2002-02-13 CC Packet - Laserfiche WebLink

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~ummary of Statement No 34 Page 2 of8 Fund statements also will continue to measure and report the "operating results" of many funds by measuring cash on hand and other assets that can easily be converted to cash. These statements show the performance-in the short term--of individual funds using the same measures that many governments use when financing their current operations. For example, if a government issues flfteen- year debt to build a school, ~ does not collect taxes in the first year sufficient to repay the entire debt; it levies and collects what is needed to rnake that year's required payments. On the other hand, when governments charge a fee to users for services-as is done for most water or electric utilities-fund information will continue to be based on accrual accounting (discussed below) so that all costs of providing services are measured. Showing budgetary compliance is an important component of government's accountability. Many citizens-regardless of their profession-participate in the process of establishing the original annual operating budgets of state and local govemments. Governments will be required to continue to provide budgetary comparison information in their annual reports. An important change, however, is the requirement to add the govemment's original budget to that comparison. Many governments revise their original budgets over the course of the year for a variety of reasons. Requiring governments to report their original budget in addition to their revised budget adds a new analytical dimension and increases the usefulness of the budgetary comparison. Budgetary changes are not, by their nature, undesirable. However, we believe that the information will be important-in the interest of accountability-to those who are aware of, and perhaps made decisions based on, the original budget. It will also allow users to assess the government's ability to estimate and manage its general resources. Bringing in New Information The financial managers of governments are knowledgeable about the transactions, events, and conditions that are reflected in the government's financial report and of the fiscal policies that govern its operations. For the first time, those financial managers will be asked to share their insights in a required management's discussion and analysis (referred to as MD&A) by giving readers an objective and easily readable analysis of the government's financial performance for the year. This analysis should provide users with the information they need to help them assess whether the government's financial position has improved or deteriorated as a result of the year's operations. Financial managers also will be in a better position to provide this analysis because for the first time the annual report will also include new government-wide financial statements, prepared using accrual accounting for all of the government's activities. Most governmental utilities and private-sector companies use accrual accounting. It measures not just current assets and liabilities but also long-term assets and liabilities (such as capital assets, including infrastructure, and general obligation debt). It also reports all revenues and all costs of providing services each year, not just those received or paid in the current year or soon after year-end. These government-wide financial statements will help users: http://accounting.rutgers.edu/raw/gasb/stlsummary/gstsm34.html 2/8/02