Montgomery County, Maryland CAFR Report Analysis.
Brief Overview of Montgomery County.
The county was established in the year 1776 by the county convention. Montgomery county was until 1948, structured under the county commission system before it was adopted to a charter that enabled the county to have a council-manager both from the home rule and the government. In the entire United States, Montgomery County of Maryland is the most populous. The county is mostly referred to as “MoCo.” The county has a total population of 1.04 million as per the 2018 estimation. It also holds a population growth rate of approximately 9% annually. In the year 2019, the county was presented with a certificate of achievement for excellence in financial reporting. This followed an independent audit performed by CliftonLarsonAllen, LLP. The external auditors issued the county’s financial statements with an unmodified opinion for the year that ended 30th June 2019 (Espinosa, 2019). The Montgomery county currently poses as the most affluent jurisdiction in Maryland. It is relished with the distinction of being identified as an All-American Community. Local governments and counties are decreed to provide comprehensive annual financial statements that are audited as stipulated under the GASB No.34. The annual reports should be in agreement with the General Accepted Accounting Principles to enable comparability as well as provide comprehensible essential financial statements to external users. In response to this, the county presented financial statements that conform with financial accounting reporting standards. The paper herein provides a CAFR report analysis for Montgomery county.
The Focus of Montgomery County’s CAFR Report.
Typically, a Comprehensive Annual Financial Report represents a set of statements of a reporting entity. In this case, the Governmental Accounting Standards Board (GASB) establishes the requirement of counties, municipalities, and other government entities to report and present their financial report for checking compliance. As per the GASB requirements, counties, including Montgomery county, have to be subjected to an independent audit under the generally accepted government auditing standards. The Montgomery County of Maryland’s CAFR Report presents financial information for the individual funds and the government-wide financial information that would indicate the county’s financial position. As per the GASB, the county government (MoCo) uses the modified accrual accounting for its statements and incorporates reconciliations that explain the shift from cash-basis of accounting that would typically occur during the year to the modified accrual basis recommended.
Fundamentally, the comprehensive Annual Financial Report consists of three sections, the Introductory section, the financial part, and lastly, the statistical section. The introductory section aims at guiding and orienting the financial report user through what the report presents about. The second section, i.e., the financial section, provides the Montgomery county’s basic statements as a reporting entity. The section also presents the notes to the financial statements as well as the report of the independent auditors. Eventually, the Montgomery county’s CAFR report presents the statistical section that issues additional financial data in statistical form. The data in this section display the financial trends, which guide through the users through understanding the county’s governmental activities and financial information spread through the fiscal year.
The County’s Reported Governmental Funds.
As reported from the Montgomery County CAFR report, the report presents governmental funds through the government-wide financial statements (Blann, 2017). Here, the funds are reported under the statement of net position and the statement of activities. The second set of statements that the county reports on the governmental funds, corresponds to the fund financial statements, which include the statement of financial position (Balance sheet), and the statement of revenues, expenditures, and changes in fund balances. The governmental funds utilized by Montgomery County throughout FY 2019 incorporate the utilization of both the major and the non-major funds. These two serve as the primary operating funds for the county. Specifically, based on the county’s 2019 CAFR report, it’s major operating fund incorporates the General Fund as the primary operating fund. The General Fund accounts for all activities and is not needed for other funds. In addition to the General Funds, the county reports Capital Fund and Grants Fund as its additional major operating funds. On the other hand, the county incorporates Non-Major funds, presented as Debt Service Fund, Special Revenue Fund, and the Internal Service Fund.
From the County’s CAFR report, the governmental funds are presented using the current financial resource measurement focus. The funds are also on the modified accrual basis of accounting form as per the GASB requirements. Notably, the GASB No. 34 amended by GASB No. 63, demands adherence to the format of presentation for governmental fund statement of financial position (balance sheet) as follows: (Assets + Deferred Outflows of resources) = (Liabilities + Deferred inflows of resources) + (fund balance). As per the GASB No 34 requirement, Montgomery presents its governmental statement of revenues, expenditures, and changes in fun balances in an order that follows; Revenues; Expenditures; Excess (deficiency) of revenues over expenditures; Other financing sources and uses (this includes transfers); Special items section; Extraordinary items; Net change in total fund balance; Fund balance beginning of the period; and lastly, the section on Fund balance end of the period.
Entities of Montgomery County CAFR Report.
From the FY2019 Comprehensive Annual Financial Report of the Montgomery County of Maryland, an auditor’s financial analysis report is attached. It provides their opinion on the relevance, accuracy, and faithful presentation of the report. The attached report provides the disclosure reports comprising of the authentication of the statements. In determining and validating of the county’s financial position, the audited report valuates assets both current and non-current as well as the liabilities presented. The auditors also analyzed the contributions of both the public and private sectors in funding the investments. Given that the county presented various sources of its revenue, the report as from the CAFR, analyses and investigates the contributions and percentages of the contributions of each revenue segments.
The analyzed segments include the sales and use tax segment, the insurance taxes segment, charges for services segment, personal income taxes segment, interests, penalties, and other taxes segment. Intergovernmental and license segments are also analyzed and investigate as per the report. An explanation of whether the debt stands out at a liability state and information regarding domestic revenue aids and financial obligations is explained. The report also provides an analysis of the county’s short-term and long-term bonds as well as risks probed by credits. These analyses aided in delivering a future projection of debt to be accumulated by the county.
The CAFR report finally provides the reconciliations statements of the earlier drafted budget relative to the county’s fiscal year’s expenses. The reconciliation statement is put forth to aid in providing the basis of judgment on whether the county had efficiently and maximally utilized its available resources (Espinosa, 2018). According to Espinosa (2018), this provided critical report analysis of major and non-major funds, debt capacity, revenue capacity, economic analysis, demographic analysis, and unemployment analysis to assist in establishing accountability on a county government’s expenditures.
The Purposes of CAFR to the Report Users.
The first purpose relates to aid in gaining the citizens’ trust. The CAFR report displays to the county citizens what it does with the public resources—having a uniformly reported and presented financial report enables the users (citizens) to gauge the county’s public officials’ trustworthiness. The second purpose is for the upholding of financial transparency (Blann, 2017). The transparency concern is critically vital for preservation by the county or the state for private investors and the public’s trust. Investors and the public are more likely to evaluate the CAFR report to establish creditworthiness. Ultimately, the CAFR report promotes accountability. The report helps hold elected county officials responsible for the constituency. Responsive financial management by public officials provides voters with insight on how their elected officials manage federal funds.
Conclusion.
In conclusion, the CAFR report provides great importance to both the county government and the citizens. It gives room for the shortcomings identified to be an amendment. The report keeps the citizens of Montgomery County of Maryland on the safety of what they stand to consume from the county elected officials.
Reference
Blann, S. W. (2017). Preparation of the Comprehensive Annual Financial Reports. Corona:
Webinar Publishers.
Espinosa, A. (2019). Montgomery County Comprehensive Annual Financial Report (For the Fiscal Year Ended 30th June 2019). Montgomery: Department of Finance.
Accounts, T. C. (n.d.). Retrieved 27th June 2020, from
https://comptroller.texas.gov/transparency/budget/cafr-faq.php