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Award Program for Small Entities

April 1, 2013 by Finance Advisor
Category: Accounting and Internal Controls , Finance Advisor

MRSC has joined with Tracey Dunlap, Director of Finance & Administration at the City of Kirkland, Mike Bailey, Finance Director, City of Redmond, Glenn Olson, Deputy County Administrator, Clark County, and Angie Sanchez, Principal, FCS GROUP, to bring you the "Finance Advisor" column. The "Finance Advisor" will feature a new article each month with timely local government finance information and advice you can use.*

By Mike Bailey, Finance Director, City of Redmond

In this column I wanted to pass along news that I'm hoping will be an opportunity for many of our smaller governments here in Washington State to get outside recognition for their financial reporting work. The Government Finance Officers Association has had a financial reporting recognition program in place for decades and many of our larger governments have been able to benefit from it. While I was on the GFOA Board of Directors many of us recognized that there was no similar program for smaller governments (those that do not use GAAP reporting). In GFOA (like Washington State) the majority of our members were not using GAAP guidance to prepare their annual financial reports. They were too small to justify the expense of such an endeavor (see my article on this topic “Financial Statements - GAAP or Cash- You Decide,” June 2011).

Well, I'm now longer on the GFOA board but they've continued to work on the idea. Now Ade Ariwoola, Finance Director for the City of Ellensburg, is on the board and is providing information about the new program that GFOA just announced in an article that he has written for the Washington Finance Officers Association. In Ade's article you will see how the program works and what you might consider regarding participation. It is my hope that, just like the recognition program for GAAP based reporting, this program will help us to provide consistent and reliable reports that are recognized for their “excellence” by the GFOA.

Article for WFOA Newsletter by Ade Ariwoola

GFOA established a new program to recognize small government entities that is intended to improve the quality and consistency of financial reporting for smaller government (Small Government Annual Financial Report - SGAFR). The program starts with agencies with fiscal year that ended June 30, 2012 and will accept application through March 31, 2013. [Note: The deadline is keyed off the fiscal year-end for the entity. For most in Washington that would either be the calendar year (cities and counties for example) or August 31 (school districts). ] The following are some of the major characteristics of “Certificate of Conformance Program” and what differentiates it from “Certificate of Achievement for Excellence in Financial Reporting”:

  • It is for small government with $25 million or less in total primary government revenues in its government-wide financial statements either for current year or the average of the last five years.
  • The report will be based on the “modified cash basis” NOT “accrual” or “modified accrual”. Modified cash basis for the purpose of this program means:
    • Will use cash basis to present both government-wide and fund statements.
    • Only transactions involving cash and cash equivalents during the reporting period are recognized, including:
      • Interfund receivables and payables involving cash or cash equivalents.
      • Assets that will normally convert to cash or cash equivalents within the reporting period like certificate of deposit, marketable investments, and receivables resulting from loans.
      • Liabilities for cash that will affect cash or cash equivalent within the reporting period like cash received in advance of performing the service, cash held in escrow.
    • The report will contain adequate and relevant disclosures required by GAAP, and
    • Other disclosures that are considered necessary in order not to mislead the readers.
  • Required supplementary information (RSI) is not required for this program but the following are required as part of the basic financial statement:
    • Budgetary comparison for the general fund
    • Budget comparison for the major special revenue funds with legally adopted budgets.
  • Management's discussion and analysis (MD&A) is not required but some of the information must be reported in the letter of transmittal like the financial highlights for the government-wide financial statements, fund financial statement, budget highlights of the general fund and etc.
  • Statistical section is not required with the report unlike CAFR.
  • For the entities that meet the revenue threshold, this report will be in place of CAFR if they have not prepared CAFR (GAAP) in the last 5-years.
  • The cost of the program is as shown below:
Total Revenues GFOA Member NonMember
Less than $1 m $290 $580
$1 - $10 million $370 $740
$10 - 25 million $435 $870

The following are some of the differences between CAFR and SGAFR reports:

Introductory Section    
Letter of transmital Yes Yes
Certificate if applicable Yes Yes
Organizational Chart Yes Yes
List of Elected and appointed Officials Yes Yes with more items from MD&A
Financial Section    
Independent Auditor's report Yes Yes
MD&A Yes No
Basic Financial Statements    
Government-wide financial statements Yes Yes
Fund financial statements Yes Yes
Notes Yes Yes
Required Supplementary Information Yes No
Combining and Individual Fund Statements and Schedules Yes Yes + 5 year trend on (a) Net position, (b) Changes in net position of govt-wide, (c) Fund balances, and (d) Revenues, expenditures and changes in fund balances of governmental funds.
Schedules of Revenues, Expenditures, and changes in FB-Budget and Actual Yes Yes
Statistical Section Yes No

The program like CAFR is a professional recognition for smaller entities that intend to improve quality and consistency of financial reporting.

As the GFOA Executive Director Mr. Jeff Esser puts it “The Certificate of Conformance Program will help governments improve the quality of financial reports by creating nationally recognized guidelines. Participants will benefit from the increased training and professionalism that go hand in hand with producing high quality financial reports.”

For more information, please check or call Krisztina Dommer of the GFOA Technical Services Center at 312-977-9700 ext. 219

Finance Advisor Authors

Mike Bailey is currently the Finance Director for the city of Redmond. Previously he worked as Administrator of Finance and Information Services for the city of Renton and as the Director of Finance for the city of Lynnwood. Mr. Bailey also served as president of the Washington Finance Officers Association and is the Vice Chair of the GFOA Budget Committee. An experienced CPA and GFOA budget reviewer, Mr. Bailey co-founded the annual Budget and Fiscal Management Workshops held each summer. Mr. Bailey conducts numerous workshops and has authored various articles on local government finance, including Effective Budgeting in Washington State Cities published by the Association of Washington Cities.

Tracey Dunlap, P.E. is the Director of Finance & Administration at the City of Kirkland. Prior to joining Kirkland in 2006, she was a principal and shareholder in FCS Group, a regional financial and management consulting firm (14 years). An industrial engineer registered in the state of Washington, she has worked with jurisdictions throughout the Northwest to develop and implement cost recovery and fee strategies, set utility rates, and improve organizational efficiency and effectiveness. Tracey's experience also includes working for a large defense contractor (5 years) and a major financial institution (3 years). She has presented on a wide array of topics for organizations including WFOA, APWA, APA, WABO, and AWC.

Glenn Olson is the Deputy County Administrator for Clark County. He has been in Clark County since 1997, serving in various leadership positions during his tenure there. Previously Mr. Olson served 15 years in the Governors Office of Financial Management overseeing budget forecasts. Mr. Olson chaired the Washington State Public Works Board for Governor Locke. Currently he is the gubernatorial appointee representing local governments on the Select Committee for Pension Policy and on the Law Enforcement Officers and Fire Fighters Plan 2 (LEOFF2) Board, and he is the president of the Washington County Administrators Association.

Angie Sanchez Virnoche is a principal and shareholder at FCS GROUP, a consulting firm specializing in public sector financial, economic and management consulting. Angie has provided financial utility business advisory services to municipalities since 1993 for water, sewer, solid waste, storm water and electric utilities. Her project work includes multi-year financial planning, cost of service studies, conservation based rate design development, capital/infrastructure planning, funding alternatives, cost benefit analysis, and community education and involvement. Angie has presented at numerous conferences and workshops throughout her career on topics related to financial management and rate-setting including WFOA, ERWOW, WAPUD, NWPPA, WOW, AWWA, PWC, WASWD.

*The Articles appearing in the "Finance Advisor" column represent the opinions of the authors and do not necessarily reflect those of the Municipal Research and Services Center.

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