Comprehensive Annual Financial Report

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Comprehensive Annual Financial Report

Tyies Wells

ACC/548

June 27, 2010
William J. Carter III, MSA

Comprehensive Annual Financial Report

The Office of Financial Management provides vital information, fiscal services and policy support that the Governor, Legislature and state agencies need to serve the people of Washington State (Investopedia, 2010). Included in this briefing, a comparison of the governmental and for-profit financial accounting will be discussed, an understanding of the government reporting and reporting entity, and an overview of the Management Discussion & Analysis report for the state of Washington. The Comprehensive Annual Financial Report (CAFR) requires statistical evaluation, whereas for-profit accounting does not. A government budget document is a blueprint for a specific grouping of government agencies spending over the course of an annual financial period. The major differences between governments and for-profit financial accounting are they 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 (FASB, 2010). A reporting entity is any unit or activity that uses resources to provide goods or services. A reporting entity is an organization that is obliged to prepare general purpose financial reports (PSAB, 2010). The government uses the CAFR along with a budget document to compare the total financial standing to the general purpose annual budget with every thing else. The CAFR shows the total of all financial accounting the basic general purpose budget reports do not and should not be confused with any rainy day funds that are but one of many investment accounts included in government budgetary reports and process. In November 2007, Washington State voters ratified Engrossed Substitute Senate Joint Resolution 8206, amending the state’s Constitution and establishing the Budget Stabilization Account (BSA). On July 1, 2008, the balance in the Emergency Reserve Fund of $303 million was transferred to the newly created BSA. An additional $115 million was transferred from the General Fund to the BSA in Fiscal Year 2009 in accordance with the provisions of the Constitution. The Constitution details a limited number of circumstances under which funds can be appropriated from the BSA, one of which is a favorable vote of at least three-fifths of the members of each house of the Legislature (State of Washington, CAFR, 2009). The Management Discussion and Analysis section of the CAFR provides an overview of the previous year of operations and how the company fared in that time period. Management will usually also touch on the upcoming year, outlining future goals and approaches to new projects (Investopedia, 2010). The state of Washington’s MD&A offers a narrative overview and analysis of the financial activities for the fiscal year ended June 30, 2009. The information is presented in conjunction with the information include in the letter of transmittal and with the state’s financial statements. The three components discussed in the MD&A includes: 1: government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the state of Washington’s finances. The concept of government wide reporting is the most dramatic change in the new approach. This is a significant move because, until now, government followed only the modified-accrual basis of accounting. The change is important to potential lenders and taxpayers because of the need to capitalize and depreciate general capital assets or infrastructure. Information...
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