Essay Sample on Comprehensive Annual Financial Report

Introduction

The five main user groups of CAFR includes the media, the public, government leadership and management, creditors, and investors. The government leadership and management, public, and media use all the sections of CAFR. It helps both the media and the public know about a city or state's financial health. Through all the three sections of the CAFR, the citizens can know what their city or state government do with the public money. Furthermore, if the accounting practices are made public and uniform, then the voters can easily gauge the trustworthiness of the public officials. When the media uses all the sections to inform the general public as some people might not be able to read them by themselves, then it promotes accountability and transparency of the government.

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The CAFR statistical section is essential to the creditors. The reason is that it is in this section that the government presents its historical information for the past ten years concerning its operations and finances of its economy and constituents. It is through this section that the creditors can know the government's debts and the revenue it has been able to collect. Statement 44 is also used by this group in capturing the changes that have occurred in government finance, reporting information in a useful manner, reorganizing statistical section, and reporting new information that government currently reports after the implementation of statement 34. The statistical section also includes the revenue capacity, operating information, debt capacity, economic and demographic information, and financial trends of a government.

Investors use both the statistical and financial sections of the CAFR. The financial section is essential as it contains the Relative Strength Index which also includes the management analysis and discussion, the basic financial statements, and independent auditor's report. The basic financial statements in this section that can be used by the investors include Fund Financial Statements, Government-Wide Financial Statements, and notes concerning these financial statements. The statistical section is essential to the investors because it provides a range of data that covers the leading financial indicators for the past ten years. They may include the property tax collections, government revenue and expenditures, and debt burden. Through the information provided in these two sections, an investor can decide on whether to invest in a certain government or not.

I chose the CAFR of the city of Chicago (2017). The CAFR of Chicago City presents a comparison between program revenues and direct expenses for every city's function. ONPO could have performed this function. ONPO could have done this function to enhance financial transparency. Financial transparency is achieved by preserving investor and public trust. When a city is issued with bonds, or it gets its revenue from the public in financing its projects, then it becomes easy to evaluate its creditworthiness. This task is performed by comparing the direct expenses and revenues. Thus, the evaluation of an organization's solvency can be done by the ONPO. Also, through this function, the public can know if their city is transparent or not in the different activities that it performs.

The service could also be outsourced from the for-profit organizations. The reason is that ONPO usually does not focus more on financial information. They mainly focus on the causes of things that happen in the communities instead of profit. Furthermore, the ONPO usually scrutinize numbers in improving their program efficiencies and meet the different funding requirements. Thus, they might not perform this function efficiently. It might also be difficult for the ONPO to accomplish this mission while they also perform their mission of working with the communities in providing them with the best products and services that can help improve their lives. Therefore, it is easier for for-profit organizations to perform this function as they always focus more on financial information and profit.

Department of Finance (2018)

There are several differences in the financial report for-profit organizations, not for profit organizations, and government entities. The government entities usually use the Government Accounting Standards board while reporting its financial statements. On the other hand, nonprofit and for-profit organizations use Financial Accounting Standards Boards and International Financial reporting Standards respectively. All the three accounting standards issue and establish accounting standards in an inclusive and transparent process which aims at promoting financial reporting which offers useful information to the different users. In reporting, the government uses the statement of cash flows, statement of activities, and statement of financial position while for-profit organization uses balance sheet, cash flow statement, and income statement. Consequently, not for profit organizations uses balance sheet, income and expenditure accounts, and receipt and payment account. Government entities are required every year to put a CAFR which analyzes their financial status. Both for-profit and nonprofit organizations are not required to prepare CAFR. Instead, they should prepare to Consolidate Financial Statements for investors, suppliers, debtors, creditors, and other interested parties.

The stakeholders can use different elements to show service delivery effectiveness and operating performance of government entities, for-profit organizations, and not for profit organizations. The elements that can show a government is delivering to its citizens include protecting their freedoms. The economic and political rights of the citizens are the essential thing in the economy. Therefore, if a government is working, then it should be able to protect its citizens. Furthermore, when a government is performing its tasks efficiently, then more people would want to invest in that state, city, or country. Through this, employment opportunities can be created which will further improve the living standards of the public. A working government can also provide educational services to students and promote public health.

The main aim of most for-profit organizations is to make a profit, and this is evident in a company's financial statements. The for-profit organizations can be seen to perform well when the number of customers increase which further increases their profits. However, these organizations also perform Corporate Social Responsibility activities to confirm their service delivery to the communities. These kinds of activities include sponsoring the bright students who are unable to fund their education, improving workers wellbeing, providing food to the poor, and helping the people affected with natural calamities like earthquakes and hurricanes.

The stakeholders can also effectively compare the operating performance and service delivery effectiveness of not for profit organizations through the services they provide to the communities. The activities include educating the poor. Generally, this type of organizations usually works towards ensuring the economic and social well-being of the communities they serve. Their performance can also be seen through providing goods, resources, and services in meeting a community's needs. The services they provide drives spirituality, unity, health, cultural awareness, and economic development of the people it serves.

In the CAFR of Chicago City, there is no college or even university that is listed as a component unit or related affiliated in the CAFR. The University of Chicago is in Chicago City, and this makes it valuable as it will help in the competition of analysis of its financial statements. The university is a private and not for profit institution. In the fiscal year 2017, the institution had an excess operating revenue over the expenses amounting to $27.6 million, and the net assets were $8.4 billion an indication that it increased with $980.4 million from the fiscal year 2016.

The university mainly reported its balance sheet, results of operations, and audited financial statements. In the balance sheet, the institution's total assets increased by about $1.2 billion from the previous year amounting to $15.2 billion. The investment was the most significant asset category. Furthermore, the total liabilities were $ 6.8 billion, and it increased by $230. 8 million. In the consolidated balance sheet of the 2017 fiscal year, the university reported under liabilities; $39, 375, 000 of refundable U.S government student loan funds ("Consolidated Balance Sheets," 2017). In 2016, the loan funds were $39, 414, 000. Also, in the consolidated statements of activities under revenue, the university reported that it received government grants and contracts amounting to $367, 577, 000 and $369, 940, 000 in 2017 and 2016 respectively (Consolidated Statements of Activities, 2017). The university only specified the amount in the balance sheet to be of U.S government. However, in the consolidated statement of activities, it did not determine whether the money was from the government of Chicago or the U.S government. The university did not make any references to CAFR.

References

Consolidated Balance Sheets. (2017). Retrieved from https://annualreport.uchicago.edu/sites/annualreport2017.uchicago.edu/files/uploads/Consolidated%20Balance%20Sheet%202017.pdf

Consolidated Statements of Activities. (2017). Retrieved from https://annualreport.uchicago.edu/sites/annualreport2017.uchicago.edu/files/uploads/Consolidated%20Statement%202017.pdf

Department of Finance. (2018). City of Chicago: CAFR - Comprehensive Annual Financial Reports. Retrieved from https://www.cityofchicago.org/city/en/depts/fin/supp_info/comprehensive_annualfinancialstatements.html