Budget season -- Audits, continuation;

General Fund Key Areas 
 The Fund Based General Fund revenues, expenditures and transfers should be close to the
     budgetary results. However GAAP throws a couple of curve balls to complicate the comparison.
 Most of the key analysis of this fund was accomplished in the budget/actual statement.
 GAAP requires that most stabilization funds be combined with the General Fund for the fund
     based presentation.
 The rational is the Stabilization Fund is just a sub-fund of the General Fund since it is usually
    funded by GF contributions.
 Therefore the Fund Balance will look a lot higher than your free cash calculation. The Notes
     should detail these amounts.

Balance Sheet 
 The Balance Sheet should be reviewed with the last few years. The Town services provided is
    usually pretty consistent year-to-year and therefore the balance sheet amounts should be
    consistent.
 Focus your review on any significant changes.
 Recently I completed a forensic audit on a Town that showed outstanding receivable balances
    increasing by significant amounts over the past several years. This was a red flag that funds were
    being stolen however it went undetected.

Stabilization Funds 
 As just stated the Stabilization Funds are combined with the General Fund for financial statement purposes.
 Read the notes and MD&A to determine how these funds are either accumulating or depleting.
 It may be best to receive this information directly from the Town Accountant.

Other Governmental Funds 
 Within the Governmental Fund Based Statements are Special Revenue, Capital Projects, Debt Service and many Trust Funds.
 The special revenue and trust activity are usually self-supporting and recurring such as school state
    and federal grants.
    These should not cause much concern unless there are significant accumulated surpluses or
    deficits.
 If there are any significant deficits then the notes are required to disclose these amounts. If there
    not a future revenue
    source then the General Fund will have to fund the deficit.
 Any significant surplus will be difficult to find by just reviewing the financial statements so
    you should request a fund analysis from the Town Accountant.
 The Capital Project Fund is also included within this statement. Capital Projects can carry a
     temporary deficit at any time during the project based on the timing of borrowing and grants
     being received. The financial statements may show a deficit if a Bond Anticipation Note is
     outstanding and the project has not been permanently financed.
 If there is a financial statement deficit you should ask the Town Accountant if there is any
    projected permanent deficit.

Major and Non-major Funds 
 GAAP requires that any “Major” Fund be presented in its own column based on certain criteria.
 What is normally seen is a Major Capital Project such as a new high school or Community
    Preservation.
 All other funds are accumulated in the single column for Nonmajor funds. Unless you prepare
    a CAFR this detail will not be found.
 These funds are not budgeted and most times are not part of a Finance Committee review.
    You may want to request the detail to see if any other available funds are available.

posted by Jeff Bennett