Using the finance or similarly named department link of a city’s Web site, download either the city’s entire comprehensive annual financial report (CAFR) or, if possible, just the portion of the CAFR that contains the basic financial statements. Print a copy of the government-wide statement of activities and a copy of the statement of revenues, expenditures, and changes in fund balances—governmental funds, along with the reconciliation between these two statements, and respond to the requirements below.
The city manager is concerned that some recently elected members of the city council will get a mixed message since the change in net position reported for governmental activities is noticeably different from the change in fund balances reported on the governmental funds statement of revenues, expenditures, and changes in fund balances. The city manager has requested that you, in your role as finance director, explain to the city council in clear, easy-to-understand terms for which purposes each operating statement is intended and how and why the operating results differ.
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a. Examine the two operating statements in detail, paying particular attention to the lines on which changes in net position and changes in fund balances are reported and develop a list of reasons why the two numbers are not the same.
b. Prepare a succinct and understandable explanation of the results of operations of this government from the perspective of each operating statement, in terms that a non-accountant council member would be able to understand.