to meet the
requirements of this section, the only additions to your audited report
are a few additional combining and individual fund financial statements
- for example, if you have multiple nonmajor funds in the financial
statements that appear in front of the footnotes, you would need to
prepare combining statements to reflect the individual funds that
comprise those totals. These statements are included behind the
footnotes.
The
last section of the CAFR includes certain statistical information. The
purpose of statistical information is to provide the reader of the CAFR
with supplementary data and trends over an extended period, usually 10
years or more. However, some information covers only a single period.
Examples of statistical information include 10-year schedules of
expenditures by function and revenues by source, property tax levies
and collections, computation of legal debt margin, and a list of
principal taxpayers, as examples. For anyone who has ever had to work
through the issuance of bonds, much of this information would be
included in your bond offering and therefore would be readily available
to you.
The
additional burdens placed on business offices in school districts
across the Commonwealth have been tremendous over the past few years.
The long hours, funding issues, legislative focus, and taxpayer
initiatives, just to name a few, have necessitated tremendous resource
utilization of you and your staff. The preparation of a CAFR provides
an opportunity for this much forgotten department to receive some
recognition for a job well done. I encourage you to take a look at the
CAFR program. For additional information, you can visit the gfoa.org website, ask your auditor, or contact our firm, Barbacane, Thornton & Company.
