Preparing for Year-End: A Comprehensive Guide to Reviewing Your AFR and ACFR

This helpful guide prepares school districts for the fiscal year-end by detailing the review process, responsibilities, and tips for accurate and timely submissions of the AFR and ACFR.

Annual Financial Report (AFR) and Annual Comprehensive Financial Report (ACFR) – Getting Ready to Review

It is only May (wait – It’s already May?!) and the June 30th school districts are only two months away from year-end, four to five months away from year-end fieldwork, six months away (potentially) from a report draft and seven months away from the filing deadline. Anyone who participates in the audit process and the reporting process understands how quickly that time will pass. Before we get started, let’s talk about what your review of the report draft should entail when the auditors assist with the preparation of the annual financial report (AFR).

The Timeline. When auditors begin fieldwork, we always work with the end in mind—the board meeting date. Once that date is set, plan for the board packet due dates, audit committee (if applicable) date and the date the report draft should be available for management review.

The Responsibility. Now let’s talk about the responsibilities. Many of you reading this recall the auditors’ board presentation discussing the results of the audit. Typically, one of those slides will address the levels of responsibility. As auditors, our responsibility is to accumulate sufficient evidence to support our opinion on the fair presentation of the financial statements. The Board is responsible for ensuring management meets its responsibility for internal control and financial reporting and management is responsible for internal control and the preparation of the financial statements. As auditors, we can assist with the preparation of the financial statements, but ultimately, management has to accept the responsibility for the preparation of those statements. That is the standard language we use but what does it actually mean?

The Review. When you receive the draft of your financial statements, you should review it in tandem with the latest trial balance the auditors are using along with the journal entries posted subsequent to the date you provided them with their initial trial balance. The trial balance you receive may also be “grouped”. A grouped trial balance is what is used to prepare the financials. It is a report of your full trial balance, grouped together and summarized in the financial statement format.

You will want to review the journal entries to determine:

  • All journal entries provided to the auditors have been posted to the audited trial balance, and you have provided all of your subsequent journal entries to the auditors. When the auditors assist with preparation, it is important to make sure that any activity that is posted after the trial balance is sent to the auditors is provided to the auditors.
  • All journal entries received from the auditors as a result of audit procedures are reviewed, approved and posted by management. Some of the entries may be referred to as reporting only (negative cash, investments and cash and cash equivalents). Many times, these are not posted to the ISD books, however, you need them in order to complete your review process.

You should also review the report and ensure that the amounts reported in the financial statements agree with your trial balance. If all journal entries have been posted correctly, the audit trial balance and trial balance per your system will be the same. This is when the grouped trial balance report is helpful. In order to know what makes up let’s say, the cash and cash equivalent balances, you can refer to the grouped trial balance report to see all of the accounts included in that amount. The two screenshots below show a small snippet of a grouped TB report with a reporting reclass entry and the two financial statement categories affected. The subtotal of the groups equals the amount reported in the financial statements. How you use the auditors grouped trial balance report to compare to the trial balance per the system and ultimately the final report will depend on the types of reports you are able to run from your ERP. You want to be thorough, but efficient as well.

Once you have reviewed the statements and the notes to the financial statements, move on to the notes and supplementary information. Reviewing the notes, especially the debt and capital asset note schedules, is extremely important. Depending on the size of your District, these schedules can be complex. You want to ensure that the final note in the report accurately reflects the activity and ending balances for the year. If your District prepares an annual comprehensive financial report (ACFR), you will also need to review the Statistical section. Keep in mind that our opinion does not cover the statistical section, but garners a lot of attention from the public and board members since it presents trend information for the District and the surrounding area. Most of the statistical section is obtained from the District and placed in the report file. There are only a few statistical tables that come from portions of the financial statements. We will review for mathematical accuracy, check against the prior year, etc., but the District should ensure the statistical section of the report reflects the information provided to the auditors.

The Submissions. There are several submissions that have to be completed. The mandatory submissions for all local education agencies are as follows:

  1. The final PDF of your AFR/ACFR agrees to the audited trial balance.
  2. The PDF of the AFR/ACFR agrees to the data feed schedules through TEAL.
  3. Your detailed general ledger agrees to the AFR/ACFR because it will be used for your PEIMS Mid-Year Submission.

If you submit an ACFR, then you will want to ensure that you have reviewed and addressed all Government Finance Officers Association comments from the prior year submission and that the application and final PDF are submitted within 180 days of your fiscal year-end. If this is your first time preparing an ACFR, you should keep the GFOA General Purpose Checklist handy. Doing so will ensure the financials and notes are presented in accordance with GASB standards. The checklist incorporates up to GASB Statement No. 99, so be on the lookout for the next version to incorporate the upcoming GASB standards (GASB No. 100 and 101 are already issued).

Enjoy your summer! Report time will be here before you know it.

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