Comprehensive annual financial report

Key concepts
Accountant · Accounting period · Bookkeeping · Cash and accrual basis · Cash flow management · Chart of accounts · Journal  · Special journals · Constant Item Purchasing Power Accounting · Cost of goods sold · Credit terms · Debits and credits · Double-entry system · Mark-to-market accounting · FIFO & LIFO · GAAP / IFRS · General ledger · Goodwill · Historical cost · Matching principle · Revenue recognition · Trial balance
Fields of accounting
Cost · Financial · Forensic · Fund · Management · Tax
Financial statements
Statement of financial position · Statement of cash flows · Statement of changes in equity · Statement of comprehensive income · Notes · MD&A · XBRL
Auditor's report · Financial audit · GAAS / ISA · Internal audit · Sarbanes–Oxley Act
Accounting qualifications
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A Comprehensive Annual Financial Report (CAFR) is a set of government financial statements comprising the financial report of a state, municipal or other governmental entity that complies with the accounting requirements—generally accepted accounting principles (GAAP)—promulgated by the Financial Accounting Standards Board (FASB).

A CAFR is "compiled" by a state, municipal or other governmental accounting staff and "audited" by an external American Institute of Certified Public Accountants (AICPA) certified accounting firm utilizing FASB requirements. It is composed of three sections: Introductory, Financial and Statistical.[1] It combines the financial information of fund accounting and Enterprise Authorities accounting.



The National Committee on Municipal Accounting (NCMA) was formed in 1934 by the Government Financial Officers Association[2] to create accounting standards. As a result of its work, the 'Principles of Municipal Accounting', the predecessor to the CAFR, was created. The successor to the NCMA, the National Council on Governmental Accounting (NCGA), issued 'Governmental Accounting, Auditing and Financial Reporting', which is the basis of the format for the current standard. This document, known as the "Blue Book", and its successors documented the CAFR accounting structure and provided standardization and example documents. By 1946, the various levels of government--federal, state, local and municipal—each began producing a CAFR to catalog an accurate picture of institutional funds, enterprise or financial holdings, assets and total investment incomes for those government and nongovernmental entities using the report. This measure is above and beyond the budget process and replaced what was regularly an "off-the-books" practice called the "general fixed-asset account group". General Purpose government "budget" reports did not reflect accounting of this financial data, only reporting on the budget or "rainy day" funds or pension fund investments. By the 1970s, the CAFR became the nationwide paradigm for local government accounting.[3]

The resulting CAFR is presented to the GFOA, which conducts each year a review of applicant local government CAFRs and upon review awards their Certificate of Achievement Award for Excellence in Financial Reporting to those local governments that are in compliance with their CAFR accounting standards of preparation. Presently, accounting principles for government entities are set by transmittal letters issued to local governments by the GASB.

Differences between General Budgets and CAFR

The primary difference between a budget and a CAFR is that where the budget is a plan for the a fiscal period (often year) primarily showing where tax income is to be allocated, the CAFR contains the results of the period (year) with previous years accumulations. A CAFR shows the total of all financial accounting that a general purpose budget reports does not. The CAFR contains a section that provides a comparison of period budget and actual. Additionally, the CAFR gives a detailed showing of investment accounts by category reflecting balances over previous years.

A Government budget document is a blueprint for a "specific grouping" of government agencies' spending over the course of an annual financial period. General Purpose Budgets contain both the spending categories of specified units of government, such as school districts, social services, transportation, police, fire, and park services; along with estimates of revenues expected to occur during the year, such as investment return; overrides of money from the previous year, and tax payments. They are usually more limited to the expected costs of running the aforementioned government operations through tax income as opposed to describing the status of any government fixed assets and investment wealth.

A CAFR is a report of the complete overall financial results of both those "specific groupings" of government agencies that appear in the current fiscal year General Purpose Budget and all other agencies and departments. These can be autonomous, enterprise(for example government or city owned golf courses), recycling, water, sewer, and financial management - often these agencies were created with the inception of that local, state or government. The CAFR provides information about all of these other government agencies that may have their own budgets and separate investment accounts but their financial holdings are not combined with the general purpose budget that the same government presents to the public. The CAFR, or as it is called in CANADA CanFR can be used along with a budget document to compare the organizations total financial standing to the annual general purpose budget. The CAFR is the complete showing of the financial investment and income records from all sources, that reflects what has developed over decades whereas a budget report is an inferior document to the CAFR being that it is primarily focused on what revenue is expected to be brought in and spent for just the year.

In contrast with the rules applying to governments, publicly traded companies such as IBM or Microsoft who are required by the U.S. Securities and Exchange Commission, SEC, to send what is called their Annual Financial Report (AFR) to every shareholder each year. Publicly funded non-profits(or Not-for-profit) quasi-government private associations have claimed that they are not subject to the public records laws & their reports are not subject to open records acts like the Kentucky Association of Cities ( KACO for Counties). However, news stories covering the Kentucky Association of Counties whose spending came under scrutiny by the Lexington Herald-Leader exposed these types of entities as well as their surpluses and claimed spending excesses using money acquired from government fees for products like municipal insurance at premium rates which build surpluses beyond the needs of the entity. [4]

Recent Developments

From at least 1998, a former Commodities Trading Adviser (CTA) who had been a active CTA for about fourteen years, Walter Bubien[5] AKA Burien,[6] and a federal auditor of thirty years, Gerald Klatt, have claimed upon showings seen and from referencing within the now 184,000 local government CAFRs, AFRs and other Federal audit reports, including Audit of the IRS, US Treasury Audit of Bank derivative holdings (tables 1, 2, 3 on pages 22, 23, 24 show that the top three banks were trading and holding over 150 trillion dollars worth of derivatives, apparently in primarily government accounts, US Treasury Audit of Bank Mortgage holdings, Federal Consolidated Financial Statements, CAFR for the Federal Reserve and List of State CAFRs.

While some[who?] have called these the "2nd set of books", Burien refers to the CAFR as "the book" with the budget being a section contained therein. Their assessments of government assets, holdings and investment supporting globalism, ownership by government investment "for profit" and government's international investments profits, significantly enhanced with the use of the now 600 trillion dollar international derivatives markets with government investments strategically placed for profit from free trade, war, commodity market, stock market, International investment movement and extreme price volatility is created by these massive moves by "institutional government funds" speculators scattered around the globe manipulating the market either deliberately or by volume.

Since 1998, with the CAFR being brought to the attention of the public by the efforts of Walter Burien and Gerald Klatt,[7] the Government Accounting Standards Board[8] (GASB), starting making significant reporting standards changes using transmittal letters. Burien and Klatt claimed that such changes were calculated steps to hide from the general public's view massive domestic and international wealth, investment assets and authority "enterprise funds", all of which could be seen more visibly outlined in the combined financial columns of 1999 and previous CAFRs, which required a showing of gross totals. The modifications transitioned the accounting from a primary showing of gross totals to that of net totals. Burien and Klatt claim that because these changes are being made without inclusion in the formal standard, there has been virtually no media attention on these issues.

While a budget may indicate that a specific government or agency has financial trouble and debt as a result of excess spending within the select grouping of "general fund" accounts, the CAFR may indicate that overall the same government entity has many facets possessing large holdings and income considerably greater than what is shown in a budget report or the "general fund" alone.

  • In 1994, Orange County California government lost about $1.5 Billion on investments in the derivatives market and claimed they needed to declare bankruptcy per their general purpose budget while holding approximately 11.3 billion in profitable holdings in their investment portfolios.[9]
  • The University of Kentucky's holdings of 85% of CHA Health insurance stock was documented in 2005 in the Lexington Herald Leader newspaper when CHA was sold to a rival firm as part of the UK president's effort to raise a billion dollars to fund becoming a "top 20" research university an ongoing effort.
  • In 2010, Oregon Rep. Bruce Hanna during general session when the floor was discussing what to do about the state's 3.5 billion dollar budget shortfall (fire employees, cut back on services, close state parks), stood up with the cover page from the state CAFR in hand and stated that in less than a few minutes he found $3.5B to satisfy the state shortfall, there being no shortfall when comparing the state CAFR and the previous "selective" presentation of the State general purpose operating budget.[10][11]

See also


External links

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