Comprehensive Annual Financial Report (CAFR)

Definition

A Comprehensive Annual Financial Report (CAFR) is the official annual report of a government entity. It encompasses numerous financial statements and disclosures, providing a detailed portrayal of the government’s financial performance over a fiscal year. The CAFR includes combined, combining, and individual balance sheets along with other financial statements such as:

1. Statement of Revenues, Expenditures, and Changes in Fund Balance (All Funds): A financial document that shows the inflow and outflow of resources, and how these affect the fund balances for all specified funds.
2. Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual (For Government Fund Types): This statement compares budgeted revenue and expenditures to the actual figures, helping to account for variances.
3. Statement of Revenues, Expenses, and Changes in Retained Earnings (For Proprietary Funds): A detailed statement that concerns proprietary fund types, showing the net income and subsequent changes in retained earnings.
4. Statement of Changes in Financial Position (For Proprietary Funds): A document that reflects the movement of financial resources in and out of proprietary funds, indicating changes in the financial position over the reporting period.

Examples

1. City of Aurora’s CAFR: Provides comprehensive information about the city’s financial activities, including all governmental and proprietary funds.
2. State of California’s CAFR: Includes detailed financial statements of revenues and expenditures, changes in fund balances, and notes to the financial statements.
3. Miami-Dade County’s CAFR: Compiles all fundamental financial statements, statistical schedules, and overall budget performance.

Frequently Asked Questions (FAQs)

Q1: Why is a CAFR important?
A1: The CAFR is vital as it offers a transparent and complete accounting of a government entity’s financial activities, aiding in fostering accountability and allowing stakeholders to assess the financial health and performance over time.

Q2: Who prepares the CAFR?
A2: The CAFR is typically prepared by the finance department or the office of the comptroller within the governmental entity.

Q3: What are proprietary funds within a CAFR?
A3: Proprietary funds refer to funds used for activities that operate similarly to private businesses, including enterprise funds and internal service funds.

Q4: How often is a CAFR published?
A4: A CAFR is published annually, at the end of each fiscal year.

Q5: What is the difference between a basic financial statement and a CAFR?
A5: A basic financial statement offers a limited view of financial activities, while a CAFR includes detailed financial reports, statistical data, and comprehensive notes, providing an extensive overview.

Related Terms

1. Governmental Fund Types: Funds used to account for activities related to governmental functions, including general, special revenue, capital projects, and debt service funds.
2. Proprietary Funds: Funds for activities that resemble a private sector operation, often including enterprise and internal service funds.
3. Fiduciary Funds: These funds are used to account for resources held for the benefit of parties outside the governmental entity, such as pension funds and investment trust funds.
4. Financial Statements: Records that convey the financial activities and conditions of an entity, including balance sheets and income statements.
5. Budgetary Compliance Reports: These highlight variances between budgeted amounts and actual results as depicted in the financial statements.

Online References

• Government Finance Officers Association (GFOA) - CAFR
• American Institute of CPAs (AICPA) - Government Accounting
• Office of Management and Budget (OMB)

Suggested Books for Further Studies

• “Government and Nonprofit Accounting: Theory and Practice” by Robert J. Freeman, Craig D. Shoulders, Gregory S. Allison, and Robert J. Freeman.
• “Financial and Managerial Accounting for School Administrators: Tools for School” by Ronald E. Everett, Donald R. Johnson, and William T. Pattillo.
• “Accounting for Governmental and Nonprofit Entities” by Earl Ray Wilson, Jacqueline L. Reck, and Susan C. Kattelus.

Fundamentals of CAFR: Public Finance Basics Quiz

### What is a CAFR? - [ ] A simplified annual financial summary. - [ ] A financial forecast for future years. - [x] The official annual report of a government. - [ ] A budget compliance report. > **Explanation:** A CAFR is the official annual report of a government entity, encompassing extensive financial data and disclosures. ### Which statement is usually NOT found in a CAFR? - [ ] Statement of Revenues, Expenditures, and Changes in Fund Balance. - [ ] Statement of Revenues, Expenses, and Changes in Retained Earnings. - [ ] Statement of Changes in Financial Position. - [x] Statement of Shareholder Equity. > **Explanation:** Since governments typically do not have shareholders, a statement of shareholder equity is not included in a CAFR. ### How often is the CAFR published? - [x] Annually - [ ] Bi-annually - [ ] Quarterly - [ ] Monthly > **Explanation:** A CAFR is published annually, providing detailed insight into the fiscal activities of the government entity over the past year. ### Who prepares the CAFR typically? - [ ] External auditors - [ ] Legislative committee - [ ] Government's IT department - [x] Finance department or office of the comptroller > **Explanation:** The finance department or the office of the comptroller is responsible for preparing the CAFR. ### What fund type is often included in a CAFR? - [ ] Endowment Funds - [ ] Pension Funds - [x] Proprietary Funds - [ ] Equity Funds > **Explanation:** Proprietary funds, which include enterprise and internal service funds, are included in a CAFR. ### Which body is often responsible for standards and best practices for CAFR preparation? - [ ] Financial Accounting Standards Board (FASB) - [x] Government Finance Officers Association (GFOA) - [ ] International Accounting Standards Board (IASB) - [ ] World Bank > **Explanation:** The GFOA offers standards and best practices for CAFR preparation. ### What information is usually compared in the budgetary compliance report within the CAFR? - [ ] Forecasted tax revenue - [ ] Government debt - [x] Budgeted figures vs. actual financial results - [ ] Citizen satisfaction > **Explanation:** The budgetary compliance report compares budgeted figures to actual financial results, highlighting variances. ### What do fiduciary funds represent in a CAFR? - [ ] Governmental operational funds. - [x] Resources held for the benefit of parties outside the governmental entity. - [ ] Commercial business operations. - [ ] Fixed asset investment. > **Explanation:** Fiduciary funds account for resources held for parties outside the government entity, such as pensions. ### Which governmental body may receive and review a CAFR? - [ ] Local business organizations - [ ] The judicial system - [x] Legislative and executive branches - [ ] Educational institutions > **Explanation:** Legislative and executive branches of government typically review the CAFR to assess the financial performance and accountability. ### What primary function does the CAFR serve for its intended audience? - [ ] Predict economic conditions. - [ ] Recommend policy changes. - [x] Ensure transparency and accountability of financial practices. - [ ] Facilitate recruitment of personnel. > **Explanation:** The CAFR ensures transparency and accountability in the government's financial practices, serving as a comprehensive public document.

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