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Breadcrumbs

The ACFR crunch

Originally Published in Statewise Winter 2008

by Jerell Lambert

While many are enjoying the year's winding down and anticipating some well-earned time off during the holiday season, the Fiscal Management (FM) Division's Financial Reporting section (FRS) is in maximum overdrive preparing the Texas Annual Comprehensive Financial Report (ACFR).

By law, every state agency and institution of higher education is obligated to submit an annual financial report (AFR) to the Comptroller's office, which combines the statements to create the ACFR.

The body ACFR

The Texas ACFR is divided into three main sections:

  1. An introductory section containing:
    • A transmittal letter to the citizens of Texas, Governor Rick Perry and members of the Texas Legislature;
    • A listing of elected state officials;
    • A chart depicting the government structure of Texas; and
    • The Government Finance Officers Association (GFOA) Certificate of Achievement, if applicable.
  2. The financial section that includes, among other elements:
    • The opinion expressed by the State Auditor's Office (SAO) on the financial statements (non-federal portion),
    • Management's discussion and analysis providing an introductory overview and analysis of the financial statements,
    • The financial statements for the primary government along with the component units of the state of Texas, and
    • Notes to the financial statements, containing additional information supporting and supplementing the statements, such as methods of accounting.
  3. Statistical data on state financial, nonfinancial and demographic trends.

For whom does the ACFR toll?

The ACFR provides a thorough picture of the state's fiscal health. But who benefits from this central resource showing how state revenues are expended?

"Citizens, legislators, investors, agencies and bond rating companies," says Irene Lee, FRS section manager.

"For instance, anyone interested in investing in Texas by buying bonds from the state or marketing bonds to the state can look at the information in the ACFR to check on our solvency and stability," says Wiley Thedford, assistant section manager of FRS and resident financial expert for institutions of higher education.

Bond rating agencies, such as Moody's and Standard & Poor’s, use the ACFR and other tools to determine the credit risk, and thus interest rates, for bonds issued by the state.

"Except for about a dozen agencies that require a separate, independent audit, all the rest rely on the statewide ACFR if they issue bonds," says Lee.

Al Kruzel, FRS's master of the State Property Accounting (SPA) system housing the state's capital assets data, sums it up: "The interest rate you have to pay on bonds is based on the rating of your bonds, which can be based on the confidence of the investing community, which, in turn, can be influenced by your ACFR."

So getting the ACFR right is serious business for the state.

All in

By late November, around 200 AFRs have been submitted to FRS by Texas state agencies and institutions of higher education.

Throughout the year and particularly as fiscal year-end approaches, Lee's section works with agencies to assist with preparation of their AFRs. Once the AFRs are all in, the state financial professionals who have worked so hard can give themselves a well-deserved pat on the back.

But for Lee and her section, it's the beginning of an intense crunch time that will carry through the holidays and continues until the end of February, when the completed ACFR must be presented to the governor.

"We experience a brief peace after the Nov. 20 deadline," says Lee. "The phones stop ringing, and we take a deep breath."

But only one.

After the AFRs

With all AFRs received, FRS begins a 10–12 day period when each financial reporting analyst is assigned a group of agencies to perform high-level AFR desk reviews.

"We have an audit program checklist that we go through — procedures for inspecting and making sure that what has been reported in an AFR is consistent and that the agency has disclosed things they're supposed to disclose," says Thedford.

"If certain key accounts don't balance, our financial reporting analysts attempt to fix the discrepancies and, if necessary, contact agencies," says Lee.

Once the AFRs have undergone high-level desk review, all the Uniform Statewide Accounting System (USAS) information for the fiscal year for all state agencies, independent universities and university systems is uploaded to the Comptroller office's Generally Accepted Accounting Principles Reporting (GAAPR) system. This system has the flexibility to generate the consolidated government-wide financial statements and fund financial statements contained in the ACFR.

"This period of time, from the final submission date of the AFRs through the first week of December, is very intensive," says Lee.

"We need to finish our high-level AFR desk reviews by Dec. 7–8. At that time, we give the GAAPR database of financial information we've uploaded from USAS to auditors from the SAO for their review. We try to get it to them by Dec. 8 so they can officially start auditing those numbers."

Notes!

"After Dec. 8, with the financial data balanced, we start the next phase of consolidating the ACFR, which occurs during a roughly five-week period ending around mid-January," says Lee. "We focus on making statewide ACFR adjustments, though agencies have tried very hard to resolve any of these discrepancies before we get involved. We also produce the 26 notes supporting the financial statements."

"The notes and ACFR adjustments are assigned to different analysts," says financial reporting analyst Aurora Ramirez who assists with putting the ACFR together. "The assigned analyst addresses a particular note for all agency AFRs received, such as Al Kruzel's SPA team that handles all capital assets, known as Note 2 in the ACFR."

Getting to know you

"During the second part of December, SAO auditors come on site to audit our work," says Lee. "They continue to work with us through the completion of the ACFR and give us their opinion, to be included in the ACFR."

Wrapping it up

"By mid-January, all the adjustments and notes are supposed to be finished, and we start working on the financial statements," says Lee.

"We then run reports and come up with the ACFR format for the statements.

Around the end of January, the Public Outreach and Strategies Division gets involved. They handle the layout to make the ACFR suitable for publication."

"In the last two weeks before releasing the ACFR at the end of February, both Public Outreach and Strategies and the SAO spend a lot of time working with us to proof the document and make sure everything in the ACFR is accurate and publication-ready," says Lee.

"Finally, we deliver the finished product to the governor. It is a statutory requirement that we produce the ACFR and deliver it to the governor by the last day of February. If it's a leap year, we get an extra day!"

Never a dull ACFR

It’s clear the Financial Reporting section is stocked with super troopers willing to go the extra mile each year to produce the ACFR. What is it about the huge job of putting together the ACFR that keeps FRS staff coming back to take on this monumental task?

Ramirez : "Every ACFR is always something new — new challenges, questions, new people you encounter, even new agencies."

Thedford : "I love building financial reports and knowing how they work, and I'm always looking to make improvements to how the system works. Also, I like being able to bring my higher-ed expertise to the task."

Kruzel : "It’s the people I work with. Those who need to reconcile their entries in the SPA system for their AFR and our ACFR are stressed and have a huge job to accomplish. Together, we navigate through the problems and find a better way to do it next time. Every time something new comes up, it adds to our knowledge base."

I have 16 going on 17

Great people with great attitudes produce similar results. Because of the excellent work they do in putting together the ACFR, the Financial Reporting section has received the GFOA Certificate of Achievement for Excellence in Financial Reporting for 16 years running and anticipates receiving their 17th consecutive award sometime this month.

So, when you're enjoying some time off this holiday season, don't forget to raise your glass for all those burning the candle at both ends to produce the biggest AFR of them all — the ACFR.