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Running head: COMPREHENSIVE ANNUAL FINANCIAL REPORTING BRIEFING

Comprehensive Annual Financial Report Briefing Mayra Samara Moura ACC/548 May 28, 2012 Lori Vance

COMPREHENSIVE ANNUAL FINANCIAL REPORTING BRIEFING Comprehensive Annual Financial Report Briefing

The Comprehensive Annual Financial Report (CAFR) is a very detailed presentation of the states financial condition. It has the objective of reporting the states activities and balances for each fiscal year, giving citizens and other interested parties extremely useful information in regards to the financial health of the state. For this paper, the State of Colorado is used in order to provide with resourceful information about the CAFR reporting method. The CAFR for the State of Colorado requires proven and verified statistical evaluation of the current population of the state and different classes of citizens. This type of statistical evaluation is not used, commonly, by for-profit accounting. The budget within the CAFR is basically the result of adding, in the same report, all government agencies and their spending for the course of the year. The major differences between not-for-profit and for-profit financial accounting methods rely on the fact that both 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. The CAFR is important for citizens, especially, since it demonstrates how well the state government is applying public funds, how it is reporting these accounts and how demographic information can affect the overall financial health of the state. The State of Colorado CAFR is housed within a public website in the main page of the state. The website gives citizens information about this important document and which sections are presented within the report. For instance, the Colorado Department of Personnel and Administration, explains to citizens and interested third parties that the aforementioned CAFR is to

COMPREHENSIVE ANNUAL FINANCIAL REPORTING BRIEFING

be presented in three separate and distinct sections named Introductory, Financial, and Statistical. The Introductory Section of the CAFR includes the State Controller's Letter of Transmittal, which provides a financial overview of the state, as well as the state's organizational chart. Secondly, the Financial Section includes the auditor's opinion, Management's Discussion and Analysis, the financial statements and accompanying notes, and supplementary information. The Statistical Section provides historical and demographic information about the state. A complete copy of the CAFR may be downloaded at the bottom of each recent fiscal year's CAFR page or below for prior years (Colorado Department of Personnel, 2012). According to the aforementioned report and its public website, the Colorados CAFR includes three budget-to-actual financial statements presented in the budget fund structure. The budget fund structure is based on the source of funding and includes appropriations from generalpurpose revenue, federal revenue, and all other cash revenue. The budget-to-actual financial statements are presented by the Department of Personnel and Administration at a highly aggregated level. The Budget-to-Actual Line Item Detail report shows the actual expenditures recorded and the related budget at the level of individual line items appropriated in the state's annual budget document. Operating and capital budgets are presented separately in the report. According to the Government Accounting Standards Board (GASB), instead of market forces, which exert a level of control over the operations in business enterprises in the for-profit accounting, the budget is the principal source of control over operations in government. The budget generally is a legal document that authorizes the government to utilize its resources to conduct operations and provide services. In contrast with budgets of business enterprises, which are internal, proprietary documents, budgets of governments are public documents that express public policy priorities and financial intent.

COMPREHENSIVE ANNUAL FINANCIAL REPORTING BRIEFING

Public funds and/or budgets are used to finance organizational entities and assist citizens in a variety of relevant social functions such as health, public assistance, education, etc. For government accounting, the stakeholders are different than for-profit accounting, especially due to the fact of how detrimental any accounting mistakes can be to a states general population, for example. The State of Colorado CAFR demonstrates how the funds are being applied towards different organizations within the state and the current levels of the budget. It gives enough information for citizens to determine how well funded the state current is and how government is using funds to allow for payment of the current fiscal year obligations. The introductory section of the CAFR presents the reader with a letter from the State Financial Controller responsible for preparing the aforementioned document. In addition, the introductory section details all the organizations covered and key government officials responsible for each of the organizations listed. Normally, in the for-profit financial statements, a letter from the CEO may/or may not open the financial documents. The financial section is opened by an opinion of the financial statements presented and, in detail, which accounts and standards they were assessed under. Finally, the statistical section brings information about Financial Trends (to help the reader understand how the States financial performance and fiscal health have changed since the last report), Revenue Capacity (to help the reader assess the factors affecting the States ability to generate and retain major revenue streams), Debt Capacity (to help the reader assess the sustainability of the States current levels of debt) and Demographic Information (to help the reader understand the environment within which the States financial activities took place for the fiscal year assessed). As demonstrated, the information within the State of Colorado CAFR provides reader with a large array of information in an easy to follow manner.

COMPREHENSIVE ANNUAL FINANCIAL REPORTING BRIEFING Conclusion

The CAFR for the State of Colorado demonstrates how different financial reporting for government agencies and for-profit companies are in the United States. There are a large number of differences since the funds used by government to fulfill obligations related to public and social types. Due to the need of transparency in the government administration of funds, the CAFR provides information to citizens and any third interested parties about how well the funds are being taken care of and applied towards important sectors of the state.

COMPREHENSIVE ANNUAL FINANCIAL REPORTING BRIEFING References

Governmental Accounting Standards Board (2012). Why Governmental Accounting and Financial Reporting is-and should be-different. Retrieved from http://www.gasb.org/jsp/GASB/Page/GASBSectionPage&cid=1176156741271 State of Colorado (2011). Comprehensive Annual Financial Report. Retrieved from http://www.colorado.gov/dpa/dfp/sco/CAFR/cafr11/cafr11.htm

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