Running head: FINAL PAPER 1

Government & Non-Profit Accounting Final Paper

Sharmori Richardson

International College of the Cayman Islands (ICCI)

BE-480

Instructor: Arlene Harris

Due date: 21 June, 2018

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Introduction

Accounting is one of most high demanded industries in the world to today. It is defined

as the systematic and comprehensive recording of financial transactions from a business

(Investopedia, 2014). Accounts are for businesses, but they are also for accountant’s

governments and non-for-profit organization Accounting and financial reporting for

governments and nonprofit organizations are based on unique concepts, standards, and

procedures that accommodate their environments and the needs of their financial report uses

(Freeman et al.,2013, p. 1). In this paper, the student will compare the management discussion

and analysis of two government financial reports as well as the financial information.

Management Discussion and Analysis

Management discussion and analysis (MD&A) is the section of a company’s annual

report in which management provides and overview of the previous year’s operations and how

the company performed financially (Investopedia, 2016). In the case of a government, the

Management’s Discussion and analysis introduces the government’s basic financial statements

and provides an analytical overview of the government’s activities. The analysis of the

government’s financial activities in the MD&A is to be based on currently known facts,

decisions, or conditions (Freeman et al. 2013).

State of Florida Government Management’s Discussion and Analysis.

Based on the analysis of the Florida State 2015/16 Financial Report, the report meets all

the requirements for Management’s Discussion and Analysis. The report began with a brief

discussion which highlights a brief discussion of the financial statements including the

relationship between governments-wide financial statements, fund financial statements and

additional information about the financial statements. To further show the relationships of the
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financial statements, State of Florida presented a table that shows the major features of the basic

financial statements.

Following the brief discussion of the basic financial statements, the report highlighted the

condensed financial information from the government-wide statements comparing the current

year and the prior year as well as an analysis of the overall financial position and results of

operations. According to Freeman et al., (2013), the financial information should be included in

the condensed statement of net position are total assets, total deferred outflows, of resources,

total liabilities, total deferred inflows of resources total net position (p. 504). In regards to the

condensed statement of activities, the information that should be highlighted in the financial are

revenues expenses, excess before contributions, contributions and transfers, special items,

extraordinary items, change in net position and beginning and ending net position. Based on the

analysis of the report, the state of Florida has met the requirements of part two of the MD&A.

In regards to requirement three, four and five of the Management’s Discussion and

Analysis, State of Florida provided thorough discussion about the major Fund Analysis, the

general fund budget variances as well as the capital asset and long-term debt activity during the

year. In addition, the report of major fund analysis discussed two funds, which are the

governmental funds and proprietary funds. The student believes that they have categorized the

major fund analysis to ensure that readers of the annual report knows what is discussed and how

they can use the information.

Last but not least, requirements seven and eight have been fulfilled as the annual report

highlights the significant changes, compares the current assessed conditions, and provides

currently known facts, decisions, or conditions that are expected to have a material effect on

financial position or results of operations. As a result of fulfilling all of the requirements, the
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State of Florida has conducted an official Management’s Discussion and Analysis of their annual

report for the year of 2015-16.

Cayman Islands’ Government Management’s Discussion and Analysis.

Based on the analysis of the Government of the Cayman Islands 2015 Management’s

Discussion and Analysis, have fulfilled the only two of the requirements of the MD&A Report,

which are requirements five, and six. The student observed that the Government of the Cayman

Islands’ MD&A was not presented clear as there is limited information about why they reported

the financial information for the fiscal year.

Last but not least, the Government of the Cayman Islands highlighted information that

should not be included in the MD&A. Information such as the government should be included in

the introduction not the Management’s Discussion and Analysis. Based on the requirements, the

introduction is separate from the MD&A. Therefore, the Government of the Cayman Islands did

not produce a full Management’s Discussion and Analysis report.

State of Florida Government Financial Overview.

Appendix A presents the state’s Consolidated Statement of Net Position as of June 30,

2015, which was derived from the government-wide Statement of Net Position. Compared to the

prior year, the state closed their fiscal year with a net position of $60.5 billion for government

activities and 24.8 billion for business-type activities, which is a total of $85.3 billion for the total

primary government. The student observed that net investments in the capital were the largest

component, comprising of $71.5 billion as of June 30, 2015. According to Florida's Chief Financial

Officer (2016), the state uses these capital assets to provide services to the citizens and business in

the state.
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Appendix B presents the condensed statement of activities for the fiscal year 2014-2015.

The states total net position increased during the fiscal year by $5.6 billion. As it relates to

governmental activities, net position increased by 3.1 billion, while business-type of activities

increased by 2.5 billion. Regarding expenses, the increase in total program expenses for

governmental activities derived from Human Services expenses and General Government

expenses, while the largest expense from business-type activities expenses came from prepaid

program expenses. Although expenses increased, the state still managed to increase their net

position, which the student believes the government to be in good financial health.

Government of the Cayman Islands Financial Overview

Appendix C presents the Consolidated Statement of Financial Position for the fiscal years

of 2013-2014 and 2014-2015. The Cayman Islands government reported a significant decrease in

total assets and total liabilities. Even though they suffered a significant decline, the government

still managed to report an overall increase in Net Assets and Equity. Based on the adverse opinion

audit done by the Office of the Auditor General the government “did not report all of its liabilities

and assets which result in the understatement of total liabilities, assets and the overall net position

of the government” (Cayman Islands Government, 2017, p. 21).

Appendix presents the Consolidated Statement of Financial Performance for the fiscal

years of 2013-2014 and 2014-2015. The Government of the Cayman Islands reported an increase

in revenues in 2014-2015 compared to the prior year. Based on the financial statements provided

in the report, there was a decreased in expenses for the government, which contributed to the

growth of surplus. However, the auditor concluded that “depreciation and amortization expenses

were not accurate stated as well as sales and goods were incomplete due to the poor controls for

patient revenues” (Cayman Islands Government, 2017, p. 21).

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In comparison between the two governments, the student believes that the State of Florida

is in a better financial position than the Government of the Cayman Islands. The student believes

that the state would be in a better position due to the government having more resources than the

Government of the Cayman Islands. Based on analysis of the financial reports, the State of Florida

records their financial statement using government accounting standards, while the Government

of the Cayman Islands records their financial statements from a public company perspective. Last

but not least, the student believes that the Government of the Cayman Islands should present their

financial information using the government accounting standards to help readers understand the

net position of the government.

Group Project

City of Josiah

Statement of Net Position (Net Position Section)

As of June 2016

Unrestricted net position:

Total fund balances of governmental funds ............................... $12,800,000

Less:

Special Revenue Funds fund balances ..................................... $2,000,000

Restricted Capital Projects Funds fund balances ..................... 400,000

Debt Service Funds fund balances ........................................... 2,000,000

Long-term claims and judgments payable* ............................. 1,750,000

Long-term compensated absences payable* ............................ 750,000 (6,900,000)

Add:

Equity of Internal Service Funds ............................................. 1,900,000

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Less: ISF net investment in capital assets

($3,000,000 x .3) - ($1,100,000 x .25) ................................. 625,000 1,275,000

Total Unrestricted Net Position ................................................. $7,175,000

Restricted net position:

Special Revenue Funds fund balances ....................................... $2,000,000

Debt Service Fund - fund balance .............................................. 2,000,000

Capital Projects Funds restricted fund balance .......................... 400,000

Less: Capital debt equal to unexpended bond proceeds ......... 300,000 100,000

Total Restricted Net Position ..................................................... $4,100,000

Net Investment in Capital Assets

General capital assets ................................................................. $12,000,000

Less: Accumulated depreciation ............................................... 5,000,000

Net general capital assets ....................................................... 7,000,000

Deferred Outflow – Deferred amount on refunding .................. 70,000

Internal Service Fund capital assets ($3,000,000 x .3) .............. 900,000 $7,970,000

Less:

General long-term capital debt

($3,000,000 - $300,000)......................................................... 2,700,000

Internal Service Fund capital debt ($1,100,000 x .25) ............... 275,000 2,975,000

Total Net Investment in Capital Assets ..................................... $ 4,995,000

Restricted for:

Debt service ............................................................................. $2,000,000

Capital projects ($400,000 - $300,000) ................................... 100,000

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Specific programs .................................................................... 2,000,000 4,100,000

Unrestricted ................................................................................ 7,175,000

Total Net Position .................................................................... $16,270,000

Conclusion

Based on the information learned over eleven weeks, the student concludes that he has

gained a better understanding of the government and non-profit accounting as well as the

difference between public accounting and government. Last but not least, the student will like to

thank his instructor, Dr. Arlene Harris for providing him with the tool for gaining a better

understanding of the course. Without her exceptional teaching skill, developing this final project

wouldn’t have been possible.

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References

Cayman Islands Government. (2017, April 3). Financial Statements for the Government for the

Year Ended 30th June 2015. Retrieved from Ministry of Finance & Economic

Development: Cayman Islands Government:

http://www.gov.ky/portal/pls/portal/docs/1/12400649.PDF

Florida's Chief Financial Officer . (2016, February 26). Florida Comprehensive Annual

Financial Report. Retrieved from Florida's Chief Financial Officer :

https://www.myfloridacfo.com/aadir/statewide_financial_reporting/1entirecafr15.pdf

Freeman, R. J., Shoulders, C. D., & Allison, G. S. (2013). Governmental and nonprofit

accounting: Theory and practice. Upper Saddle River, NJ: Pearson Prentice Hall.

Investopedia. (2014, December 5). Accounting . Retrieved from Investopedia :

https://www.investopedia.com/terms/a/accounting.asp

Investopedia. (2016, February 20). Management Discussion and Analysis - MD&A. Retrieved

from Investopedia: https://www.investopedia.com/terms/m/mdanalysis.asp

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Appendix A
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Appendix B
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Appendix C
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Appendix D