ACCTG PAPER - FINANCIAL STATEMENT_AUDIT REPORT REVIEW_REQUIREMENTS

FINANCIAL STATEMENT_AUDIT REPORT REVIEW_REQUIREMENTS

Select Columbus Muscogee, GA government review the financial statements and audit report for the Muscogee County, GA. The financial statements of the government you selected should have at least three (3) funds.

Refer to the Continuing Problem Homework for Weeks 1 through 3 for this assignment.

See below the Requirement for the Continuing Problem for Questions and Answers

Required Websites:

1. Columbus Muscogee GA CAFR - 2016

https://ted.cviog.uga.edu/financial-documents/sites/default/files//columbus_muscogee_consolidated_government_fy2016_cafr.pdf

2. City of Austin TX - CAFR - 2011

https://lmscontent.embanet.com/NEC/AC5620/Documents/city_of_austin_cafr_fy2011.pdf

Requirements

Write five to six (5-6) page paper in which you:

1. Compare and contrast the comprehensive annual financial report (CAFR) of the Columbus Muscogee GA government entity with the City of Austin report from Week 1 homework. In your comparison, include:

a. Publication method of the CAFR

b. Audit and budget information in the CAFR

c. The type of audit report issued

d. existence or non-existence of an internal audit function within the

Government entity

2. Prepare the analysis for the selected local government entity, including information on the introduction, financial section, and statistical section prepared in the city of Austin’s CAFR from Chapter 2.

3. Analyze the methods used by the selected local government entity in comparing the budget-to-actual reports. Your analysis should include an evaluation of the basis of accounting used for the budget and financial statements.

4. Analyze the sources of revenue on the selected local government. Your analysis should include information on both governmental and business-type activities of the government. In your report, be sure to examine

a. Property taxes and how they are accounted for

b. Other sources identified as primary revenue for the entity

c. Deferred revenue

d. Year-to-year variations in the tax levels of income

e. Various management discussion and analysis items of note

f. Information about the general fund

Assignment must follow these formatting requirements:

• Be typed, double spaced, using Times New Roman font (size 12), with one” margins on all sides; citations and references must follow APA format.

• Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are NOT included in the required assignment page length.

MUST BE PLAGIARISM FREE

PAPER WILL BE RUN THROUGH TURNITIN AND GRAMMARLY

The specific course learning outcomes associated with this assignment are:

Evaluate the financial reporting of state and local governments and assess the reporting requirements in accordance with Governmental Accounting Standards Board (GASB).
Analyze governmental activities related to expenditures and expenses.
Use technology and information resources to research issues in government and not-for-profit accounting.
Write clearly and concisely about government and not-for-profit accounting using proper writing mechanics.

CONTINUING PROBLEM - Questions and Answers

Ch 2 - Continuing Problem

The solutions to the continuing problems are based on the CAFR for the City of Austin, Texas, for the fiscal year-ended September 30, 2011.

The 2011 CAFR for the City of Austin can be found at: https://assets.austintexas.gov/financeonline/downloads/cafr/cafr2011.pdf

Review the Comprehensive Annual Financial Report (CAFR)

Q1. What are the three (3) main section of the report?

Answer to Q1. - The three (3) main sections of the CAFR are the introductory section, the financial section (the main section) and the statistical section.

Q2. Review the introductory section of the CAFR.

Was the entry’s annual report of the previous year awarded a “certificate of achievement for excellence in financial reporting” by the Government Finance Officers Association? What is the significance of this award?
What are the key issues addressed in the letter of transmittal?

Answers to Q2. - Introductory section

a. The city was awarded the Government Finance Officers Association (GFOA) Certificate of Achievement in year 2010. This indicates that the report of the previous year met the GFOA’s standards of accounting and reporting. The City management believes that this 2011 CAFR conforms to the Certificate of Achievement program requirements, and will be submitting it to the GFOA for their review. (p. vi)

b. Key topics addressed in the letter of transmittal include: (p. i-vii)

Overview of City government, economic conditions and outlook

Major initiatives and achievements, including:

PRIDE initiatives to become best-managed city in the country (through public service & engagement, responsibility & accountability, innovation & sustainability, diversity & inclusion, and ethics & integrity)
Energy efficiency in recognition Austin Energy’s continued leadership and achievement in the delivery of energy efficiency services to its customers
Innovation through the Austin Finance Online program to enhance financial transparency

Other, including:

Financial policies
Internal control and budgetary control
Awards

Acknowledgements

Q3. Review the Financial Section.

Which, if any independent audit firm preformed an audit of the CAFR?
Did the entry receive an “unqualified” audit opinion” If not, why not?
Does the report contain management’s discussion and analysis (MD&A)? If so, what are the key issues addressed?
Does the report provide a reconciliation between government net position per the government-wide statement of net position and total governmental fund balance sheet? If so, what are the main reconciling item?
What are the major governmental funds maintained by the entry? Does the entry’s fund structure conform to its organizational structure?
Does the report include “required supplementary information”? If so, what are the main areas addressed?
Does the report include “combining statements”? If so, what is nature of these statements?
Does the report include other supplemental information? If so, what types of information are in this section of the report?

ANSWERS to Q3. - Financial Section

a. The basic financial statements and related notes have been audited by the independent firm of Certified Public Accountants Deloitte & Touche LLP.

b. Yes. The city received an unqualified audit opinion. (p. 1)

c. Yes. It includes the MD&A, which included: (p. 3-14)

Financial highlights
Overview of the financial statements
Financial analysis of the government-wide statements
Financial analysis of the fund level statements
Other information includes: General fund budgetary highlights; capital assets; debt administration; economic factors and next year’s budget and rates; request for information.

d. The report contain reconciliation between total governmental net assets per the government-wide statement of net assets and total governmental fund balances per the governmental funds balance sheet. The main reconciling items are: (p. 21)

Capital assets capitalized on the government-wide statements but are not reported in the funds
Other long-term assets reported on the government-wide statements but not on the funds statements
Internal service fund assets and liabilities reported on the government-wide statements but not on the funds statements
Long-term liabilities reported on the government-wide statements but not on the funds statements.

e. The city has only one (1) major governmental fund - the general fund: (p. 20)

The fund structure does not conform to the city’s organizational structure (as set forth in the organizational chart included in the introductory section of the report). (p. viii)

f. It include required supplementary information, mainly: (p. 106-112)

Budget to actual comparisons
Reconciliation of GAAP basis and budget basis accounts
Budget amendments
Retirement plans

g. Yes, it include combining statements. It present financial statements and schedules, by fund type, for the general and non-major governmental and enterprise funds. (p. 113-186)

h. Yes, also includes other supplemental schedules, such as: (p. 187-191)

Enterprise related grants
Schedule of general obligation bonds authorized and unissued
Schedule of revenue bonds authorized, de-authorized and unissued.

Q4. Review the statistical section.

What is the population of the entity being reported?
Who is the entity’s major employer?
What type of information are included in the statistical section?

Answers to Q4. - Statistical section

a. In 2010 - the population was 778,560. (p. 212)

b. The major employer is State Government. (p. 213)

c. Other information in the statistical section relates to: (p. 194-220)

Revenue and Expenditure Trends
Property Tax Levies and Collections, Principal Taxpayers
Value of Property
Direct and Overlapping Debt, Debt Margin
Debt Coverage
City Sales Tax
Electric Fund and Water and Wastewater Fund
Airport Statistics
Hotel-Motel Occupancy Tax
Vehicle Rental Tax
Economic and Growth Indicators
Employment Characteristics

Ch 3 - CONTINUING PROBLEM

City of Austin: FY 2011

Q1. In which section of the Comprehensive Annual Financial Report (CAFR) are the budget-to-actual comparisons of the major funds?

Which accounting basis did the City follow to prepare its annual operating budget?
Are the actual amounts include in the reconciliation of any difference between GAAP and budgetary amounts? If so, what are the largest reconciled items?
Are the reported variances based on the original budget or the year-end amended budget?

Answers to Q1.

The actual to budget comparisons for the major funds are reported as required supplementary information (p. 106).

a. The City of Austin prepares its annual operating budget based on the modified accrual basis (p. 110).

b. The City of Austin prepares its annual operating budget based on cash and available resources (budget basis), not on a GAAP basis. And the Economic incentives reserve, new central library, neighborhood housing and community development, and sustainability actives are based on GAAP. Yes, the statement includes a reconciliation of differences between GAAP and budgetary amounts (with a column indicating the differences). The largest reconciled item is the reporting of encumbrances and the reporting of certain transfers.

1. The variances are computed as the difference between the actual amounts and the final budgeted amounts.

Q2. Does CAFR include budget-to-actual comparisons of non-major funds? If so, what section?

Answers to Q2.

2. The CAFR does include budget-to-actual comparisons of non-major funds. These, which are not required per GASB Statement No. 34, are included in the section of the report that presents combining financial statements and supplemental information. (p. 118)

Q3. Does the government encumber goods or services that have been ordered but not yet received? How, if at all, are the encumbrances reflected on the governmental fund balance sheet? How, if at all, are they reflected on the government-wide statement of net position (asset)?

Answers to Q3.

3. Austin does encumber goods that are on order but have not yet been received. They are reported on the governmental funds balance sheet as reservations (should be committed under GASB 54) of fund balances (p. 20). Encumbrances are not reflected on the government-wide financial statements (p. 16).

Q4. Do encumbrances that remain outstanding at year-end lapse? This is, do the amounts that will be expended in the following year, when the goods or services are received, have to be rebudgeted in the following year? How can you tell?

Answer to Q4.

4. Notes relating to the general fund actual to budget comparisons refer to expenditures charged against prior year’s encumbrances and to outstanding prior year encumbrances, thereby implying that encumbrances do not lapse and the associated expenditures do not have to be re-budgeted. (p. 106)

Ch 4 - Continuing Problem

City of Austin FY 2011

Q1. What are the main sources of the government’s revenues including those from both governmental and business-type activities?

Answers to Q1.

The largest source of government’s revenues from governmental activities is property taxes with $355,185,000 in 2011. Per the government-wide statement of activities, the largest single source of revenues in 2011 was from electricity (a business-type activity) - gross just over $1,249 million from charges for services and $10.2 million from capital grants, net $122.550 million. The second largest was from another business-type activity, water - $243.382 million and $13.964 million, respectively, from charges for services (p. 18).

Q2. How are revenues from property taxes accounted for, i.e., as a single amount, or in multiple categories? Identify the various categories and indicate the percentage breakdown. (e.g., residential property taxes are 50 percent of the total property tax revenues.)

Answers to Q2.

Property tax revenues are shown as a single amount in the Fund and Government-wide Financial Statements. However, there are tables in the statistical section which break down property taxes into categories. For instance, on (p. 202), property tax is broken out by class. 52.7% comes from single family property, 12.5% is from multi-family property, 1.8% from land, commercial property accounts for 24%, and finally 9% is from personal property.

Q3. Which of the entity’s governmental functions or revenue or activities had the greatest amount of directly identifiable revenue?

Answers to Q3.

Of the governmental activities, public safety had the greatest amount of identifiable revenues - $52.998 million in charges for services and $10.098 million in operating grants and contributions (p. 18).

Q4. Does the report discuss the accounting basis for reorganizing revenues?

Answers to Q4.

NOTE 1c - provides a general discussion of the measurement focus, basis of accounting and financial statement presentation. The government-wide financial statements are reported using the flow of economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. This basis of accounting recognizes revenues in the accounting period in which they become susceptible to accrual, i.e. both measurable and available. Revenues are considered available if they are collected within 60 days of year-end (p. 41).

Q5. Does the government’s government-wide statement of net position or governmental-fund balance sheet report “deferred revenue” (or deferred inflows of resources)? If so, what is the most likely reason this amount has been deferred?

Answers to Q5.

Yes, the governmental funds balance sheet report deferred revenue. (p. 20) The notes to the financial statements do not explicitly indicate the nature of the deferred revenue. Typically, however the deferred revenues are from property taxes and interests that are not available as current-period resources and are not reported in the funds. (p. 21)

Q6. What is the government’s property tax rate?

Answers to Q6.

As indicated in the schedule for Assessed Taxable Property Value by Class, the tax rate is $0.4571 per $100 assessed value of property. (p. 204).

Q7. At what percentage of fair market value is real property assessed?

Answers to Q7.

As indicated in the schedule “Property Appraised Value, Tax Value, Tax Rates, Tax Levies, and Tax Collections,” which is included in the statistical section of the CAFR, in each of the last ten years the ratio of assessed value to market value is 88.15%. (p. 201)

Q8. When are property taxes due? When do interest and penalties begin to accrue?

Answers to Q8.

The City’s property tax is levied each October 1 on the assessed value listed as of January 1 for all real and personal property located in the City. Taxes are due by January 31 following the October 1 levy date and interest and payments begin to accrue on February 1. (p. 56, note 4)

Q9. By what percentage did each of the largest sources of tax revenue increase over the last ten (10) years?

Answers to Q9.

Per the schedule, “Tax Revenue by source, Governmental funds,” which is included in the statistical section, the three largest taxes are property tax, sales tax and franchise fees/gross receipts tax. Property taxes increased from 215,838 million to $355,262 million (65.11%), sales tax increased from $115.441million to $151.125 million (31.03%), and franchise taxes increased from $62.435 million to $94.92 million (51.61%). (p. 199)

Q10. Did the government generate from traffic fines? As best you can tell, are these revenues reported in the government-wide statements as program revenue (e.g., associated with police or public safety) or as general revenues?

Answers to Q10.

Yes. The city did generate revenue from fines. These were reported in General Fund Schedule of Revenues- Budget and Actual-Budget Basis (p. 113) as well as governmental funds- statement of Revenues, Expenditures, and Changes in Fund Balances (p22). They are not explicitly reported in the government-wide statements. However, since the fines would not fit into any of the general revenue categories of the statement of activities, they are reported as special revenues associated with public safety, as “charges for services.”