New York City’s Comprehensive Annual Financial Report (CAFR)
The Comprehensive Annual Financial Report (CAFR) is the summation of basic financial statements with additional items included as introductory, statistical, or other supplementary information. CAFR is usually issued to external users seeking to gain insightful information regarding the government’s revenue, expenditure, and budget. Notably, it is similar to the regular annual reports of for-profit organizations. The CAFR document provides a clear government financial report for a fiscal year.
The Components and Structure of the CAFR
Essentially, CARF is subdivided into three categories and these include the introductory, financial, and the statistical sections. The introductory one contains a table of content, general information of the collected financial statements, and a letter of transmittal (Whittington et al., 2012). The financial segment covers a broad spectrum of the fiscal report as it entails the key components: auditor’s report, basic financial statements, management discussion and analysis, and the government-wide statements among others (Gauthier, 2005). The statistical subdivision comprises integral financial information, such as the financial trends, revenue and debt capacities, and demographic, economic, and operating information (Ruppel, 2009).
The financial position of City of New York City government
In the fiscal year 2017, New York City is said to have generated a surplus on its general funds. The total calculations of the general funds are an indicator of the financial activity and legal compliance of the city within the financial reporting model measured by the Governmental Accounting Standards Board (GASB) (Whittington et al., 2012). In the mentioned year, the total revenues and other financial sources included in the general fund totaled to $83.468 billion. On the contrary, the amount of money spent on other uses amounted to $83.463 billion. In comparison to the previous year, the total expenditure increased by $5 billion.
The Fund Balances in each Reported Fund
The fund balances are normally reported through the Governmental Accounting Standards Board Statement 54 (GASB 54). During the 19th century, the statement only measured the reserved and unreserved cost of the fund balance. The method of reporting fund balances has significantly changed. Today, the statement has replaced the reversed and un-reversed classification of fund balance with five new categories; non-spendable, restricted, committed, assigned, and unassigned sections of fund balance (Thompson & Green, 2012). The current classifications of fund balance are important as they showcase the level of constraints placed upon the scarce resources. Moreover, the five different groupings may help the government to identify the sources of the constraints placed on the use of the available resources. By the end of the fiscal year 2017, the New York City governmental funds reported the total fund balances of $157,789. In comparison to the previous year, the total fund balances significantly reduced by $19,960. The unassigned fund balance for the general fund was $5,670 whereas the City’s total outstanding debt had decreased by $9,281 compared to the previous fiscal year (New York, 2017).
How Does the Government Examine the Results for the General Fund
The general fund normally consists of assets and liabilities used to finance the daily and long-term operations of the government. Furthermore, it is the largest pool of money used for the routine or ordinary activities of the government (Ruppel, 2009). The general fund serves as the chief operating fund in New York City. This fund is normally inspected by examining the assigned, unassigned fund, and the total fund balances. A comparison is usually made between the general funds accrued in the current fiscal year and those accumulated in the previous year to examine their state. New York City recorded that at the end of the current fiscal year, assigned fund balance of the general fund was $37,029, unassigned fund balance was $5,670, and total fund balance was $90,534. Assigned and unassigned fund balance total to a combined amount of $42,699. The fund balance of the City’s general fund decreased $2,910 in assigned fund balance and a decrease of $2 in unassigned fund balance (New York, 2017).
Review the Management Discussion and Analysis Section
The Management’s discussion and analysis (MD&A) is part of the financial section that allows external users to check and analyze the overall financial state of the government entity. The section also allows the users to assess whether the government financial position improve or deteriorate during the fiscal year (Ruppel, 2009). MD&A is usually created by performing a comparison analysis on the overall financial position of a government during its current and previous years. The information that ought to be included as part of (MD&A) includes; an analysis of balances and transactions in individual funds, description of capital asset, long term debt activity during the year, and an analysis of balances and transactions of individual funds (Whittington et al., 2012). The MD&A section presented in 2017 CAFR for New York City has provided short-term and long-term analyses of the governments’ activities. Furthermore, the MD&R section has provided clear analysis of its financial activities based on the presented facts and conditions (Thompson & Green, 2012). From the notes in the CAFR, some of the notable material changes include the amounts spent on recreation and youth services, public market, environmental services, and transportation.
Significant Policy Changes
One of the notable financial policy changes in New York City’s CAFR revolves around debt. The city has developed a financial policy that states the specific debt limit. The guideline requires the debt limit for tax-supported borrowing to be equal to the amount of principal on outstanding debt that will eventually be redeemed during the financial year when the limit was first established (Gauthier, 2005). Indeed, this allows the government to determine the overall government revenue and expenditure.
Importance of CAFR Information to the Internal and External Viewers
Comprehensive Annual Financial Report (CAFR) is eminently important as it provides vital financial information to both the internal and external viewers. The former can analyze the monetary decisions made by the government and provide key solutions to the government on how it can improve the financial position of the city. The former are also made aware of the financial situation and progress of the city. In addition, CAFR information plays an important role in establishing trust between the government and potential lenders. The city is thereby placed at a suitable position to get surplus finances by the lenders who have been provided comprehensive and clear financial information in form of CAFR. In difficult situations where the government is unable to completely fund its budget, they can utilize the CAFR to request loan whilst assuring the lenders on prompt payment of the loan. By analyzing the CAFR, most of them are at a better place to make informed business decisions, such as investment since they are informed about the financial position of the government.
Ruppel, W. (2009). Wiley GAAP for governments 2009: Interpretation and application of generally accepted accounting principles for state and local governments. Hoboken, N.J: Wiley.
Thompson, F., & Green, M. T. (2012). Handbook of public finance. Milton Keynes, UK: Lightning Source.
New York (New York City). (2017). Comprehensive annual financial report. New York, NYC.: The Office.
Gauthier, S. J. (2005). Governmental accounting, auditing, and financial reporting: [using the GASB 34 model]. Chicago [u.a.: Governmental Finance Officers Assoc.
Whittington, O. R., & Books24x7, Inc. (2012). Wiley CPA exam review. Hoboken, N.J: John Wiley & Sons.