Use the 2019 Comprehensive Annual Financial Reports (CAFRs) of the State of Virginia Your specific
responsibilities include working on the development of the State’s budget and financial statements, along with
providing financial information to other members of the mayor’s office. Like many states in the United States,
your home State has some financial challenges involving both sources of revenues and expenditures
associated with state operations, including costs related to public safety (police and firefighters) and the
It is your first week on the job and to orient you to your new position, your supervisor has given you the
following assignment. In approaching this assignment, you want to do an excellent case analysis to make a
favorable first impression.
Part I: Basic information of the Comprehensive Annual Financial Report (CAFR)
1. Review the introductory section of the CAFR and provide the following information to the mayor’s office:
a. Was the entity’s annual report of the previous year awarded a ‘‘certificate of achievement for excellence in
financial reporting’’ by the Government Finance Officers Association? What is this award for?
b. What are the key issues addressed in the letter of transmittal?
2. Review the financial section and provide the following information to the mayor’s office:
a. Which, if any, independent audit firm performed an audit of the CAFR?
b. Did the entity receive an ‘‘unqualified’’ audit opinion? If not, why not?
3. Review the statistical section and provide the following information to the mayor’s office:
a. What is the population of the entity being reported on?
b. What types of information are included in the statistical section?
Part II: Preliminary Analysis of the State CAFR
1. Review Statement of Net Position. Find
• The total assets, total deferred outflow of resources, total liabilities, total deferred inflow of resources, total
net position, unrestricted net position, and restricted net position.
• Is total the net position deficit or positive? Explain to the office what does a deficit/positive net position
2. Review Statement of Activities of 2019. Calculate/find
• Total expense
• Total PG revenue, total CU Revenue, and General Revenue
• Change in Net Position
Note: PG stands for Primary Government; CU stands for Component Unit
Part III: Additional Analysis of the CAFR
(1) An article by Chancy, Mead and Schermann (2002) summarizes government-wide ratios to measure fiscal
distress and related financial risk factors of municipalities. One ratio provides an overall measure of financial
position for the government. A second ratio provides measures of financial performance. A third ratio provides
a measure of liquidity. A fourth provides measure of solvency. These ratios in comparison to the ratios
measured for similar governments, combined with other useful information, provide a starting point for
evaluating the overall financial condition of a governmental entity. The definitions and measurements of these
ratios and factors are listed in the following table.
Measure of: Calculation:
Financial Position Unrestricted Net Assets/Expenses
Financial Performance Change in Net Assets/Total Net Assets
Liquidity Cash + Current Investments+ Receivables/ Current liabilities
Solvency Long-term Debt/Assets
Calculate the risk ratios for state, and answer:
a. What conclusions concerning the state’s financial position can be drawn from these ratios?
b. What conclusions concerning the state’s liquidity can be drawn from these ratios?
c. What conclusions concerning the state’s financial performance can be drawn from these ratios?
d. What conclusions concerning the state’s solvency can be drawn from these ratios?