GAAFR 9.1

GAAFR 9.1 CSMFO San Francisco, California Wednesday, February 24, 2011

Overview of Presentation   

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History of the “Blue Book” Change in structure and format Comparison 2005 v. 2011 Detail on structure of 2011 GAAFR New GASB guidance incorporated Contents of individual chapters

History of the “Blue Book” Part 1

National Committee on Municipal Accounting (NCMA) 

Established in 1934 • Municipal Finance Officers Association (MFOA) 

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Later Government Finance Officers Association (GFOA)

First “Blue Book” issued in 1936 

NCMA Bulletin No. 6, Municipal Accounting Statements

National Committee on Governmental Accounting (NCGA)  

Founded in 1948 Second “Blue Book” issued in 1951 • NCGA Bulletin No. 14, Municipal Accounting and Auditing (1951)

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Third “Blue Book” issued in 1968 • Governmental Accounting, Auditing, and Financial Reporting 

First to bear the GAAFR title

Transition 

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National Council on Governmental Accounting established in 1974 Result • Prior to 1974 

“Blue Book” source of authoritative GAAP

• After 1974 

“Blue Book” no longer sets GAAP • Focus henceforth on practical application of authoritative standards

MFOA/GFOA   

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Fourth “Blue Book” issued in 1980 Fifth “Blue Book” issued in 1988 Sixth “Blue Book” issued in 1995 Seventh “Blue Book” issued in 2001 Eighth “Blue Book” issued in 2005 Ninth “Blue Book” issued in 2011

Summary of a 75-Year Tradition      

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1936 1951 1968 1980 1988 1995 2001 2005 2011

First “Blue Book” Second Blue Book Third Blue Book (first GAAFR) Fourth Blue Book Fifth Blue Book Sixth Blue Book Seventh Blue Book Eighth Blue Book Ninth Blue Book

Change in Structure and Format Part 2

Changes in Structure 

Shorter and more focused chapters • From 19 chapters to 47 chapters

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Integrated discussion of accounting and financial reporting • Accounting chapters (e.g., revenue and expenditure recognition in governmental funds) • Financial reporting chapter (e.g., governmental fund financial statements)

Changes in Structure (cont.) 

Separate chapters devoted to major topics • Postemployment benefits • Capital assets • Debt • Derivatives • Landfills and pollution remediation • Risk financing and insurance • Other specialized applications

Changes in Structure (cont.) 

Study materials • Previously provided in separate GAAFR Study Guide • Now included at the end of each chapter  

Summary (“chapter in brief”) Exercises • Multiple choice • True/false

Change in Format 

Current format • Same size as a typical CAFR 

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To permit reproduction of full-size illustrative CAFR (Appendix D)

New format • Smaller “manual” size • Illustrative CAFR provided on CD-ROM

Comparison 2005 v. 2011 Part 3

GAAFR 2005 

19 chapters • Introduction to governmental accounting (4) • Accounting (4) • Financial reporting (7) • Budgetary integration and performance measurement (2) • Internal control and auditing (2)

GAAFR 2011 

47 chapters 1. Background and framework (8) 2. Fund accounting and basic financial statements (14) 3. Specialized accounting applications (8) 4. Reporting beyond the basic financial statements (11) 5. Internal control, auditing, and analysis (6)

Detail on Structure of 2011 GAAFR Part 4

Part 1 – Background and Framework 

Basic background (3 chapters) • • •

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Overview of accounting/financial reporting/auditing cycle Impact of governmental environment Sources of authoritative guidance

The Governmental Financial Reporting Model (3 chapters) • • •

Funds and fund types Government-wide financial reporting Financial reporting entity

Part 1 – Background and Framework (cont.) 

Basic Recognition Principles (2 chapters) • Measurement focus and basis of accounting • Categories of transactions and events and their recognition

Part 2 - Fund Accounting and the Basic Financial Statements 

Governmental Funds (5 chapters) • • • • •

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Revenue recognition Expenditure recognition Other financing sources/uses Asset and liability recognition Financial statements

Proprietary Funds (3 chapters) • • •

Enterprise funds Internal service funds Financial statements

Part 2 - Fund Accounting and the Basic Financial Statements (cont.) 

Fiduciary Funds (2 chapters) • Trust and agency funds • Financial statements

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Government-wide Financial Statements (2 chapters) • Converting and consolidating fund data • Financial statements

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Disclosure (2 chapters) • Summary of significant accounting policies • Notes to the financial statements

Part 3 – Specialized Accounting Applications 

Specialized Accounting Applications (8 chapters) • • • • • • •

Postemployment benefits Budgetary integration Capital assets Debt Derivatives Landfills and Pollution remediation Risk financing and insurance

Part 3 – Specialized Accounting Applications (cont.) 

Other specialized applications • • • • • • • • • • •

Compensated absences Escheat property Grants Investments Joint ventures and similar arrangements Lease accounting Special assessments Sales and pledges of receivables Sales and pledges of future revenues Service concession arrangements Bankruptcies

Part 4 – Reporting Beyond the Basic Financial Statements 

RSI (3 chapters) • Management’s discussion and analysis • Budgetary reporting • Other RSI

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The CAFR (2 chapters) • Structure and Contents • The statistical section

Part 4 – Reporting Beyond the Basic Financial Statements (cont.) 

Specialized Entities (4 chapters) • • • •

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Postemployment benefit plans Public entity risk pools School districts States, investment pools, and specialpurpose governments

Other Reporting (2 chapters) • Popular reporting • Performance measurement reporting

Section 5 – Internal Control, Auditing, and Analysis 

Internal Control (2 chapters) • Comprehensive framework of internal control • Evaluating internal control

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Auditing and Analysis (4 chapters) • • • •

Financial statement audit Single Audit Other types of auditing Analyzing local government financial statements

Appendices   

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Glossary Illustrative Chart of Accounts Illustrative Journal Entries Illustrative Trial Balances Illustrative Conversion/ Consolidation Worksheet General Index Illustrative CAFR (CD-ROM)

New GASB Guidance Incorporated Part 5

Incorporation of New Guidance 

Termination benefits • GASB Statement No. 47 

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Chapter on postemployment benefits

Sales and pledges • GASB Statement No. 48 

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Chapter on other specialized applications

Pollution remediation obligations • GASB Statement No. 49 

Chapter on landfills and pollution remediation

Incorporation of New Guidance (cont.) 

Pension disclosure • GASB Statement No. 50 

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Chapter on note disclosure

Intangible assets • GASB Statement No. 51 

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Chapter on capital assets

Real estate held by endowments • GASB Statement No. 52 

Chapter on specialized applications

Incorporation of New Guidance (cont.) 

Derivatives • GASB Statement No. 53 

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Chapter on derivatives

Fund balance and governmental fund types • GASB Statement No. 54  

Chapter on fund types Chapter on governmental fund financial statements

Incorporation of New Guidance (cont.) 

GAAP hierarchy • GASB Statement No. 55 

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Chapter on sources of GAAP

Guidance incorporated from auditing standards • GASB Statement No. 56 

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Chapter on note disclosure

OPEB measurement • GASB Statement No. 57 

Chapter on postemployment benefits

Incorporation of New Guidance (cont.) 

Chapter 9 bankruptcies • GASB Statement No. 58 

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Chapter on specialized applications

Financial instruments • GASB Statement No. 59 

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Chapter on specialized applications

Service concession arrangements • GASB Statement No. 60 

Chapter on specialized applications

Incorporation of New Guidance (cont.) 

Financial reporting entity changes • GASB Statement No. 61 

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Chapter on financial reporting entity

Codification of applicable privatesector guidance • GASB Statement No. 62  

Chapter on sources of GAAP References throughout publication

Incorporation of New Guidance (cont.) 

Guidance on Medicare Part D • GASB Technical Bulletin 06-1 

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Chapter on postemployment benefits

Guidance on calculating the annual required contribution • GASB Technical Bulletin 08-1 

Chapter on postemployment benefits

Contents of Individual Chapters Part 6

Chapter 1 - Overview  

Accounting Financial reporting • Internal • Special-purpose external • General-purpose external 

Methods of communicating financial information • GASB Concepts Statement No. 3

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Definition of financial statement elements • GASB Concepts Statement No. 4

• Financial statement audit

Chapter 2 – Impact of the Governmental Environment  

Structure of state and local government Key environmental differences • • •

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Profit motive v. service motive Return on investment v. stewardship Appropriated budget v. financial plan

Impact of environmental differences • • •

Use of more than one measurement focus Fund accounting Budgetary reporting

Chapter 3 – Sources of Governmental GAAP    

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Nature and purpose of GAAP Legal authority to set standards Development of GAAP Structural framework for standard setting Due process GAAP hierarchy Defining a government Original pronouncements v. codification

Chapter 4 – Funds, Fund Types, and Interfund Activity 

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Nature and purpose of fund accounting Number of funds principle Fund categories Fund types Interfund activity

Chapter 5 – Government-Wide Financial Reporting  

Background Relationship to fund financial statements • From funds to activities • From one measurement focus and basis of accounting to another • From aggregation to consolidation

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Focus on direct cost

Chapter 6 – The Primary Government and its Component Units    

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Overview of the financial reporting entity The primary government Identifying component units Component units v. fiduciary funds Potential for dual inclusion Presenting component units Component units with a different fiscal year end Transactions v. interfund activity Separate reporting by component units

Chapter 7 – Measurement Focus and Basis of Accounting 

Measurement focus • Effect on statement of position • Effect on statement of resource flows

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Basis of accounting Application to specific sets of financial statements

Chapter 8 – Categories of Transactions and Events 

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Exchange and exchange-like transactions Nonexchange transactions Extraordinary and special items Direct changes to equity

Chapter 9 – Revenue Recognition in Governmental Funds   

Background General application Specific applications

Chapter 10 – Expenditure Recognition in Governmental Funds   

Background Basic rule Exceptions to basic rule

Chapter 11 – Other Financing Sources and Uses   

Nature and purpose Other financing sources Other financing uses

Chapter 12 – Asset and Liability Recognition and Measurement in Governmental Funds   

Background Governmental fund assets Governmental fund liabilities

Chapter 13 – Governmental Fund Financial Statements  

Focus on major funds Basic financial statements

Chapter 14 – Enterprise Funds Differences from private sector

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• • • • • • • • •

Transactions unique to the public sector

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• • 

Interest capitalization Capital asset impairments Refundings Compensated absences Postemployment benefits Cash flows reporting Segment reporting Changes in equity/net assets Categories of equity/net assets Connection fees Impact/developer fees

Regulated industries

Chapter 15 – Internal Service Funds   

Cost reimbursement Identity of customers Interest capitalization

Chapter 16 – Proprietary Fund Financial Statements  

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Statement of position Statement of revenues, expenses, and changes in fund net assets/equity Statement cash flows

Chapter 17 – Fiduciary Fund Accounting  

General considerations Practical applications

Chapter 18 – Fiduciary Fund Financial Statements   

General formatting issues Statement of fiduciary net assets Statement of changes in fiduciary net assets

Chapter 19 – Converting and Consolidating Fund Data  

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Overview Conversion of governmental fund data Consolidation (Dis)allocation - governmental activities

Chapter 20 – Government-Wide Financial Statements   

Scope of reporting Statement of net assets Statement of activities

Chapters 21 - 23 

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Summary of significant accounting policies Notes to the financial statements Pensions, OPEB, and termination benefits

Chapter 24 – Budgetary Integration   

Nature and purpose Budgetary accounts Budgetary journal entries

Chapter 25 – Capital Assets         

Definition Basic accounting and financial reporting Major asset classes Capitalizable costs Improvements v. repairs Valuation Impairments Depreciation/amortization Replacements and retirements

Chapter 26 - Debt      

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Basic accounting for debt Deep discount debt Refundings Demand bonds Special assessment debt Conduit debt Long-term borrowings within the primary government Proprietary fund debt

Chapter 27 - Derivatives   

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Definition and use Essential characteristics Hedging Reporting derivatives in the statement of position Reporting derivatives in the statement of resource flows Embedded derivatives

Chapter 28 – Landfill Closure and Pollution Remediation 

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Landfill closure and postclosure care costs Pollution remediation obligations

Chapter 29 – Risk Financing and Insurance  

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Background Basic accounting for claims and judgments Risk financing activities in fund financial statement Insurance Participation in a public entity risk pool

Chapter 30 – Other Specialized Applications        

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Compensated absences Grants (recipient perspective) Investments Lease accounting Special assessments Sales and pledges of receivables Joint ventures and similar arrangements Sales and pledges of future revenues Escheat property Service concession arrangements Bankruptcies

Chapter 31 – Management’s Discussion and Analysis   

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Background Content Component units Relationship to letter of transmittal Relationship to financial statement audit

Chapter 32 – Other RSI  

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Budgetary reporting Infrastructure condition and maintenance data for governments using the modified approach Trend data on postemployment benefits Trend data on revenue and claims development for public-entity risk pools

Chapter 33 – Structure and Contents of the CAFR   

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Purpose Structure Contents GFOA Certificate Program

Chapter 34 – Supplementary Budgetary Reporting Within the CAFR 

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Scope of supplementary budgetary comparisons Mandatory comparisons v. supplementary comparisons Legal level of budgetary control

Chapter 35 – Statistical Section  

Background Types of information to be presented • • • • •

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Information on financial trends Information on revenue capacity Information debt capacity Demographic and economic information Operating information

Additional considerations

Chapter 36 – Postemployment Benefit Plans 

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Requirement to report individual plans separately Basic financial statements Notes to the financial statements Required supplementary information Supplementary schedules CAFR • •

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Investment section Actuarial section

Defined contribution plans Other recommendations from GFOA

Chapter 37 – Public-Entity Risk Pools  

Background Accounting and financial reporting

Chapter 38 – School Districts   

Basic financial statements Fund financial statements CAFR

Chapter 39 – States, Investment Pools, and Special-Purpose Governments   

States Investment pools Special purpose governments

Chapter 40 – Popular Financial Reporting   

Background Characteristics of an effective PAFR GFOA PAFR Program

Chapter 41 – Performance Measurement Reporting    

Nature of performance measurement reporting Tie to budgeting Broader context of performance management Guidance

• National Advisory Commission on State and Local Budgeting • National Performance Management Advisory Commission • GFOA best practice • GASB suggested guidelines

Chapter 42 – Comprehensive Framework of Internal Control  

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Nature and purpose of internal control Respective responsibilities of management, governing board, and independent auditors Management objectives Elements of a comprehensive framework From internal control to enterprise risk management • Expansion of management objectives and control elements

Chapter 43 – Evaluating Internal Controls 

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Core element of monitoring element of internal control Responsibility Process Resolution

Chapter 44 – Financial Statement Audit  

Nature and purpose Roles • Management/internal control/governing board/audit committee/independent auditor

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Key concepts Scope Relevant auditing standards Auditor reporting

Chapter 45 – Single Audit   

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Nature and purpose Applicability Major program focus Specialized reporting • Internal controls over federal awards • Compliance for federal awards

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Reporting package

Chapter 46 – Other Types of Auditing  

Performance auditing Internal auditing • Diversity of roles • Structure of the internal audit function  

Report to management Report to audit committee

• Alternatives if separate internal audit function not feasible

Chapter 47 – Financial Statement Analysis 

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Limited relevance of private-sector techniques Focus of analysis • Near-term financing 

Focus on fund financial statements

• Financial position 

Focus on government-wide financial statements

• Economic condition 

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Focus on statistical section

Practical application