The Main Components of A Comprehensive Annual Financial Report
What is CAFR and what are its main components?
CAFR is a comprehensive annual financial report for government agencies. It includes the organization’s year-end financial statements. Main components of a CAFR typically include an introductory section, which includes a letter of transmittal, an organizational overview, and details about organizational officials. The next main component is the financial section. In this section users can locate an independent auditor’s report, management’s discussion and analysis, basic financial statements, required supplementary information, and a combination of financial statements and schedules. A CAFR may also include a third section for statistical information.
Differences between a budget and a comprehensive annual financial report mainly exist between the purpose for which each is prepared. A government entity is required by GASB to prepare two sets of financial statements, the government-wide statements and the fund financial statements. The government-wide statement consolidates all of the entity’s operations and includes a focus of the government’s economic resources. Fund financial statements show the government as a collection of separate funds. A CAFR goes beyond the GASB required statements, by preparing basic fiscal year-end financial statements for users which details all assets, liabilities, revenues, and expenditures. A CAFR will often provide users with a comparison of the original budget, the final budget with appropriations included, and an actual expenditures schedule. This is beneficial for all stakeholders of the organization, including state agencies and departments, employees, and funding contributors so that they can quickly identify budgetary concerns – overspending and lack of funding, or even the welfare of retirement funds for current and past employees.