Assignment 1: Financial Statement / Audit Report Review

Due Week 4 and worth 240 points

 

Select one (1) local government in your state or area and review the financial statements and audit report for the county or municipality. 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.

 

Write a three to five (3-5) page paper in which you:

1.Compare and contrast the comprehensive annual financial report (CAFR) of the selected local 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

 

Your assignment must follow these formatting requirements:

•Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format. Check with your professor for any additional instructions.

•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.

Below is the link for your perusal:

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 can be found at: https://assets.austintexas.gov/financeonline/downloads/cafr/cafr2011.pdf

 

1.      The three main sections of the CAFR are the introductory section, the financial section (the main section) and the statistical section.

2.      Introductory section

a.      The city was awarded the 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

 

 

 

3.      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. The MD&A includes: (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 does 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. Among 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 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 does include required supplementary information, mainly: (pp. 106-112)

·         budget to actual comparisons

·         reconciliation of GAAP basis and budget basis accounts

·         budget amendments

·         retirement plans

 

g.     Yes, it does include combining statements. These present financial statements and schedules, by fund type, for the general and nonmajor governmental and enterprise funds. (pp. 113-186)

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

·         enterprise related grants

·         schedule of general obligation bonds authorized and unissued

·         schedule of revenue bonds authorized, deauthorized and unissued

 

 

4.      Statistical section

a.      The population of Austin was 778,560 in 2010. (p. 212)

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

c.      Other information in the statistical section relates to: (pp. 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

 

 

P. 2-6

                                                                                                                                                                                       (1)         

 

Cash                                                                                        1,000,000

      Tax revenues                                                                                                                     1,000,000

To record dedicated tax revenues (debt service fund)

 

                                                                                                                                                                                       (2)         

 

Accounts receivable                                                              5,000

       Miscellaneous revenues                                                                       5,000

To recognize miscellaneous police department revenues (general fund)

 

                                                                                                                                                                                       (3)         

 

Cash                                                                                     60,000

       Dividend revenues                                                                            60,000

To record investment income in a fund to support activities of the government itself (permanent fund)

 

                                                                                                                                                                                       (4)         

 

Cash                                                                                     70,000

       Dividend revenues                                                                            70,000

To record investment income in a fund to support outside parties (fiduciary fund)

 

                                                                                                                                                                                       (5)         

 

Construction expenditures                                             6,000,000

       Cash or Contracts payable                                                           6,000,000

To record construction costs (capital projects fund)

 

                                                                                                                                                                                       (6)         

 

Transfer-out to debt service fund                                      400,000

       Cash                                                                                                400,000

To transfer funds to a debt service fund (general fund)

 

Cash                                                                                   400,000

       Operating transfer-in from the general fund                                   400,000

To record the transfer of funds from the general fund (debt service fund)

 

Investments                                                                       400,000

       Cash                                                                                                400,000

To invest cash transferred from the general fund (debt service fund)

 

                                                                                                                                                                                       (7)         

 

Depreciation expense                                                        100,000

       Accumulated depreciation                                                              100,000

To recognize depreciation (internal service fund)

 

                                                                                                                                                                                       (8)         

 

Cash                                                                                     30,000

       Parking fee revenues                                                                         30,000

To recognize parking fee revenues (enterprise fund)

 

                                                                                                                                                                                       (9)         

 

Cash                                                                                8,000,000

       Bonds payable                                                                              8,000,000

To record the issuance of bonds (enterprise fund)

 

                                                                                                                                                                                     (10)       

 

Due to school districts                                                    3,000,000

       Cash                                                                                             3,000,000

To record distribution of taxes collected on behalf of school districts (agency fund)