Government accounting standards board requires all government entities to prepare a comprehensive annual financial report. The report outlines the annual government financial statements containing all the financial transactions that occurred during the year of the report. Preparation of the report is done by professional accountants, and the audit is carried out by an external American Institute of certified public accountants firm that follows GASB requirements. The audit is done by an external body to ensure the independence of audit work ( Wang and Peng 2016) .
Boston city comprehensive annual financial report of 2016 complied with GASB 34 which requires every government entity to prepare financial statements. Also, the board calls for preparation of management reviews and analysis. The City’s financial records preparation followed the United States generally accepted accounting principles. According to the audit report, the statements prepared are accurate, complete, and fairness is observed in the data presented. The city also provided the board discussions and recommendations as required by the government accounting standard board 34.
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The city is reputable in excellent preparation and reporting of financial. As a result, they were awards a certificate by the finance association of the United States government. The city was given the award because its report was readable and organized. The report satisfied the accepted accounting principles.
The financial statements of Boston city were audited by KPMG audit firm. The firm obtained competent audit evidence which was sufficient to provide ground for an audit opinion. Substantive procedures were carried out to determine whether there was a material misstatement in the financial statements. The audit firm gave a report on internal controls of the city by United States government audit standards. After the audit, the firm gave an opinion that the financial statements present a true and a fair view the financial position of the government activities. Cash flows, budgetary comparison for city’s general fund and other financial statements for the year were prepared by generally accepted accounting principles. However, the firm included an emphasis of matter paragraph concerning note 2n in the financial statements. The city adopted governmental accounting standard board statement No 72, fair value measurement and application. The city financial records comprised of brought forward records of the general funds budget. Also, the city financial records had two essential elements. Firstly, previous year financial comparative report and secondly, general funds budget.
The report is prepared in a manner to be understood by all citizens; it contains financial review that contains the summary of the financial performance of the city. Also, the audit report explains the financial statements in a simpler way which makes it more clearly to the stakeholders. Management discussions and analysis provides a summary of the basic financial statements; this helps citizens acquire necessary information (Grant, R. M. 2016). The report includes notes on financial statements. The notes provide additional information that ensures full understanding of the data provided in the financial statements.
The city governmental funds include special revenue, capital revenue funds, and general funds. General funds are the primary operating fund allocated to federal government financial resources. However, it excludes all other funds accounted in the reporting financial records. Special revenue fund accounts for the gained revenues from legal sources set aside catering for various general governmental functions. It excludes revenue sources from, a private organization, trusts for individuals or major projects. On the other hand capital projects fund account revenue from bonds and grants. The city’s proprietary fund is the total of internal service revenue form government employers. Also, in the case of insurance premiums, they are added to the proprietary funds. The city reported fiduciary which includes trust funds which are saved for private expenses, pension, agency funds, and OPEB.
The city adopted the statutory method to maintain its financial books and records. The statutory basis differs varies from GAAPs requirement but is recommended by Massachusetts bureau of accounts. Type of Funds is used to organize the accounts of the city where individual fund is accounted as a separate entity and it’s managed and maintained separately.
The major government’s revenues include bills paid, donations and capital grants. Other revenues included proceeds from taxes, donations, contributions not restricted, and income from investments.
According to the report, Boston city-incurred expenses in support of various social amenities services which included parking, recreation centers, and social amenities such as health, education, and utilities. Additional costs were long-term debt, acquisition of machines and equipment, and city miscellaneous expenses
The financial statements components are classified in their respective classes. The balance sheet items are classified as assets, deferred assets, deferred liabilities, and liabilities. Assets and liabilities are mainly divided into the long and short term. The classification has been done by according to the requirement of international accounting standards (IAS 1). In a nut cell financial statements were prepared according to accounting principles.
Management discussions and analysis are comprehensive and well-arranged. They followed the independent auditor's report. MD & I provided a historical introduction and a systematic analysis of the financial statements prepared by the city. The city profile is indicated in a comprehensive and in a manner that can be understood by all citizens. The management includes a financial overview which summarizes financial statements components.
The city has both long term and short term liabilities. Some of the city's liabilities include collateral held on securities lending, securities purchased, warrants account payable, payroll and related costs, unearned revenue, net pension liability, post-employment benefits obligation and due to the first government. Additionally, the city invested in money market mutual funds, US Treasury and agency securities, and corporate debt instruments. The city investment policy ensured that all investments activities are safely conducted safely. The report showed that Boston city used its capital resources efficiently.
Fixed assets include buildings, infrastructure, equipment and machinery, vehicles computers, and office fittings such as furniture and fixtures. The city used the straight line method to depreciate the fixed assets. Buildings, infrastructure, and land have estimated useful life of 30 years while that of equipment and machinery is ten years. Intangible assets such as computer software, trademarks, easement, and patents depreciation are accounted using straight line method.
The financial statement preparation was done on the accrual method of accounting The revenues have been recorded in the income statement in the period it is earned. Also, expenses have been recorded in the period they occurred. The accrual basis helps to provide a better picture of the financial position of the city ( Bice and Coates 2016) . Also, the basis complies with the matching principle outlined by generally accepted accounting principles.
The financial results of the city were affected by OPEB obligation. The obligation increased by $111.8 million because of the adjustment made to the discount rate used in the actuarial valuation. Also, pension liability had a huge impact to the city financial results.
In 2016 fiscal year, General Fund equity increased to $949 million. State aid revenue registered an increase of $8.2 million in the fiscal year 2016. Also, special revenue funds, capital projects fund increased compared to the previous year. The net position of the city amounted to a deficit of $(549) million at the end of 2016. However, this is an improvement from a deficit of $(630.6) in the previous year. The financial statements show that the city manages its asset well. Therefore, the net financial position will increase in future.
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Wang, Q., & Peng, J. (2016). An empirical analysis of state and local public pension plan funded ratio change, 2001-2009. The American Review of Public Administration , 46 (1), 75-91.