Essays on Comprehensive Annual Financial Report Briefing Essay

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The main question for financial accounting for government agencies revolves around the intelligibility and accountability in the competent allotment of scarce public funds (Ruppel, 2009). The Statement No. 34 of Basic fiscal Statements and Management’s Discussion and Analysis for State and Local regime Agencies outlines new best practices and requirements for financial coverage in the U. S. These requirements were implemented in June 15, 1999 for subsequent fiscal years, and were aimed at restructuring the approach and design of presenting annual financial reports in a more comprehensive and easy to understand way for enhanced usability.

This concept for Comprehensive Annual Financial Reporting (CAFR) identifies and reaffirms the most important objectives of annual financial statements for governments. This approach has been successfully adopted by public agencies all over the country, with some notable ones including Prince George’s County, Maryland, managing to win awards for excellence in financial reporting. This approach is necessitated by the different nature of government financial reporting with that of profit businesses. Concepts Underlying CAFRAlthough the basis for financial reporting and auditing may be universally similar, government accounting is distinctly different from accounting for profit businesses.

However, specific parts of financial reporting in not for profit agencies plus the government’s use a different convention than that used by profit-oriented organizations. Profit organizations aim at maintaining a balance of revenues over expenses, while government agencies basically spend only and all of whatever revenue they get from the government (Benston, 2006). In terms of accounting for contributions, non-profit organizations lack a clear-cut convention for accounting for those that are tax exempt, as are many contributions by the government to the various public agencies.

Accounting for large capital projects and depreciating assets over their useful life is not always clear in government agencies as opposed to the methods used in business financial reporting. The use of money basis and customized money basis in non-profit accounting is also different from profit accounting. The later normally uses an accrual basis to account for incomes and revenues incurred. Government reporting provides for functional expenditure categorization in terms of program services costs and sustaining activities as opposed to reporting them in a general expenses account as is the case for profit making organizations. The CAFR approach reaffirms already existing objectives and identifies new information that is important for the public agencies financial reporting process.

The most conspicuous feature of this approach is reaffirming the requirements of the reporting of various funds. They are designed as a means of imposing restrictions on funds appropriation and tracking revenues and expenditures arising from particular activities (Engel, 2010). The focus on reporting of funds has been sharpened by the requirement of classifying the various funds in terms of the most important and taking in a government universal fund category.

This is mainly in line with the requirement of providing financial reporting that facilitates accountability in government agencies. This is through providing clear and sufficient information as a form of compliance to the laws, rules and regulations. This adopts a similar approach to that used in government agency financing. Generally, operating results are measured in terms of cash in hand and other liquid assets, and expenses in terms of accruals to facilitate easier measurement of public service costs. Another existing objective affirmed in the new approach is the requirement for budgetary compliance as part of the accountability process.

This entails establishing annual operating budgets and providing budgetary comparisons in the annual financial reporting, with a change requiring additional comparison to the government’s original budget. This is important in displaying the various revisions on the government budget and how they are reflected on the agency’s fiscal report, adding another analytical dimension and enhancing usefulness of the financial report.

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