Improving the usefulness of comparative budgetary information in the CAFR.

• Author: Kinnersley, Randall L.
• Position: Solutions

Budgetary information is a vital part of government financial reporting. The Governmental Accounting Standards Board (GASB) revised budgetary reporting standards in GASB Statement No. 34, Basic Financial Statements--and Management's Discussion and Analysis--for State and Local Governments, and GASB Statement No. 41, Budgetary Comparison Schedules--Perspective Differences--an amendment of GASB Statement No. 34. The GASB provides alternative budgetary presentation methods in the standards. Governments are encouraged to adopt the most useful budgetary reporting methods for their users.

Preparers of budgetary comparison information have several reporting options available to them. The number and percentage of cities that have adopted various reporting methods, from a sample of 100 cities, provides insight into the reporting methods governments have chosen to use for budgetary reporting.

REPORTING OPTIONS AVAILABLE

Location of Budgetary Information in the CAFR. The GASB requires governments to report budgetary comparison information for their general fund and major special revenue funds with legally adopted budgets. "Governments are encouraged to present such budgetary comparison information in schedules as a part of RSI." (1) GASB only mentions in a footnote that "Governments ... may elect to report this budgetary comparison information in a budgetary comparison statement as part of the basic financial statements, rather than RSI." (2) The GASB believes budgetary comparison information is more appropriately reported in required supplementary information (RSI), rather than as part of the basic financial statements. (3)

In contrast, the Government Finance Officers Association (GFOA) encourages its members, and all governments, to include the budgetary information in the basic financial statement. Budgetary comparison information was historically part of the general purpose (now basic) financial statements. The GFOA believes it is important for governments to report budgetary information in the basic financial statement. According to Governmental Accounting, Auditing, and Financial Reporting (GAAFR), "While GAAP require only that this budgetary comparison be presented as required supplementary information (RSI), governments are specifically permitted to include this presentation as an integral part of the basic financial statements for their governmental funds. Indeed, the Government Finance Officers Association formally recommends that budgetary comparisons be reported as basic governmental fund financial statements." (4)

The presentation format selected for the budgetary information is identical whether presented as RSI or in the basic financial statement. There are important reporting differences related to the location of the budgetary information in the comprehensive annual financial report (CAFR). First, the budgetary information is considered and labeled as a statement when it is included in the basic financial statement. The same information is labeled and considered a schedule if the information is included in RSI. Second, any notes related to a budgetary statement in the basic financial statement must be in the notes to the financial statements. However, notes to the same information reported as a schedule in the RSI must be included in the notes to the RSI, unless specifically required in the notes to the basic financial statement. Finally, budgetary information presented as part of the basic financial statement requires a higher level of responsibility for the auditors than the RSI...