What is a Comprehensive Annual Financial Report and what are the benefits of preparing one? Preparing a Comprehensive Annual Financial Report allows the unit of government to participate in the Government Finance Officers Association's (GFOA's) Certificate of Achievement for Excellence in Financial Reporting program joining over 4,200 other government (about 4% of all governments in America). This program is most beneficial to entities that already, or soon will be, required to report financial statements in accordance with Generally Accepted Accounting Principles in order to issue debt, have a continuing disclosure requirement for audited financial statements and/or receive an audit each year.
A Comprehensive Annual Financial Report has three main sections: introductory, financial and statistical.
The Introductory Section includes letters of transmittal that give management the opportunity to discuss what the entity has done and plans that will have an effect on the future. This subjective dialogue is an important feature that is not available in a traditional audit of basic financial statements.
The Financial Section includes the Independent Auditor’s Report, Management Discussion and Analysis (MD&A), Basic Financial Statements, Required Supplementary Information and other Supplementary Information. The MD & A is another opportunity to discuss performance but it is more restrictive than a transmittal letter and must contain specified required information. A benefit of the financial section of the Comprehensive Annual Financial Report is the opportunity for management to present expanded fund level financial statements and increased information on budgetary performance beyond what is required in a basic financial statement audit.
Lastly, the Statistical Section gives context about financial trends, revenue capacity, debt capacity, demographic and economic information and operating information. This allows readers of the financial statements to assess economic condition over time.
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