Comprehensive annual financial report

Accountancy
Key concepts
Accountant · Accounting period · Bookkeeping · Cash and accrual basis · Cash flow forecasting · Chart of accounts · Journal · Special journals · Constant item purchasing power accounting · Cost of goods sold · Credit terms · Debits and credits · Double-entry system · Mark-to-market accounting · FIFO and LIFO · GAAP / IFRS · General ledger · Goodwill · Historical cost · Matching principle · Revenue recognition · Trial balance
Fields of accounting
Cost · Financial · Forensic · Fund · Management · Tax (U.S.)
Financial statements
Balance sheet · Cash flow statement · Statement of retained earnings · Income statement · Notes · Management discussion and analysis · XBRL
Auditing
Auditor's report · Financial audit · GAAS / ISA · Internal audit · Sarbanes–Oxley Act
Accounting qualifications
CA · CPA · CCA · CGA · CMA · CAT · CFA · CIIA · IIA · CTP

A Comprehensive Annual Financial Report (CAFR) is a set of U.S. government financial statements comprising the financial report of a state, municipal or other governmental entity that complies with the accounting requirements—generally accepted accounting principles (GAAP)—promulgated by the Governmental Accounting Standards Board (GASB). The U.S. Federal Government adheres to standards determined by the Federal Accounting Standards Advisory Board (FASAB).

A CAFR is "compiled" by a state, municipal or other governmental accounting staff and "audited" by an external American Institute of Certified Public Accountants (AICPA) certified accounting firm utilizing GASB requirements. It is composed of three sections: Introductory, Financial and Statistical. It combines the financial information of fund accounting and Enterprise Authorities accounting.

History

The National Committee on Municipal Accounting (NCMA) was formed in 1934 by the Government Financial Officers Association to create accounting standards. As a result of its work, the 'Principles of Municipal Accounting', the predecessor to the CAFR, was created. The successor to the NCMA, the National Council on Governmental Accounting (NCGA), issued 'Governmental Accounting, Auditing and Financial Reporting', which is the basis of the format for the current standard. This document, known as the "Blue Book", and its successors documented the CAFR accounting structure and provided standardization and example documents. By 1946, the various levels of government--federal, state, local and municipal—each began producing a CAFR to catalog an accurate picture of institutional funds, enterprise or financial holdings, assets and total investment incomes for those government and nongovernmental entities using the report. This measure is above and beyond the budget process and replaced what was regularly an "off-the-books" practice called the "general fixed-asset account group". General Purpose government "budget" reports did not reflect accounting of this financial data, only reporting on the budget or "rainy day" funds or pension fund investments. By the 1970s, the CAFR became the nationwide paradigm for local government accounting.

The resulting CAFR is presented to the GFOA, which conducts each year a review of applicant local government CAFRs and upon review awards their Certificate of Achievement Award for Excellence in Financial Reporting to those local governments that are in compliance with their CAFR accounting standards of preparation. Presently, accounting principles for government entities are set by transmittal letters issued to local governments by the GASB.

Differences between a general budgets and a CAFR

The primary difference between a budget and a CAFR is that where the budget is a plan for the a fiscal period (often year) primarily showing where tax income is to be allocated, the CAFR contains the results of the period (year) with previous years accumulations. A CAFR shows the total of all financial accounting that a general purpose budget reports does not. The CAFR contains a section that provides a comparison of period budget and actual. Additionally, the CAFR gives a detailed showing of investment accounts by category reflecting balances over previous years.

A Government budget document is a blueprint for a "specific grouping" of government agencies' spending over the course of an annual financial period. General Purpose Budgets contain both the spending categories of specified units of government, such as school districts, social services, transportation, police, fire, and park services; along with estimates of revenues expected to occur during the year, such as investment return; overrides of money from the previous year, and tax payments. They are usually more limited to the expected costs of running the aforementioned government operations through tax income as opposed to describing the status of any government fixed assets and investment wealth.

A CAFR is a report of the complete overall financial results of both those "specific groupings" of government agencies that appear in the current fiscal year General Purpose Budget and all other agencies and departments. These can be autonomous, enterprise(for example government or city owned golf courses), recycling, water, sewer, and financial management - often these agencies were created with the inception of that local, state or government. The CAFR provides information about all of these other government agencies that may have their own budgets and separate investment accounts but their financial holdings are not combined with the general purpose budget that the same government presents to the public. The CAFR, or as it is called in CANADA CanFR can be used along with a budget document to compare the organizations total financial standing to the annual general purpose budget. The CAFR is the complete showing of the financial investment and income records from all sources, that reflects what has developed over decades whereas a budget report is an inferior document to the CAFR being that it is primarily focused on what revenue is expected to be brought in and spent for just the year.

In contrast with the rules applying to governments, publicly traded US companies are required by the U.S. Securities and Exchange Commission (SEC), to provide their annual financial report (AFR) to every shareholder each year. Some publicly funded non-profits(or Not-for-profit) quasi-government private associations have claimed that they are not subject to the public records laws and that their reports are not subject to open records acts.^{[citation needed]} However, news stories covering the Kentucky Association of Counties whose spending came under scrutiny by the Lexington Herald-Leader exposed these types of entities as well as their surpluses and claimed spending excesses using money acquired from government fees for products like municipal insurance at premium rates which build surpluses beyond the needs of the entity.

See also

• GFOA
• California Society of Municipal Finance Officers (CSMFO)
• GASB
• Single Audit
• Nationalization
• Government Accountability Office
• Financial statements
• Working Group on Financial Markets
• Revenue
• Government-owned corporation
• Budget theory
• Comprehensive income
• Permanent fund
• Public company
• Derivative (finance)
• Regulatory capture
• US national security privatization
• Government Accountability Office investigations of the Department of Defense

External links

• Governmental Accounting Standards Board (GASB) Web Site
• American Institute of Certified Public Accountants (AICPA) Web Site
• "The Biggest Game In Town" - Walter Burien's January 2000 documentary
• "The Only Game in Town" - Walter Burien's January 2010 documentary 10 min trailer
• 65 years of the Blue Book - a detailed history of how the CAFR standards were developed by GFOA.
• Treasury Direct FedInvest site
• GAO History Government Accounting Office