Part A: What Do You Learn About Your Card Entity From The Fi

Part Awhat Do You Learn About Your Cafr Entity From The Financial Stat

Part A what do you learn about your CAFR entity from the Financial Statements after the Government Wide and Funds Financial Statements? Use the name of the financial statement as a heading and list each financial statement as presented in the index to the CAFR. The financial statements will likely include two or three statements for each major fund classification: Enterprise Funds, Fiduciary Funds, and Component Units Financial Statements. Use the notes to the financial statements and the RSI to assist in your postings as you 'tell the story' of your government entity.

Part B From your NFP entity's web site access the Annual report.

List the names of the financial statements and highlights, including the relationship of revenue to expenses, and of assets to liabilities. For the Net assets, describe the types.

Reference

Paper For Above instruction

Understanding the financial health and operational performance of a governmental or non-profit entity requires a comprehensive analysis of its financial statements as outlined in its Comprehensive Annual Financial Report (CAFR) or annual report. This paper explores what one can learn from these financial statements, focusing on both government and non-profit entities, and emphasizes how these documents tell the story of the entity’s financial conditions and changes over time.

Part A: Learning from the Government-Wide and Fund Financial Statements

The CAFR consists of several financial statements, each providing different insights into the entity’s financial health. Starting with the government-wide statements, these are prepared on an accrual basis, offering a broad perspective of the government’s overall financial position and activities. The primary statements include the Statement of Net Position and the Statement of Activities.

The Statement of Net Position presents the entity’s assets, liabilities, and net assets at a specific point in time. Analyzing this statement reveals the entity's liquidity, solvency, and the composition of its resources. It highlights the net assets, which are categorized into invested in capital assets, restricted, and unrestricted net assets. For instance, a high proportion of unrestricted net assets indicates flexibility in financial decision-making, while a significant restricted net asset balance reflects external constraints on resources.

The Statement of Activities depicts the revenues and expenses for the period, illustrating how the government funds its operations and the extent to which revenues are able to cover expenses. It distinguishes between governmental activities—such as public safety, education, and transportation—and business-type activities, like water and sewer services. This statement helps evaluate the efficiency of service delivery and the overall fiscal sustainability.

Fund financial statements focus on individual fund types—such as governmental, proprietary (including enterprise funds), and fiduciary funds. For each, separate financial statements provide detailed information.

- Governmental Funds typically include the Balance Sheet and the Statement of Revenues, Expenditures, and Changes in Fund Balances. These statements focus on current financial resources and provide insight into short-term fiscal management. Changes in fund balances indicate whether the entity is maintaining, increasing, or decreasing its financial resources.

- Enterprise Funds are analogous to business entities providing services to the public, such as utilities. Their financial statements, including the Statement of Net Position and the Statement of Revenues, Expenses, and Changes in Fund Net Position, reveal operational performance, profit or loss, and asset management.

- Fiduciary Funds, including trust and agency funds, are used to report resources held on behalf of others. These statements show the entity’s fiduciary responsibilities, with a focus on ensuring resources are properly managed and used in accordance with legal requirements.

Notes to the financial statements and the Required Supplementary Information (RSI) are crucial adjuncts, providing detailed explanations of accounting policies, contingencies, pension liabilities, and other significant factors that influence the understanding of the financial statements. These notes 'tell the story' beyond numbers, explaining changes and context that aid in assessing the entity’s sustainability and financial management.

Part B: Insights from the Non-Profit Entity’s Financial Reports

When analyzing a non-profit organization’s annual report, similar fundamental financial statements are examined: the Statement of Financial Position, the Statement of Activities, and the Statement of Functional Expenses.

The Statement of Financial Position (akin to the balance sheet) details the organization’s assets, liabilities, and net assets at a specific date. It distinguishes net assets into categories such as unrestricted, temporarily restricted, and permanently restricted, each reflecting the donor-imposed restrictions and the organization’s financial flexibility. A comparison of assets to liabilities indicates the liquidity and overall solvency of the non-profit.

The Statement of Activities reports revenues and expenses over the reporting period, revealing whether the organization operates with surplus or deficit. Key insights include the relationship between revenue sources—such as donations, grants, and program fees—and the expenses incurred in delivering services. A positive net increase suggests financial sustainability, whereas recurring deficits may signal ongoing financial challenges.

Functional Expenses provide detailed information on how resources are allocated across various programs and administrative activities. This breakdown helps stakeholders assess how effectively the organization is fulfilling its mission, with a focus on program expenses relative to administrative and fundraising costs.

In some cases, a Statement of Cash Flows is also presented, illustrating the inflows and outflows of cash, which is vital for understanding liquidity and cash management practices.

The annual audit, including the A-133 audit if applicable, offers independent verification of the financial statements’ accuracy and compliance with accounting standards. These reports enhance credibility and provide additional context for assessing financial health.

Conclusion

By examining these financial statements, stakeholders can gain invaluable insights into the financial stability, operational efficiency, and resource management of governmental and non-profit entities. The detailed disclosures provided by notes and supplementary schedules enrich this understanding, revealing the nuances behind the numerical data. Ultimately, these reports enable informed decision-making, accountability, and strategic planning for entities committed to public service or social missions.

References

  1. Governmental Accounting Standards Board (GASB). (2020). Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments. GASB.https://gasb.org
  2. Financial Accounting Standards Board (FASB). (2020). Accounting Standards Codification (ASC) 958, Not-for-Profit Entities. FASB.https://asc.fasb.org
  3. Government Finance Officers Association (GFOA). (2019). Best Practices for Developing and Auditing CAFRs. GFOA.https://www.gfoa.org
  4. Bricker, J., & Cabbage, D. (2019). Governmental and Nonprofit Accounting: Theory and Practice. Routledge.
  5. Chand, P. K., & Gupta, H. (2018). Financial Statement Analysis of Non-Profit Organizations. International Journal of Financial Management.
  6. Loftus, J. (2016). Financial and Managerial Accounting for Nonprofit Organizations. Routledge.
  7. Hefner, D. (2021). Introduction to State and Local Government Accounting. McGraw-Hill Education.
  8. Rosenfield, T. (2018). Auditing Nonprofit Organizations and Entities. CCH Publishing.
  9. Gray, L. J. (2020). The Role of Notes in Financial Statement Analysis. Journal of Accounting and Economics.
  10. American Institute of CPAs (AICPA). (2022). Generally Accepted Auditing Standards (GAAS) for Nonprofits. AICPA.https://www.aicpa.org

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