Comprehensive annual financial report overview for government stakeholders

Non-Profit CAFR

Nonprofit accounting is based on the fund accounting, making it very complicated and different from for profit accounting. Fund accounting financial statements are divided into government wide, proprietary, and fiduciary statements. Nonprofit actually has three sets of financial statements compared to one set of financial statements for a for profit entity. Government wide statements basically cover the operations of the government in general. The government wide statements are the ones that are basically the same as for profit financial statements, except they are done differently. Proprietary statements cover funds that are restricted for certain items, such as capital infractures. Fiduciary statements are funds the government is responsible for that are for held other entities, such as the hospital district.

Differences in Missions

There are key differences between non-profit and for profit accounting. (Nonprofit (Not-for-Profit) Accounting) The primary mission of nonprofit is to provide needed services to the community, where for profit is to earn profits for shareholders. The secondary mission is to ensure revenues are greater than expenses in order for services to be maintained or expanded, where for profit is to provide services and sell goods to make profits. The tax status of nonprofit is tax exempt if approved by IRS compared to for profit is subject to tax for the business and the shareholders.

Financial Statements

The Statement of Financial Position for a nonprofit is the Balance Sheet for a for profit business. The Statement of Activities for a nonprofit is the Income Statement or Statement of Operations. The Statement of Functional Expenses for some nonprofits is the Statement of Cash Flows in for profit. The Statement of Cash Flows for nonprofit is the Statement of Stockholder's Equity. Both nonprofit and for profit have the notes to the financial statements. The nonprofit expense is reported by function as program, management and general, and fundraising. Nonprofit and for profit obtain sources of money other than revenue from borrowing from lenders, but for profit corporations issue shares of stock as an additional source of money and nonprofit government issues bonds. Where for profit corporations are required to submit the SEC Form 10-K, nonprofit is required to submit the IRS Form 990. The accounting equation for profit is Assets = Liabilities + Owner's Equity, but for the nonprofit the equation changes to Assets = Liabilities + Net Assets.

The Net Asset section of the Statement of Financial Position reports the totals in classifications of unrestricted, temporarily restricted, and permanently restricted. These are based on contributions from contributors. Contributors often place restrictions on donated money. For example, if a contributor donated $100,000 for the youth center and stated a restriction of the money being put in investments for two years, this would be temporarily restricted funds. After the two-year period, it would transfer to the unrestricted funds for the youth center. The general ledger accounts for the Statement of Financial Position are assets, liabilities, and net assets.

The Statement of Activities has four columns across the top for unrestricted funds, temporarily restricted funds, permanently restricted funds, and a total column for the totals. The formula for the statement is revenues -- expenses = change in net assets + beginning net assets = ending net assets. Revenues often include a reclassification of net assets at the time they are released from restriction. The revenues of the statement include contributions, membership fees, program fees, fundraising, grants, investment income, gain on sale of investments, and reclassification of net assets. The expense portion is figured by program expenses + supporting services expenses -- management and general -- fundraising. Under the accrual accounting method, expenses are not recorded in the period to best match revenues. They are counted as an expense in the current period or when they are used up. It is also important to note that deferred tax revenues are listed as a liability in nonprofit statements. These are actually accounts receivable for a for profit business on the Balance Sheet. For profit accounting matches expenses with revenues in the current period, nonprofit does not. For the Statement of Activities, the general ledger accounts are revenues, gains, expenses, and losses. The Statement of Cash Flows is basically the same, except for tax, as for profit with sections of operating activities, investing activities, and financing activities. (Kieso, 2008)

Management Discussion and Analysis

This is an overall financial analysis like for profit analysis. (Comprehensive Annual Financial Report, 2010)

On November 17, 2009, the Home Rule Retailer's Occupation Tax Law was rolled back from 1.75% to 1.25%, a decrease of 0.5%, causing a revenue loss of $32.7 million.

On November 30, 2010, the liabilities exceed the assets by $1,568.2 million. This was a result of expenses rising at a faster pace than revenues.

During 2010, the county's total net assets decreased by $575.5 million. The net assets of governmental activities resulted in a negative $2,295.3 million.

The 2010 fiscal expenses were $295.4 million more than the fiscal expenses in 2009.

For the 2010 fiscal year end, government funds reported an increase of $129.7 million more in combined fund balances than 2009 because of increases in Sales Tax revenue that was allocated to the general fund and fee and license revenue.

In 2010, the Board of Commissioners transferred $14.7 million from the Juvenile Temporary Detention Supportive Services Special Revenue to the Public Safety, Health and Hospital systems.

On June 23, 2010, the government issued Bonds in the total of $689,845,000.

On October 13, 2010, the government issued Bonds in the total of $119,855,000.

For the government wide statements, the Statement of Net Assets shows information on all assets and liabilities with the difference as net assets. The increase or decrease, over time, serves as a benchmark for improvements or the deterioration of the county's financial position. Property tax bases and conditions of facilities in the county should be assessed when evaluating the financial health of the county. The Statement of Activities shows information on how the net assets change during the year. The revenues and expenses for the same items will result only in cash flow for future years, such as uncollected tax and expenses relating to earned, not used, vacation, sick leave, and pension obligations.

The majority of services for the government activities include public safety, jail, courts, highway, environmental control, property tax collection, and general administration and finance. The major revenues include property taxes and other non-property taxes. This includes the county and the Forest Preserve District, which is a blended unit of the county.

The business activities include the county's hospital and health services.

The county is financially accountable for Chicago Zoology Society, Chicago Horticultural Society, and Emergency Telephone System, which provides the county's telephone system. These are the fiduciary obligations of the county.