the municipal secretary desktop reference manual - Southwestern ...

NOTES
FINANCIAL STATEMENTS
The total package of financial statementsCboth internal and externalCissued by a political
unit should meet all of the following objectives:
" provide financial information useful for making economic, political and social decisions;
" provide financial information useful for evaluating managerial and organization
performances; and
" provide financial information for demonstrating accountability and stewardship in the
utilization of public resources.
If these objectives are to be realized, political subdivision=s reporting structure should
basically consist of three types of documents:
" a combined balance sheet;
" a statement of changes in fund balance or retained earnings; and
" a statement of revenues, expenditures (expenses) and encumbrances.
These reports are issues on an interim basis (generally monthly) and within a reasonable
time-frame after the conclusion of the fiscal year. As a rule of thumb annual financial statements
should be issued within 90 days after the close of the fiscal year.
Municipalities with less than 2,500 population may not need a balance sheet or changes in
fund balance reports in an interim basis. The nature of the fiscal environment may not require such
reports. The only exception to this waiver would be if a unit maintains one or more proprietary fund.
However, these fiscal statements are recommended for proprietary funds where management may
require fiscal data in making adjustments in an enterprise=s operations.
The combined balance sheet shows the financial position at the end of the fiscal period or
year for every fund maintained by the jurisdiction as well as its non-fund account groups. The
balance sheet may be accompanied by a series of supplemental fiscal schedules, narrative
explanations and statistical tables on various types of socio-economic data.
The statement on changes in fund balance or retained earnings shows the cumulative effort of
the fiscal year=s operation on the overall financial position of the fund or retained earnings, whether it
increased or decreased. A statement of changes is prepared for each fund. In many jurisdictions, the
change in fund balance is shown as part of this balance sheet statement, such as is attached.
Statements of revenues, expenditures (expenses) and encumbrances are basically flow
statements showing in-flows and outflows (including potential outflows) of resources and the
impacts these flows have upon the adopted annual budget. An example of an interim statement
follows.
XII-31