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Issuing a CAFR: suggestions for facilitating the process.

Accountability, clear reporting and timeliness remain high priorities as cost-effective methods guide the preparation and issuance of a CAFR.

An article in the October 1992 issue of Government Finance Review discussed the value of consistently issuing a Comprehensive Annual Financial Report (CAFR) or a Component Unit Financial Report (CUFR) and participating in the Government Finance Officers Association's Certificate of Achievement for Excellence in Financial Reporting Program from a rating agency's perspective. The authors, while acknowledging the budget-sensitive conditions facing most finance departments, cited the evidence of this value:

* useful information to the credit analyst;

* particularly key trend data and economic base, desirable financial statements and disclosures that are consistently prepared;

* confidence in a government's management and financial reports due to consistent receipt of the Certificate of Achievement; and

* tools to keep in touch with the marketplace and keep it up to date.

They promoted preparation of the CAFR/CUFR and the consistent receipt of the Certificate of Achievement as essential priorities, despite budgeting constraints.

The following article continues that dialogue by offering suggestions on how a government can issue a CAFR more easily, quickly and less expensively. This advice applies to a government that is considering issuing a CAFR for the first time, as well as a government currently issuing a CAFR that may discontinue this practice. The authors believe that a government cannot afford not to issue a CAFR.

Given that accountability and clear reporting are to remain high priorities, it is appropriate to explore more cost-effective methods of meeting these performance standards. For those government finance officials still considering not moving forward, and for those who seek to minimize their related costs, this article's suggestions for preparing and publishing a CAFR may provide a more cost-effective result without sacrificing this important marketplace tool or a government's reception and clout in that marketplace.

Getting Started

Planning and preparing to issue a CAFR begins at least six months in advance of the fiscal year end. Assigning a project coordinator is the first step to ensuring a smooth flow of the process. It is critical that top management emphasize to all concerned staff the importance of the project and the authority of the coordinator over the project. By so doing, all staff will understand the priority of the project and the importance of providing information in a timely manner.

Following is a suggested time frame for issuing a CAFR within six months of the end of the fiscal year--the deadline imposed by the Certificate of Achievement Program for CAFR submission.

Steps in the Production Process

Six Months Prior to Year End. The coordinator is responsible for:

* drafting a table of contents,

* determining the sources of information,

* identifying the members of the project team,

* proposing a production schedule of assignments and completion dates, and

* arranging for pension/actuarial information.

This initial phase of the CAFR preparation includes contacting other entities that have issued CAFRs and have received the Certificate of Achievement, especially entities that are in the same state or share the same tax base. Discussions with project coordinators at these entities can provide invaluable information on how to proceed. Obtaining copies of their CAFRs may provide a variety of samples to assist in determining a CAFR's content and possibly some sources of data.

Upon approval of the table of contents by the project team, the coordinator assigns tasks to the appropriate team member. Assignments are best made in logical groupings, such as bonded debt, tax information, financial information, etc., to avoid duplication of effort.

A key issue is the timely completion of the annual audit. Auditors should be contacted at this time to determine if their report will be issued well before the six-month deadline and, hopefully, to obtain their commitment to this completion date.

To resolve financial reporting issues and problems early, a draft of the financial statement format should be prepared as soon as possible so that it will be ready for update immediately after year-end close. It must incorporate all new reporting requirements.

Arrangements to get necessary pension disclosure information from the public employee retirement system or the plan's actuary are made at this time. The appropriate people need to know what information will be required and when.

Many statistical section tables contain 10 years of data. The prior nine years' data can be compiled before the end of the fiscal year. Once completed, there will be a minimum of effort involved in compiling the most current year's data as it becomes available. Any problems with obtaining data will have a better chance of being resolved by allowing ample time to work out a solution.

The use of microcomputers greatly increases efficiency and reduces the cost of CAFR preparation from year to year. Using spreadsheet software for the financial and statistical section data saves a great deal of time by calculating totals and percentages and providing a template for future years.

In order to ensure compliance with all requirements for CAFR presentation, a copy of the GFOA Special Review Committee CAFR Checklist should be obtained and referred to as report sections are prepared. The checklist is available from GFOA upon request as part of the "new participant" packet.

A determination must be made as to whether the report will be printed in-house. The available budget for producing the CAFR will drive some decisions. If the budget is tight, pages and production costs should be kept to a minimum, An estimate of time required to print reports needs to be obtained and worked into the production schedule.

When issuing a CAFR for the first time, a government might emphasize the minimum requirements necessary to receive the GFOA certificate. Quality, not quantity, is the key. In future years, expansion of some sections may be considered if the additional data will be of use to the user.

Two Months Prior to Year End. Print services, if necessary, are put out for bid. Once the vendor is selected, a firm commitment of the time required to print the report should be obtained and the absolute last day for completion and submission of the CAFR to the printer determined. It is advisable to schedule at least a week, if not a two-week, buffer between the six-month deadline and the date the report will be back from the printer.

Within Two Months After Year End. Financial statements and the related notes should be completed as soon as possible to expedite the completion of the annual audit.

The first draft of the letter of transmittal should be completed and available for review by the project team for content, as well as for typographical and grammatical errors. Some data will need to be filled in later once other financial statements and statistical tables are completed. Word processing software for both the letter of transmittal and notes to the financial statements provides the easiest, fastest and most accurate means of making changes for both the current year and future years. Charts and graphs are recommended for inclusion in the letter of transmittal, as they are a user-friendly means of presenting comparative data.

Within Two Months of the CAFR Deadline. All statistical section tables should be completed. Data from outside sources may be the most difficult to obtain on a timely basis. If the availability of statistical information for the current fiscal year will delay the publication of the CAFR, staff can consider using the prior fiscal year's data as the tenth year of information and explain in a note that it is the most recent information available.

The transmittal letter also should be completed with all references to amounts from other sections of the report filled in.

Within One Month of CAFR Deadline. The annual audit should be completed at this time and any audit adjustments incorporated into all sections of the CAFR.

It is important to schedule in-house reviews of the CAFR before the final printing. All amounts should be cross-referenced, totals footed, percentages recalculated and numbers traced to the source documents. All pages are then proofed for typographical and grammatical errors. Additionally, the CAFR should be reviewed against the GFOA Special Review Committee's CAFR Checklist in its entirety. The CAFR then should be read for content: Is it meaningful, useful and easy to read/understand?

The GFOA application form should be prepared by the time the report goes to print.

Production Pointers

Financial reporting can be streamlined by:

* eliminating or combining smaller funds;

* avoiding reporting insignificant amounts and unnecessary detail;

* eliminating unnecessary, insignificant or excessive disclosures and blank pages;

* issuing a separate budgetary report if budgetary comparisons are lengthy;

* consolidating individual fixed asset categories (i.e., Land, Buildings, Equipment, etc.) into one single line item, entitled, "Property, Buildings and Equipment" when preparing the balance sheet;

* rounding to thousands of dollars;

* including parenthetical disclosures (e.g., "construction in progress") in the footnotes; and

* reclassifying immaterial balances to other line items to eliminate superfluous categories.

One further idea in streamlining the reporting process is to standardize footnotes. This eliminates unnecessary retyping, facilitates updating for new accounting promulgations and enables a consistent footnote format from year to year. The above pointers to streamline financial reporting help both the preparers and the users.

Cost-cutting Tips

The use of the microcomputer software greatly enhances the efficiency with which the report is produced, and it also provides a means of cutting preparation time and printing costs. With quality output, it is possible to print the reports in-house, which will eliminate the need for outside typesetting and printing services.

If the decision is made to contract services to print the report, some cost-cutting tips are to:

* use the same typesetter/printer each year,

* minimize the number of pages to be typeset,

* keep the format simple by avoiding photographs and color pages, and

* determine the number of copies needed carefully and print extras only if cost-effective.

Summary

In light of the fact that budget dollars are diminishing, yet fiscal accountability is increasing, the CAFR/CUFR have been proven to be essential tools for governments to demonstrate creditworthiness and reliability. Further, the attainment of a GFOA Certificate of Achievement for Excellence in Financial Reporting has become a hallmark of professionalism for government management teams.

The annual preparation of the CAFR/CUFR does not have to be an expensive, time-consuming or tedious task. The suggestions offered here will support a more cost-effective and ultimately successful CAFR/CUFR issuance.

RUFUS GLASPER, CPA, is associate vice chancellor for financial operations at the Maricopa County Community College District. JAMES M. WILLIAMS, CPA, is a partner with Ernst & Young in Cleveland, Ohio. Both authors serve on the GFOA's Special Review Executive Committee.
COPYRIGHT 1993 Government Finance Officers Association
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993 Gale, Cengage Learning. All rights reserved.

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Title Annotation:comprehensive annual financial report
Author:Glasper, Rufus; Williams, James M.
Publication:Government Finance Review
Date:Oct 1, 1993
Words:1763
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