Financial Statements – presentation to municipal staff and elected officials

Government of Yukon Community Services

Whitehorse, YukonMarch 30, 2011

Users of the Financial Statements (F/S) F/S Components Introduction to Public Sector Accounting Board

(PSAB) Reporting model Recent change to the reporting model: Tangible

Capital Assets (TCA) Non-compliance with Generally Accepted

Accounting Principles (GAAP) Audit opinion Subsequent consequences

What to look for in F/S

Presentation Outline

Users of the Financial Statements

Community residents Resources available to your community and how they

are used Leadership and management of council

Mayor and Council Planning and good decision making Validated information by professional independent

auditor

Governments Funding decisions

F/S Components

F/S have 4 Statements (plus Notes):1. Statement of Financial Position2. Statement of Operations 3. Statement of Change in Net Financial Assets4. Statement of Cash Flows

Also required: Schedules – i.e. Tangible Capital Assets and

Segmented Information Significant accounting policies – i.e. Tangible Capital

Assets, Revenue Recognition Comparative balances for all statements, notes, and

schedules Budget figures (approved by Mayor and Council)

TCA Schedule - Example

Introduction to PSAB

What is PSAB? External organization, part of the Canadian Institute of

Chartered Accountants

What does it do? Sets financial reporting standards for all governments

(Federal, Provincial/Territorial, Local) across Canada

Why? To enhance public confidence in public sector

reporting:• Accountability• Transparency• Comparability

PSAB F/S are reported on a full accrual basis

Expenses are recorded as incurred

Cash does not need to be disbursed for an item to be recorded as an expense (i.e. sick leave)

Cash basis may be used for budgeting purposes

Remember: Different basis = different results! Budget ≠ F/S

Reporting model

Old Financial Statements PSAB Financial Statements

Expense Asset / Amortization Expense

Capital expenditures are charged directly to operations or

transferred to capital fund

Capital payments recorded as TCA

Cost is amortized over the useful life of the asset (except land)

Statement of Operations Asset – Statement of Financial Position

Amortization – Statement of operations

Tangible Capital Assets (TCA)

RoadsBuildingsVehicles

Machinery and EquipmentLand

Water and Sewer Infrastructure

Recent change to the reporting model: TCA

Audit report: Unqualified – Objective: No significant issues! Reserved:

Qualified: positive opinion on the financial statements as a whole, but qualifies due to a departure from GAAP or a limitation in the scope of the examination (departure is not pervasive – can be isolated)

Adverse: financial statements are not presented fairly in accordance with GAAP (generalized issue)

Denial: Unable to form an opinion

Non-compliance with GAAP

Subsequent consequences: Could affect financing costs with banks Could affect receipt of funds from other governments Public concern over council’s management practices Federal Gas Tax agreements require that municipalities

comply with PSAB – possibility of funds being held back Affect eligibility for other federal and territorial programs –

risk of reduced funding

Non-compliance with GAAP

What to look for in F/S Audit opinion Significant differences between current year and prior

year/budgeted figures Notes should always agree to the F/S Accumulated Surplus

Key indicator of a municipality’s financial healtho Does not represent excess casho Does represent its net worth

Contingent liabilities (i.e. lawsuits) Subsequent events: Important events that occurred

after the year-end, but before the date on which auditor signs opinion (and Council takes responsibility for the F/S