MRSC has joined with Toni Nelson, Small Cities Specialist, State Auditor's Office, Gayla Gjertsen, Finance Director, City of Tumwater, and Mike Bailey, Finance Director, City of Redmond, 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.*

Annual Financial Report

March 2007

By Toni Nelson, Small Cities Specialist, State Auditors Office

It’s that time of year when all finance staff will focus their attention on the completion of the “Annual Financial Report”. Whether you are a smaller “cash basis” entity or a larger “GAAP” reporting entity the annual financial report is required for all (RCW 43.09.230). The RCW further states that the State Auditors Office shall prescribe the format for reporting.

The prescribed reporting format includes financial statements, schedules and notes that provide the public, management and state legislature with valued information about the financial condition of your city, town or county. It is designed to provide essential financial information to assure accountability of public funds and to convey the financial affairs and condition of your local government entity. There are comparative statements of your adopted budgets to actual revenues and expenditures during the reporting period. There are schedules which reflect detailed revenues and expenditures and there are schedules that reflect information concerning legal, contractual and fiduciary requirements. There are also notes to the financial statements and schedules that provide information about the organizational structure and performance of your city, town or county.

While the annual financial report is used by management to assess and evaluate the financial condition of its entity it is also used by the State Legislature. The financial data provided to the Legislature is used to assist in decisions regarding local funding of programs and appropriations of State grants. In addition, the schedules you provide are the source of the data that is used to create the “Local Government Financial Reporting System (LGFRS)”. This reporting system was discussed in detail in the October 2006 Finance Advisor article and provides ten (10) years of statistical data.

Knowing who reads your annual report and how the financial data is being used helps us to appreciate the importance of an accurate and timely filed financial report. The “Annual Financial” report must be filed with the State Auditors office within 150 days after the close of the fiscal year. This date is May 29 or 30, depending upon whether or not it is a leap year. Electronic filing is encouraged but if you are mailing be sure to have it postmarked by the filing deadline.

Timeliness of filing is important, but not at the expense of accuracy. Both of these components are critical. Should you need any assistance in understanding your reporting requirements, do not hesitate to contract your local audit manager or the State Auditor’s Office Help Desk.

Toni Nelson is the "Small Cities Specialist" for the Washington State Auditor's Office, providing both on and off site financial training and assistance to smaller cities and towns throughout the state. Ms. Nelson has been working with the Auditors office for 6 years and prior to that was the Clerk/Treasurer for a small town for 9 years. She has co-authored the "Small Cities Manual" a detailed reference guide for new clerk/treasurers on governmental accounting procedures and presents numerous training workshops throughout the state for AWC, WFOA, WMTA, WMCA and local/regional organizations such as EWFOA and SCWMCA. Ms. Nelson is also a member of and conference track coordinator for the WFOA Education Committee.

Gayla L. Gjertsen has been the Finance Director for the City of Tumwater for over 15 years and was previously the Director of Administration for the City of Milton for 13 years. She has also served as president of the Washington Finance Officer's Association. Gayla has been a presenter at the annual Budget and Fiscal Management Workshops held each summer for many years, and periodically conducts other workshops and writes about local government finance issues.

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