What is the CAFR?

It comes up regularly at County Board meetings in regards to the County's financial situation. At this week's County Board hearing Member Goss asked for an update on the Fiscal Year 2018 CAFR status. The Auditor answered that it's still in a rough draft form and needs refinement. He pointed out the need for some additional numbers about the Nursing Home and that he was working with the Chief Deputy Circuit Clerk on another issue. Earlier in the meeting County Board Member Young pointed out that as a newer member he didn't even know what a CAFR is yet. Here's a Cheat Sheet post on the CAFR. 

It's a term that comes up often, but probably as confusing to the public as it is for many in the County government itself. Listening to the meetings, you'll almost always hear it pronounced as "caf'-er" with the first syllable like a domestic cow's young: "calf." I strongly recommend avoiding spelling it out phonetically as it could be picked up as a variant of one of the most heinous racial slurs in English speaking South Africa. Something to be aware of given our international community here in Champaign County.

The Fiscal Year 2017 CAFR is available here as an example of what one is exactly. The introduction lays out the general idea:

The Comprehensive Annual Financial Report (CAFR) of the County of Champaign, Illinois for the fiscal year ended December 31, 2017 is submitted herewith. The CAFR is management’s annual financial report to its taxpayers, governing board, oversight bodies, investors and creditors.

This report consists of management’s representations concerning the finances of the County of Champaign. Consequently, management assumes full responsibility for the completeness and reliability of all information presented in this report. To provide a reasonable basis for making these representations, County management has established a comprehensive internal control framework that is designed both to protect the government’s assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the County’s financial statements in conformity with Generally Accepted Accounting Principles (GAAP). 

Full report here (page 1 of the introductory section starts on page 13 of the PDF file). This introductory guide by Jayden Sangha on a website for Municipal Bond information explains it with a bit more detail from the perspective of an investor reading a CAFR. Except:

As an investor in local government debt instruments, you might often hear the term ‘CAFR’ and its importance in maintaining financial transparency for local governments for financial markets and their investors. As the name suggests, a Comprehensive Annual Financial Report (CAFR) is a set of financial reports produced by local governments, states and other entities to comply with the reporting rules set by Government Accounting Standards Board (GASB). GASB also serves as the oversight board to ensure compliance and communicate any new updates or changes to reporting methods. In addition, an independent auditor audits the CAFR using GASB standards prior to their publication.

The local and state governments produce many comprehensive documents and reports; however, the CAFR and the entity’s budget book are typically considered two of the most important documents. Where the budget is a forward-looking document that plans for the future fiscal year and shows how the revenues will be allocated, the CAFR shows the actual numbers of financial activities for the previous fiscal year. In this article, we will take a closer look at different sections of the CAFR and how investors can find information pertinent to their investments in a particular local government’s CAFR.

That full article here. If this wonky explanation is still clear as mud, don't worry. This stuff can be complicated for the folks who work with it regularly. The Virginia Government Financial Officers' Association has slide presentation that helps walk people through the parts of a CAFR. This is intended for people on government boards who may be new to the concept as well.

Hopefully this information can help anyone from a curious constituent to a freshman board member wrap their heads around this critical accounting tool. It's key to other institutions, organizations, investors, etc to know the financial situation of a local government body so that they can make informed decisions in their interactions with it.