Running Head: CAFR IN CASE OF THE GOVERNMENTAL ACCOUNTING 1

CAFR IN CASE OF THE GOVERNMENT & NON PROFIT ORGANIZATION

CAFR IN CASE OF THE GOVERNMENTAL ACCOUNTING 2

Financial statements are the key reports that provide the numerical as well as the theoretical
aspect of how an organization performed in the particular year with respect to the previous years.
Moreover this kind of statement also contains the future goals and the existing key events that
took place because of which the company is at this position. Further the financial statements also
contains a section of the notes to accounts where the which delivers the answers to all the
complicated questions that cannot be understood just by vouching the figure presented in the
income statement, balance sheet or the statement of the cash flows. In this report a detailed
discussion of the comprehensive annual financial report with respect to the government entities
and the nonprofit entities have been undertaken in detail to vouch for the similarities, or
dissimilarities and the benefits and the outcomes one can have after incorporating such
methodology (Miller. 2015).

CAFR also termed as the Comprehensive Annual financial report is a set of the U.S government
financial statements, comprising the financial report of the state, municipal or the other
government entity that are required to comply with the Accounting standards driven by the
GASB, Government Accounting Board Standard. The federal government on the other hand
abides by the rules of the Federal Accounting Standards Advisory Board.

The compilation of the CAFR is done by the staff of the state or the municipal corporation and
the same is audited by the AICPA, American institute of the Certified Public Accounting.
Further the CAFR are based on the three major stages that is, Introductory, Financial and
Statistical. These contain the sufficient as well as the necessary information regarding the fund
accounting and Enterprise Authorities accounting (Find law, 2015).

Unlike most private based associations, it is the duty of the government to become responsive to
various groups and the organizations, including chosen authorities, different units of
governments, financial specialists, leasers, and natives that are centered on checking their
exercises and the daily operations conducted in the government. All types of checking
incorporate gathering and translating information, and this oversight capacity is frequently
performed through data given in administrative reports. Among the most significant kinds of
correspondence is the annual financial report, which depicts the income statement balance sheet
and the cash flow position of the government, working outcomes and money streams for a
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specific bookkeeping period. All legislatures, including school, or the districts of different states,
build up their yearly money related reports as per standards built up by standard-setting experts
to give consistency and similarity to clients (Miller. 2015).

For governments to accomplish the target of responsibility, information of the financial

statements must be both important and dependable for sensibly educated clients who are using
these for the purpose of the decision making. Financial reports must fulfill various and differing
needs or targets, including momentary money related position and liquidity, budgetary and
lawful consistence, and issues having a long haul concentrate, for example, capital planning and
support. Also, contrasts exist in the measure of detail that different clients need (Bartlett, 2016).

Following a time of research and examination over the period of more than 10 years, the GASB
as of late presumed that to meet the differed needs of a wide scope of clients, administrative
reports must give data viewing the open substance overall notwithstanding the conventional
reserve fiscal summaries. As needs be, this can simply be observed in June 1999 GASB
presented another monetary announcing model in Statement 34, Basic Financial Statements—
and Management's Discussion and Analysis—for State and Local Governments. The new model
incorporates the customary focal point of legislative store budget summaries identifying with
monetary responsibility (and the adjusted collection premise of bookkeeping) with new types of
detailing (e.g., government wide fiscal summaries). The two dimensions of money related
detailing are proposed to give the information to the clients that will eventually turn out to be the
more accountable step taken by the government and at the same time this can flourish at the
state as well as je local government as well and secondly to promote the understanding and the
awareness about the importance of the financial statements, especially to the users of it, so that
they are able to make the strategic, economic, social as well as the political decisions effectively
(NCES, 2017).

This was the case of the government entities and there are certain benefits, reaped by the
government for following such kind of the procedures, which have been outlined below.

 If CAFR is prepared on the perfect timing it acts as a vehicle that drives the
accountability and the stewardship. Below is the data which represents the timeliness and
the perspective of the users of the CAFR.
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 It can produce the accountability and the help managers take the important decisions; it
can also give the competitive edge with respect to the other countries and their way of
operating. It also facilitates the modern accounting and the representation of the financial
statements (Snow & Reck, 2016).

Drawbacks
 Further there are certain drawbacks of the preparation of the CAFR, which have been
heard from the mouth of the manager itself. These drawbacks include the survey
conducted on the managers which stated that the 64% of the managers surveyed only use
of the financial statements is necessary for taking the decisions with regards to the
preparation of the future policy of the government and this excludes he CAFR’s (NCES,
2017).
 The opinion of the small government states that the 82% of the managers have the idea of
the CAFR being too complex to understand and to operate to, and this complexity
accelerate gradually with respect to the time and the size of the government.
 70% managers also believe that the benefits outweigh the costs.
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There are certain recommendations that can solve the problem of the managers and keeps the
accountability even stronger than before and the same have been outlined below.

In case of the not for government organizations the nonprofit organizations are also required to
prepare the financial statements by law so as to keep the record for the future purposes. The
nonprofit organizations are developed with the motive of providing the services, rather than
earning profits. All the funds are generated from the public for the welfare and the wellbeing of
the general public. As per the GASB of the United States the nonprofit organization are also
required to present the financial statements in the most appropriate manner (Snow & Reck,
2016). Financial reports must fulfill various and differing needs or targets, including momentary
money related position and liquidity, budgetary and lawful consistence, and issues having a long
haul concentrate, for example, capital planning and support. Also, contrasts exist in the measure
of detail that different clients need.

Some individuals mistakenly treat nonprofit organizations as those firms that are not required to
pay the tax, whereas these firms are required to apply for designations under 501(c)(3).
Nonprofit corporations are also required to submit their financial statements, which are inclusive
of the expenses are the salaries of the directors, officers and the key employees to IRS of the
respective form number 990. It is the duty of the IRS and nonprofit corporation to reveal the
information on Form 990. The nonprofit must make their records available for the public
inspection for operating the regular business hours at the principal office (Phillips & Strickland,
2016).

Reassess substance, semantics and structure of reports

 GASB has begun "pre-motivation" take a shot at rethinking money related revealing
model
 Until at that point, content of whole report should be returned to at any rate every year to
evacuate standard and adjust to current conditions – no more fill in the spaces!

Leverage New Technologies

 To expand practicality – use frameworks admirably go past Excel what's more, Word
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 Use of the new software that could easily produce the reports without much hassle
(Franzel & Gregory, 2016).

Increase Outreach Efforts

 Need to grasp famous revealing, Citizen's Centric announcing, financial specialist

centered sites and dashboards to achieve Citizens, bondholders and chiefs
 Consider basic break detailing (for example budget: actual) on site (Phillips & Strickland,
2016).

Conclusion

From the overall analysis it can be stated that the accounting for the government and the
nonprofit organizations are required to operate as per the rules prescribed by the United States
and moreover they are required to present the financial statements in the particular format.
Further the recommendation has also been provided both in case of the government as well as the
nonprofit organizations on how to deal with the CAFR and manage the financial statements
accordingly. Further in order to have the smooth accountability it is necessary to comply and
abide by the rules and the regulations. Hence an in-depth analysis gave an insight on the
workings of the Government and the nonprofit organizations.
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References

Bartlett, D. M. (2016). Government Financial Disclosures: The Timeliness of State

Comprehensive Annual Financial Reports.

Find law, (2015). Nonprofit Financial Statements. Retrieved from

https://smallbusiness.findlaw.com/incorporation-and-legal-structures/nonprofit-financial-
statements.html

Franzel, J., & Gregory, R. (2016). Public–Private Collaboration and Trust Funds of the US
States. Problem Solving with the Private Sector: A Public Solutions Handbook, 143.

Miller. L, (2015). CAFR What is it and why should you do it? Retrieved from
https://cdn.ymaws.com/idahocities.org/resource/resmgr/Mountain_West_Institute/CAFR
_-_Lealan_Miller.pdf

NCES, (2017). Financial Accounting for local and state government. Retrieved from
https://nces.ed.gov/pubs2004/h2r2/ch_4.asp

Phillips, J. F., & Strickland, P. J. (2016). Initial Evidence on the Association between Local
Government Fiscal Distress and Environmental Protection Programs. Issues in Social &
Environmental Accounting, 10(3).

Snow, N. M., & Reck, J. L. (2016). Developing a government reporting taxonomy. Journal of

Information Systems, 30(2), 49-81.