UOPX ACC 548 - Comprehensive Annual Financial Report Briefing

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Comprehensive Annual Financial Report Briefing:Each year the State of Nevada issues the Comprehensive Annual Financial Report (CAFR).  Themost recent being the 2011 report that was issued by Kim R. Wallin, the State Controller, for the fiscal year ending June 30, 2011.  In recent elections, there have been some additions to the Nevada elected board members.  The purpose of this paper is to provide an overview of government accounting and reporting, and to introduce the Nevada CAFR to the newly elected board members.  Also contained is an evaluation of the Management Discussion & Analysis (MD&A) section contained in the 2011 report.Governmental Accounting and ReportingBudgeting and accounting are particularly important for a government entity.  Any individual with the capacity to make decisions concerning the governing body should possess the fundamental knowledge of budgeting and accounting.  The Governmental Accounting StandardsBoard (GASB) sets the accounting and financial reporting standards for state and local governments, whereas the Financial Accounting Standards Board (FASB) sets these standards in for-profit business (Granof&Wardlow, 2011).Governmental objectives and missions are different than those in for-profit business.  For-profit business is highly measured by increasing profits and shareholder value.  Financial metrics are based specifically on revenue and net income targets, whereas these measures would not be of much significance to governmental reporting.  Government focus cannot always be measured in dollars and cents and tends to bebased more so on service efforts and accomplishments.  In addition, the actual budget holds more significance in government than in regular business.  The budget is technically what governs the government, whereas in business, the marketplace and competition is the driving force (Granof&Wardlow, 2011).  Furthermore, annual financialreports are more important in for-profit business than the associated budget.State of Nevada CAFRThe State of Nevada issues the CAFR in accordance with the Nevada Revised Statutes (NRS) and the State Accounting Procedures Law.  The reports objective is to provide a clear picture of the State of Nevada government as a unified, single entity and to provide fund-based financial statements.The State of Nevada CAFR is divided up into four sections.  A brief outline of the contents of each section is shown below.  • Introductory Section – This section includes the letter of transmittal that summarizes the governments profile, financial information, the economic outlook, major initiatives and awards and acknowledgements for the state.  Also included are the constitutional officers and an organizational chart.  • Financial Section – This section is the bulk of the report.  It includes the independent auditor’s report, management discussion and analysis, government and fund financial statements,supplementary information, and statements and schedules for multiple funds associated with the State of Nevada.  • Statistical Section – The section includes statistical information that aid in supporting the financial section.  Analysis on trends for government assets, fund balances,sales tax, debt ratios and margins, demographic and economic statistics, state employees, and operating indicators.  • Compliance Section – Include in the section is a letter from the independent auditor thatacknowledges the overall presentation of the financial statements and the effectiveness of internal controls over financial reporting.   The State of Nevada was admitted to the Union in 1864.  The majority of land contained inNevada is owned and operated by the federal government, 80% respectively.  Nearly 88% of theentire population of Nevada is located in one of two population centers, Washoe County and Clark County.  Nevada does not collect a personal income tax as the economy and tax base is reliant on gaming, tourism, federal activities, and the mining industry (Wallin, 2011).   The State of Nevada reporting entity prepared the associated financial statements in conformity with Generally Accepted Accounting Principles (GAAP) as applied to government units, in the United States of America.  The financial statements conform to the requirements of GASB, the accepted standard setting body for government accounting and financial reporting.  The accounting and reporting principles are based on the theory that publicly elected officials areaccountable to their residents throughout the state (Wallin, 2011).Management Discussion & Analysis EvaluationThe analysis of the basic financial statements of the State of Nevada is broken up into separate sections: (1) government-wide financial statements, (2) fund level financial statements, and (3) the notes to the financial statements.  In additionto the analysis of the basic financial statements, the analysis of other supplementary information is included.The government-wide financial statements provide an overview of all revenues and expenses for the fiscal year.  The statement of net assets and the statement of activities provide users with a year over year picture of whether the overall financial position of the state is improving.  Each statement is reported in either government or business-type activities.  Government activities would be primarily supported by states taxes whereas the business activities are intended to be self-sufficient.  The State of Nevada’s financial position improved slightly from 2010 to 2011 asnet assets increased by $50 million (Wallin, 2011).Government-wide revenues increased from 2010.  This increase was primarily due to increased revenues from sales taxes, gaming taxes, mining taxes, and lodging taxes.  All of these increasedrevenues are key indicators on the economic progress of the state.  More people are spending more money which is a positive indicator of stability.  Governmental activities realized a net increase in assets of $266 million which was partially offset by the business activities net assets decrease of $216 million.  Expenses exceeded revenues for both government and business-type activities in 2011, resulting in the use of $4 billion in general revenues (Wallin, 2011).  The governmental funds for the State of Nevada decreased from 2010 by $120 million to $1.46 billion.  These funds are

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UOPX ACC 548 - Comprehensive Annual Financial Report Briefing

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