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The 2012 GAAFR – An Overview

This article provides a comprehensive overview of the 2012 GAAFR (Governmental Accounting, Auditing, and Financial Reporting), covering topics such as fund accounting, basic financial statements, specialized accounting applications, reporting beyond the basic financial statements, and internal control, auditing, and analysis.

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The 2012 GAAFR – An Overview

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  1. The 2012 GAAFR – An Overview

  2. An Overview Nature and scope – Complete rewrite – Coverage through GASB Statement No. 66 – GFOA best practices Structure – 5 parts • Subdivided into sections – 47 chapters - 9 appendices

  3. Chapters • More narrowly focused • Additional chapters for specialized guidance • Study aids provided for each chapter – Chapter in brief – Exercises

  4. The Five Major Parts I.Background and framework II. Fund accounting and the basic financial statements III. Specialized accounting applications IV. Reporting beyond the basic financial statements V. Internal control, auditing, and analysis

  5. I. Background and framework A. Basic background 1. Accounting, financial reporting, and the financial statement audit: overview 2. The government environment and its impact on accounting and financial reporting 3.Sources of governmental GAAP

  6. I. Background and framework B. The governmental financial reporting Model 4. Funds and fund types 5. Government-wide financial reporting 6. The primary government and its component units

  7. I. Background and framework C. Basic recognition principles 7. Measurement focus and basis of accounting 8. Categories of transactions and events and their recognition

  8. II. Fund Accounting And The Basic Financial Statements A. Governmental funds 9. Revenue recognition in governmental funds 10.Expenditure recognition in governmental funds 11.Other financing sources and uses 12.Asset and liability recognition in governmental funds 13.Governmental fund financial statements

  9. II. Fund Accounting And The Basic Financial Statements B. Proprietary funds 14.Enterprise funds 15.Internal service funds 16.Proprietary fund financial statements C. Fiduciary funds 17.Trust and agency funds 18.Trust and agency fund financial statements

  10. II. Fund Accounting And The Basic Financial Statements D. Government-wide financial statements 19.Converting and consolidating fund data 20.Government-wide financial statements E. Disclosure 21.Summary of significant accounting policies 22.Detailed note disclosures

  11. III. Specialized Accounting Applications 23. Benefits 24. Budgetary integration 25. Capital assets 26. Debt 27. Derivatives 28. Landfills and pollution remediation 29. Risk financing and insurance

  12. IV. Reporting Beyond The BasicFinancial Statements A. Required supplementary information (RSI) 31. Management’s discussion and analysis 32.Other RSI Budgetary reporting Infrastructure condition and maintenance data Postemployment benefit trend data Revenue and claims development trend data for public-entity risk pools

  13. IV. Reporting Beyond The BasicFinancial Statements B. The comprehensive annual financial report (CAFR) 33. Structure and contents of the comprehensive annual financial report 34. Supplementary budgetary reporting in the CAFR 35. The statistical section

  14. IV. Reporting Beyond The BasicFinancial Statements C. Specialized entities 36. Postemployment benefit plans 37. Public entity risk pools 38. School districts (we will discuss in a minute) 39. States, investment pools, and stand-alone business-type activities D. Other reporting 40.Popular reporting 41. Service efforts and accomplishments reporting

  15. V. Internal Control, Auditing, And Analysis A. Internal control 42. The comprehensive framework of internal control 43.Monitoring and the periodic evaluation of internal control

  16. V. Internal Control, Auditing, And Analysis B. Auditing and analysis 44. The financial statement audit 45. The Single Audit 46.Other types of auditing Performance auditing Internal auditing 47. Analyzing local government financial statements

  17. Appendices A. Illustrative journal entries B. Illustrative trial balances C. Illustrative adjustments worksheet D. Illustrative CAFR E. Illustrative accounts, classifications, and descriptions

  18. Appendices F. Responses to exercises G. Glossary H. Acronyms I. General index

  19. Format • New size (7” x 10”) • Appendix D available electronically

  20. Chapter 38 – School Districts • The Reporting Entity • Basic Financial Statements • Conversion Of A School Building To Some Alternative Use • Commodities Donated To A School Lunch Program • A Grant For A Single Program Accounted For In More Than On Function • Classification Of Tuition Revenue

  21. Chapter 38 – School Districts • Donated Services • Annualized Payroll • Fund Financial Statements • Comprehensive Annual Financial Report • Letter Of Transmittal • Statistical Section

  22. The Reporting Entity • A independent school district is a legally separate entity, whereas, a dependent school district is part of the legal entity of the sponsoring government • The criteria used to evaluate a charter school as a potential component unit are the same as those used to evaluate any other potential component unit • In practice, charter schools normally do not quality for inclusion as component units (not true in Georgia)

  23. The Reporting Entity • Charter Schools – The reporting entity includes nine charter schools. Charter schools were created by the Georgia General Assembly to increase student achievement through academic and organizational innovation by encouraging local school systems to utilize the flexibility of performance based contract known as a “charter.” • Pursuant to Georgia Statute 20-2-2062, charter schools are considered public schools and are entitled to receive equal treatment as a public school. The source of funding for public schools includes the State of Georgia Quality Basic Education allotment as prescribed in Georgia Statute 20-2-2068-1. Other resources are received from local, federal and other state grants, and donations. Charter schools within the School System’s boundaries receive allocations from the stated sources of revenue.

  24. The Reporting Entity • These charter schools are considered “Not for Profit Organizations” pursuant to Internal Revenue Code Section 501(c) (3). • Because the major portion of the funding for the charter schools comes through the School System, the School System is considered financially accountable for the charter schools. The financial activities of the charter schools have been presented discretely because they provide services to third-parties outside the School System.

  25. The Reporting Entity • It is common for public schools to be associated with one or more legally separate tax-exempt organization such as parent-teacher association or a booster club • These organizations should be included as discretely presented component units if they all of the meet the following criteria: • The resources of the organization entirely or almost entirely benefit the school district

  26. The Reporting Entity • The school district has access to the resources of the organization • The resources raised and distributed by the individual organization that is being evaluated as a potential component unit are significant to the school district • Normally the third criteria is not met

  27. The Basic Financial Statements • School districts use the same combination as general purpose governments

  28. Conversion of a School Building • A capital asset impairment should be recognized whenever a significant unexpected decline in the service utility of a capital asset occurs and that decline is considered permanent • Such a decline in service may result from a change in the manner or expected duration of uses of a capital asset

  29. Commodities Donated to a School Lunch Program • Considered nonexchange revenue • Should be recognized at their fair value as soon as the recipient school district has met all related eligibility requirements (normally met with the receipt of the commodities) • Should use the consumption inventory method • Any inventory at year-end would be reported as nonspendable fund balance

  30. A Single Grant for Multiple Functions • A single program may be accounted for in multiple functions – very common • If the function is not defined in the grant award, allocate to each on some reasonable basis

  31. Classification of Tuition Revenue • Charge generally designed to recover the cost of instruction and related administrative expense • Tuition revenue is a program revenue, classified as charges for services • The revenue should not be allocated between the functions, rather classified as instruction program revenue

  32. Contributed Services • Revenue if contributed services create or enhance nonfinancial assets (e.g.,volunteer improvements to a capital assets • The contributed service: • Requires specialized skills • Is provided by individuals possessing those skills and would typically need to be purchased if not provided by the donation

  33. Annualized Payroll • Although teacher salaries are paid over a twelve3 month period which does not coincide with the fiscal year, the salaries payable at June 30, should be booked at June 30.

  34. Fund Financial Statements • Student activity funds: • Special revenue versus agency versus general fund • Technically the use of an agency fund is not appropriate if these funds are used to support school programs • Agency funds may be used only in situations involving minimal managerial discretion • Scholarship funds: • Benefit individual students • Use a private purpose trust fund

  35. CAFR’s • Only a few distinguishing characteristics that reflect the unique environment in which they operate

  36. CAFR’s Letter of Transmittal • Scope of instructional activities (K-12) • Number of students • Types of programs • Relationship to other governments • How charter schools are funded and their relationship to the reporting district • Projected enrollment • Age of school buildings

  37. CAFR’s Statistical Section • Ratios unique to School Districts • Cost per student • Teacher student ratio • Percentage of student lunches subsidized • Information on individual school buildings • Age • Square footage • Capacity • Percentage of capacity in use

  38. CAFR’s Statistical Section • Information on Teachers • Salary ranges • Number of teachers in each salary range • Average salary • Educational levels

  39. We Are Finally FinishedAny Questions pglick@mindspring.com

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